CBN flayed for jerking  up MPR by 400 basis points

Tue, Feb 27, 2024
By editor


THE Central Bank of Nigeria, CBN, has been flayed for jerking up MPR by 400 basis points to on February 27 after the monetary policy committee meeting.

Uchenna Uwaleke, professor of capital market and special adviser to the Senate chair on Banking, Insurance and other Financial Institutions said that “jerking up the MPR by 400 basis points in one fell swoop is simply an overkill.”

He queried: “Why not by not more than 200 basis points since they have another opportunity to meet next month and review impact?

According to him, “They didn’t stop at MPR, they also jerked up the CRR to 45% which at the previous level of 32.5% was among the highest in Sub Saharan Africa.”

The CBN governor had assured that policies of the bank would be evidence-based. Which empirical results support this aggressive move? he asked.

Uwaleke  pitied the real sectors of the economy, adding that “the implication is that for every deposit in the bank, CRR takes 45% of it while Liquidity ratio takes 30%. So it is only 25% of the deposit that banks can lend!

“This has negative implications for access to credit, cost of capital for firms, cost of debt service by the government and asset quality of banks. 

“Expect banks to quickly reprice their loans with negative consequences for non performing loans and financial soundness indicators.

“By this overkill on the economy in a bid to crash elevated  inflation which by the way has numerous non monetary factors driving it, output is bound to shrink. 

“So, expect lower GDP numbers especially from Agric and Industry sectors as well as a surge in unemployment levels.” 

“This is not a welcome development”, he said.

27th February, 2024.