NECA calls on CBN to lower 14% MPR, interest rates

Nigerian Employers Consultative Association (NECA) has called on the Central Bank of Nigeria (CBN) to lower interest rates and reduce the Monetary Policy Rate (MPR), which has been kept at 14 percent since 2016.
The association says that the negative implication of the current interest rate policy is the phenomenon of “crowding out” of private sector access to credit, adding that manufacturers and other employers of labour have had to cope with a triple whammy of recession, high inflation and high interest rates caused by the wrong policy choices made by the monetary authorities.
Speaking during a press conference yesterday, Larry Ettah, president of NECA, said, “It is accepted practice in economic management in most jurisdictions that the correct posture in a recession is a reflationary fiscal policy and monetary easing, including reducing interest rates. Instead the CBN has maintained tight monetary policy and raised interest rates.
“We are of the view that this approach is sub-optimal and has failed. It is based on an erroneous assumption that tight monetary policy would constrain inflation and temper pressures on the naira.
“Instead the actual experience confirms that Nigerian inflation is driven by cost elements usually currency devaluation and food and energy prices, while Naira values are shaped by oil prices and the FX reserves rather than monetary conditions, especially as CBN has maintained administrative control of the currency value.”
Ettah observed that unemployment in Nigeria rose to 14.2% in Q4 2016 with National Bureau of Statistics (NBS) reporting that 3.4 million people lost their jobs in 2016, which is a direct attribute to erstwhile policy gaps as well as flawed FX policies that constrained the productive sector.
He explained that while the current FX policies have improved the situation reflecting in modest improvements in Gross Domestic Product, (GDP), the CBN should sustain these improvements in FX management and availability, and move towards a market-based system.
The association further suggested that it is imperative for government to leverage of private capital. “As NECA, we are particularly concerned with non-constitution (or non-approval by the Senate) of the boards of key regulatory boards which have to do with economic and employment issues such as the Securities and Exchange Commission (SEC), National Pensions Commission (PenCom), Financial Reporting Council of Nigeria (FRCN) and Nigerian Social Insurance Trust Fund (NSITF),” the association added.

 

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