Money market: CBN retains rates

A major development in the money market this week was the retention of the Monetary Policy Rate by the Central Bank of Nigeria.
The News Agency of Nigeria reports that CBN Governor, Malam Sanusi Lamido Sanusi, announced the retention of the MPR and Cash Reserve Ratio on May 22.
The announcement came after a two-day meeting of the apex bank’s Monetary Policy Committee in Abuja.
The MPR, one of the monetary policy instruments of the CBN, is the benchmark lending rate and the rate at which the CBN lends to commercial banks.
The apex bank retained CRR at 30 per cent and pegged MPR at 12 per cent.
Another important development this week was the CBN’s advice to the Federal Government not to spend too much on the state of emergency declared in three states.
Sanusi said that excessive spending on the emergency rule could be inflationary.
Remi Alarape, Managing Director, Remmy Associates Limited, said that the retention of MPR at 12 per cent was a negation of development aspirations of Nigerians.
Alarape said the MPR rate could slow down economic growth.
Alarape said that the issue of diversification of the economy should be given more attention, adding that the economy was currently structurally imbalanced.
“Until our government gives more attention to the industrial and the agricultural sectors, the CBN’s monetary policies will continue to achieve undesirable results,” he said.
Dr. Deji Thomas, a Senior Lecturer, Department of Economics, University of Lagos, said no nation could achieve sustainable growth with a high MPR regime.
Thomas suggested that the challenges of improving the nation’s infrastructure needed to be taken more seriously.
“If we have the infrastructure in place, foreign investors will be attracted into the country and our productivity will improve, while more jobs will be available,” he said.
Thomas hailed the retention of the CRR, saying it was a step in the right direction.