Lagos – Some financial experts on Tuesday faulted the increase in the lending rate by the Central Bank of Nigeria (CBN) to 14 per cent, saying it was not in the interest of the economy.
They told Nigerian Observer in Lagos that the increment fell short of expectations as it was not targeted at addressing the major challenges of the economy.
The Nigerian Observer reports that the CBN Monetary Policy Committee (MPC) rose from its two-day meeting with a resolution to increase the lending rate from 200 basis points to 14 per cent.
The CBN Governor, Godwin Emefiele, told reporters that five out of the eight members of the MPC voted for a rate increase.
Prof Sheriffadeen Tella, a Senior Economist at the Olabisi Onabajo University, Ago-Iwoye, Ogun, said he had expected the CBN to reduce the lending rate to encourage small business owners to borrow.
Tella said that a higher lending rate of Monetary Policy Ratio (MPR) would discourage borrowing that was needed to stimulate local production.
According to him, a higher lending rate is not good for the economy now.
“Since the cost of lending is part of the cost of production, a hike in the lending rate will be counterproductive for the economy,’’ Tella said.
Dr Evans Osabouhien of the Department of Economics, Covenant University, Ota, said that a higher interest rate would reduce the ability of business owners to lend from the bank.
Evans, who noted that a higher MPR was required to reduce the amount of money in circulation, said that our present economic challenge was far from surplus money in circulation.
He said that the apex bank should have taken into consideration the performance of the economy to inform and guide its decisions.
Dr Chijioke Mgbame, an Accountant, said that he does not see how a higher lending rate would stimulate an economy that was close to recession.
Mgbame said that a higher MPR was just a short- term measure in an attempt to address the nation’s economic challenges.
“Our problem is that we are not getting enough foreign exchange through the stimulation of production and export,’’ Mgbame said.
The Nigerian Observer reports that the MPC noted that the apex bank lacked the instruments required to directly jumpstart growth in the economy.
“In assessment of the relevant issues, MPC was of the view that the balance of risks remains tilted against price stability.
“Consequently, five members voted to raise the Monetary Policy Rate while three voted to hold.
“In summary, the MPC voted to: increase the MPR by 200 basis points from 12.00 to 14 per cent, retain the CRR at 22.50 per cent, retain the Liquidity Ratio at 30.00 per cent and retain the Asymmetric Window at +200 and -500 basis points around the MPR,’’ the CBN said.
