AS the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) meets this week, an agro economist, Ikechi Agbugba, has suggested that the apex bank should retain the current monetary policy rate (MPR) to lessen hardship on Nigerians.
The CBN had in a notice on March 14 announced that the 290th MPC meeting would be holding on Monday, March 20 and Tuesday, March 21.
The MPC, had at its last meeting in January 2023, further raised the MPR by 100 basis points to 17.5 per cent to rein in inflation, which currently stands at 21.91 per cent.
The MPR has been on the rise since April 2022, when it was 11.50 per cent. The rate impacts lending and inflation rates, and, when jacked up, consequently affects upward movement of prices of good and services.
Agbugba, a senior lecturer at the Rivers State University, Port Harcourt, told The ICIR that there is the need to retain the MPC to see how the re-circulation of the naira would affect the economy before increasing, or perhaps decreasing it.
“On a sad note, every policy that will result in increasing the interest rate will further bring about hardship to industries and Nigerians.
“Truly, this move by the CBN was intended to raise the rates and at the same time reduce money supply in the economy and rein in inflation. As an agro economist and policy maker, I must say that this action is not just risky but will slow down economic growth. A higher interest rate will raise the cost of borrowing for businesses, and may make goods and services even more expensive,” Agbugba said.
The lecturer also noted that the introduction of new banknotes was meant to reduce inflation by limiting money supply, but that old banknotes re-entering circulation, could raise inflation risks.
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According to him, the Stanbic IBTC Bank Purchasing Managers’ Index, which measures the performance of the private sector, dropped to 44.7 per cent in February, from 53.5 per cent in the previous month, indicating a sharp decline in business conditions (mostly due to cash shortages and fuel scarcity) which might be needed for more borrowing also.
“Rising interest rates will have a direct or indirect impact on farms and agribusinesses. Farm operating loans will be affected first for most farms leading to higher interest expense. As farms acquire machinery, land and buildings with debt, more non-current debt will have higher rates, leading to larger interest expenses for many years.
“In addition, high energy costs will raise fuel and fertilizer prices, boosting food production costs, but they also divert output from food to biofuels. Fertilizer prices are double what they were before the pandemic, even after a pullback in recent months,” Agbugba added.
