The chair of the banking and finance department of the Nasarawa State Department, Prof. Uche Uwaleke, has posited that the outcome of the Monetary Policy Committee (MPC) meeting.
Prof. Uwalake, who made this known to journalists in Abuja, noted that despite the increase in the inflation rate, the Committee may not be in a hurry to tinker with the MPR.
“Regarding the forthcoming MPC meeting, I see members voting for a hold on the policy parameters.
“The reality is that in spite of the increase in last month’s inflation rate to 11.4 per cent, the MPC is not likely to further tighten monetary policy in order not to jeopardize the chances of the ruling party in the coming elections. So, in a way, political consideration will be a major factor.
This appears to be the trend in many countries regardless of central banks’ independence. Recall that in the run up to the Presidential elections in US, the then Chairman of the US Fed Reserve was accused by Donald Trump of deliberately keeping the policy rate low to favour the Democratic party.
According to Nigeria’s first capital market professor, the MPC will be mindful of the current political uncertainties and so will go for maintaining the status quo.
“Of course, the usual justifications with respect to global and domestic factors will be used to support the hold-rates stance.
“The implication of maintaining the status quo is to stabilize the macro environment in a period of election.
He further added that “An increase in say the MPR will worsen the already high interest rate environment to the detriment of production and economic growth in general. It will also push up borrowing costs.
“This won’t be good news for a government seeking to partly finance the budget deficit from domestic loans.
“On the other hand, inflation rate has resumed an upward trajectory while foreign investors are still fleeing the country in search of higher yields in the US. So MPC is constrained not to lower MPR.
“The compelling option is therefore not to upset the apple cart by holding the rates,” he added.
