Following the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to retain policy parameters, the Lagos Chamber of Commerce and Industry (LCCI) has disclosed that the decision is most appropriate at this moment considering recent happenings in the economy. LCCI explained that the CBN’s decision to retain Monetary Policy Rate (MPR) at 11.5 per cent, Cash Reserve Ratio (CRR) at 27.5 per cent and Liquidity Ratio at 30 per cent was best for the economy amid the dilemma the current stagflation condition presents to the monetary authorities.
The Chamber, however, noted that it was time for CBN to address the posers presented by forex squeeze in the economy so as to reflate the economy and save the real sector of the economy. The Director-General,LCCI, Dr. Muda Yusuf, while commenting on the LCCI’s position on the MPC meeting of March 2021, in Lagos, yesterday, said that the Chamber commended MPC for the farreaching decisions to reflate the battered economy adversely effected by COVID-19. He noted that it was imperative to strike a balance between stimulating output growth and curbing intensifying inflationary pressures at this period in the country’s economy.
The CBN governor stated at the briefing that the bank’s current policy focus anchored on boosting output growth, given the fact that the domestic economy narrowly exited recession in the fourth quarter of 2020. With this, Yusuf said: “We believe sustained intervention efforts of the Bank would further enhance credit flows to the real economy, stimulate output growth and ultimately moderate inflationary pressures. “With unemployment rate at a record high of 33.3 per cent and weak employment levels in manufacturing and servic-es sector, tightening monetary policy stance would stifle access to credit, and undermine the pro-growth agenda of CBN.
“Headline inflation rose by 17.33 per cent in February 2021, the highest price level since March 2017. “As we have stated in our previous position papers, consumer prices are currently being driven by cost-push factors including heightened insecurity resulting in persistent decline in agricultural output; foreign exchange illiquidity, exchange rate depreciation, higher energy prices and upward adjustment of electricity tariffs, which are beyond the control of monetary authority.”
The LCCI DG further said: “We endorse the position of the MPC on need for fiscal authorities to expedite actions in addressing these challenges and other investment climate issues constraining the supply side of the economy and fuelling inflationary pressures.
“We request that the MPC gives more attention in its de-liberations to the foreign exchange policy because of its profound implications for economic performance and the confidence of investors. The forex policies are as important as liquidity management concerns.
Foreign exchange framework is key to the price stability mandate of CBN.” He stated that the Chamber noted with concern the divergent positions of both the fiscal and monetary authorities on the country’s foreign exchange policy framework. According to him, “it is important for the fiscal authorities, CBN and Economic Advisory Council to be on the same page as far as the country’s foreign exchange policy framework is concerned. “This lack of coherence among policymakers sends negative signal to the investment community, aggravates uncertainty and undermines the confidence of investors.”