Some financial experts have called for a downward review of the Monetary Policy Rate (MPR) during the next Monetary Policy Committee’s (MPC) meeting scheduled for Nov. 21 and Nov. 22. to tackle inflation in the country.
The MPR currently stands at 14 per cent.
The experts told the News Agency of Nigeria (NAN) in Lagos that the committee should pursue an expansionary monetary policy.
They said that the extant monetary policy adopted by the Central Bank of Nigeria (CBN) had not yielded any result.
Prof. Sheriffadeen Tella of the Department of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, said the committee could pursue a downward review of the interest rate to reinvigorate economic activities.
Tella said that the country’s inflation rate would continue to soar if the interest rate was not reduced.
He explained that companies would find it difficult to borrow money for business expansion with the current interest rate.
Tella also called on the committee to address the challenge of foreign exchange volatility currently causing intense speculation and affecting the nation’s currency.
Mr Sola Oni, the Chief Executive Officer, SOFUNIX Investment and Communications Ltd., said that high inflation affected stock prices negatively.
Oni said that quoted companies, like any other, struggled with high inflation as it affected their return on investment.
According to him, the real return, either from companies or sale of stocks, is when it is higher than inflation rate.
“When inflation rate is lower, investment in stocks can be used as a hedge against it.
“But a higher inflation rate at 18.3 per cent is a disincentive to investment in stock as the relationship is inverse,’’ Oni said.
He said that the MPC should address the current regime of stag-inflation whereby economic growth was stagnant and inflation rate was soaring.
NAN reports that the committee, at its September meeting, retained the MPR at 14 per cent; the cash reserve ratio at 22.50 per cent and the liquidity ratio at 30 per cent.
Mr Godwin Emefiele, the CBN Governor, had explained that while challenges in the economy remained, monetary policy alone could not boost growth.
“Cutting interest rates is not advisable and the current stance will help to limit inflation,’’ Emefiele said.
