21 hours Ago By Clem Aguiyi
The recent decision by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate (MPR) by 25 basis points to 27.50 per cent from 27.25 per cent is a pragmatic move that reflects the Committee’s commitment and determination to addressing the rising inflationary pressures in the country.
A popular and populist policy would have been to cut the interest rate, but curbing the spiraling inflation is one policy the current CBN leadership is audacious about and it appears they are determined to take all the tough and difficult decision . The MPC’s decision, which was unanimous among all 12 members, is a clear indication that the Committee is willing to take bold steps to ensure price stability and sustainable economic growth. The decision to raise the MPR is also a testament to the Committee’s commitment to using monetary policy tools to manage the economy and achieve the overall objectives of the administration.
The MPC’s decision was made against the backdrop of renewed inflationary pressures, with the headline, food, and core measures rising year-on-year in October 2024. The Committee was particularly concerned that all three measures also inched up on a month-on-month basis, suggesting the persistence of price pressures and their attendant adverse impacts on income and welfare of citizens. The MPC’s decision to raise the MPR is expected to have a positive impact on the economy, as it will help to reduce the demand for goods and services, thereby reducing inflationary pressures.
The decision is also expected to stabilise the exchange rate and anchor inflation expectations, which are critical for achieving price stability and sustainable economic growth. While the MPC’s decision to raise the MPR is a positive move, it is also important to note that the Committee’s work is far from over. The MPC must continue to closely monitor the economy and make adjustments to monetary policy as necessary to ensure that the economy remains on a path of sustainable growth and price stability otherwise the sacrifice the average Nigeria is making today will not be worth the efforts.
In addition, the MPC must also continue to work closely with the Federal Government to ensure that monetary and fiscal policies are aligned and supportive of the country’s economic objectives. This includes investing in infrastructure, promoting private sector development, and implementing policies that support economic growth and development. The MPC’s decision to raise the MPR is also a clear indication that the Committee is committed to using monetary policy tools to manage the economy and achieve its objectives.
This includes using interest rates, reserve requirements, and other monetary policy tools to influence the overall direction of the economy. Furthermore, the MPC’s decision to raise the MPR is also expected to have a positive impact on the country’s external sector. The decision is expected to attract foreign investment, stabilise the exchange rate, and improve the country’s balance of payments position.
However, it is also important to note that the MPC’s decision to raise the MPR may have some negative impacts on the economy, particularly in the short term. The decision may lead to higher borrowing costs for businesses and individuals, which may reduce consumption and investment. Additionally, the decision may also lead to a reduction in economic growth, at least in the short term.
Despite these potential negative impacts, the MPC’s decision to raise the MPR is a necessary step to address the rising inflationary pressures in the country. The decision is expected to have a positive impact on the economy in the long term, and it is a clear indication that the MPC is committed to using monetary policy tools to manage the economy. The news that the Port Harcourt Refinery is now back to life, coupled with refining capacity of Dangote Refinery will lower the pressure on the dollar and gain stability for the naira.
Nothing will push down the cost of living than bringing down the cost of PMS and Jet A fuel. Hopefully, the other three refineries in Port Harcourt, Warri and Kaduna will also come on stream without sabotage Recommendations: The MPC should continue to closely monitor the economy and make adjustments to monetary policy as necessary to ensure that the economy remains on a path of sustainable growth and price stability. The Federal Government should continue to implement policies that support economic growth and development, such as investing in infrastructure and promoting private sector development.
The CBN should continue to work closely with the Federal Government to ensure that monetary and fiscal policies are aligned and supportive of the country’s economic objectives. The Way Forward: Short-term measures Close Monitoring of the Economy: The MPC should continue to closely monitor the economy and make adjustments to monetary policy as necessary to ensure that the economy remains on a path of sustainable growth and price stability. Implementation of Fiscal Policies: The Federal Government should continue to implement policies that support economic growth and development, such as investing in infrastructure and promoting private sector development.
Enhanced Collaboration between Monetary and Fiscal Authorities: The CBN and the Federal Government should continue to work closely together to ensure that monetary and fiscal policies are aligned and supportive of the country’s economic objectives. Medium-Term Measures: Investment in Infrastructure: The Federal Government should continue to invest in infrastructure, such as roads, bridges, and power plants, to support economic growth and development. Promotion of Private Sector Development: The Federal Government should continue to promote private sector development, such as through the provision of incentives and the creation of a favourable business environment.
Improvement of the Business Environment: The Federal Government should continue to work to improve the business environment, such as through the simplification of regulatory procedures and the reduction of bureaucratic red tape..
