The Centre for the Promotion of Private Enterprise (CPPE) has asked the Central Bank of Nigeria (CBN) to put a break on interest rate hike as the apex bank’s Monetary Policy Committee (MPC) meets today.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), emphasised the importance of this approach during an interview with the News Agency of Nigeria (NAN) on Sunday in Lagos.
Yusuf highlighted that the committee should aim to keep the increase minimal, acknowledging the Central Bank of Nigeria’s (CBN) efforts to stabilise the economy.
He stated, “Knowing the disposition of the Central Bank of Nigeria, given the fact that the bank has repeatedly affirmed its commitment to taming inflation, there is a very high probability that the MPC is likely to hike interest rates, although it may be marginal.”
“My wish is that the central bank should put a hold on interest rate hikes for now. I believe that monetary policy instruments have been practically over-stretched in this quest to tame inflation,” he said.
Backstory
The Central Bank’s monetary policy committee will meet today and tomorrow to decide to either hold or continue its interest rate hike since the beginning of the year. The CBN in the last three Monetary Policy Committee (MPC) have hiked interest rates by a record combined 750 basis points from 18.75% to 26.25%.
The apex bank opened the year with a 400 basis points hike in MPR in February from 18.75% t0 22.75%. This was followed by another 200 basis points hike in interest rate in March and the last 150 basis points hike in May.
What you should know
The apex bank noted that the hike in MPR is needed to tame inflation and stabilise the foreign exchange market. However, that has proven elusive as inflation has continued to rise to reach 34.19% and the forex market has seen significant volatility to reach almost N1,600/$ on the official market.
However, the MPR hike by the apex bank has attracted significant forex inflows into the government securities. In the first quarter of 2024, foreign portfolio investment surged by 237% when compared to the corresponding quarter of 2023 at $2.07 billion.
The consistent hike in interest rates has been condemned by members of the business community claiming it increases the cost of accessing capital and compounds the general macroeconomic malaise in the country.
Famous among the criticism is that of Africa’s richest man, Aliko Dangote who stated that no economic growth will occur with bank interest rate at 30%.
