The Central Bank of Nigeria (CBN) continued to increase the Monetary Policy Rate (MPR), otherwise known as the interest rate, to combat inflation could stifle economic growth, analysts have said.
The apex bank’s Monetary Policy Committee (MPC) raised the benchmark interest rate by 50 basis points to 18.0% from 17.5% at the end of its two-day meeting on Tuesday, marking the sixth consecutive rate hike.
According to Dr. Chinyere Almona, Director General of the Lagos Chamber of Commerce and Industry (LCCI), the monetary authority’s consistent hawkish stance is in response to high inflationary pressure, but the move has not dampened the rise in inflation.
Almona said in a statement seen by TechEconomy: “This consistent hawkish stance by the monetary authority is in response to the high inflationary pressure. At 21.91%, the inflationary rate is more than twice the targeted range (6 – 9%) set by CBN.
Since April 2022, inflation has increased from 16.82% to 21.91% in February 2023. Despite the 6.5% points increase in the key rate over the same period, inflation does not seem to be letting off.
“The price rises that continue to hit the system appear non-transitory. We, like the other market watchers, expected CBN to hold off an increase or at best moderate, the key rate given the weak relationship between it and inflation, especially after manufacturers and other businesses are groaning under high borrowing costs and the cash crisis.
“While CBN has the overarching mandate of ensuring price stability, we suggest it should not be done in a manner that compromises growth, more especially in the face of high unemployment.
Furthermore, the instrumentality of monetary policy alone appears quite insufficient to guarantee the desired results of low, stable, and predictable prices. We believe that structural rigidities around infrastructure and agriculture should be looked into and tackled to rein in inflation.
“Inflation chips away at purchasing power leads to inventory stockpiles, undermines growth, and creates a lot of economic uncertainties. Taming it, however, should not be done at the expense of growth and the most vulnerable sectors.”