Raising MPR to 22.75% Will Not Result in Economic Growth, Says Obaseki

Edo State Governor, Godwin Obaseki, has criticized the Central Bank of Nigeria (CBN) for its recent decision to raise the Monetary Policy Rate (MPR) to 22.75 percent.

Obaseki argued that the decision is not the solution to the current economic crisis in the country. Instead, he advocated for an increase in local production to cater for goods and services.

He gave this opinion in a speech as a guest speaker during the annual dinner of the Edo Zone Bankers committee in Benin City, the Edo State capital.

He said, “I understand that the monetary rationale for increasing MPR but fundamentally and fiscally, it is not going to lead to growth in our economy. We must focus on the fundamentals which is increasing production, making sure our citizens produce the goods and services we consume and depend less on imports.

“Our economic policy and monetary policy cannot be determined by exchange rate alone. So, this whole issue of increasing the cash reserves in a bid to tighten liquidity is going to be detrimental to our economy. I understand the challenge the monetary authorities face but unfortunately, you cannot plan with one hand.

While I understand the monetary rationale behind the recent increase in Cash Reserve Ratio (CRR) by the Central Bank of Nigeria (CBN), it must be stated that the effects will be detrimental to the nation’s economy and to small business holders.

The Annual Dinner of Edo Zone… pic.twitter.com/tGEKFGGybv

— Godwin Obaseki (GGO) (@GovernorObaseki) March 4, 2024

“The economy is about the fiscal and monetary policies, both must work hand in hand and when they don’t as they don’t in Nigeria, we will have a crisis. So, we should focus on fiscal issues so that we can grow our economy out of the challenges we have.

“We should not panic too much because of foreign exchange, we must focus on how we can do things within our economy, how we can grow our economy to earn more foreign exchange. Foreign exchange is our problem, but I believe that creating jobs for young people should be more of a priority for us a people at this time.”

The CBN’s Monetary Policy Committee (MPC) had last week raised the Monetary Policy Rate (MPR) by four hundred basis points to 22.75 percent from 18.75 percent.

“All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 400 basis points to 22.75 percent from 18.75 percent. Adjust the asymmetric corridor around the MPR to +100 to -700 from plus 100 to -300 basis points,” Governor of the CBN, Yemi Cardoso, said after the first MPC meeting for the year in Abuja.

The MPR has been 18.75 percent since the last MPC meeting between 24th and 25th July 2023.

With inflation at 29.90 percent, he said the new MPR is part of moves to tackle the country’s inflation.