Obi said the MPR rate hike will push interest rate on loans to above 30%, which would be very difficult for the real sector operators especially manufacturers and SMEs to repay.
By Jeffrey Agbo
Former presidential candidate, Peter Obi, has criticised the Central Bank of Nigeria (CBN) over the increase in the monetary policy rate (MPR) by 400 basis points from 18.75 to 22.75.
According to Obi, the new policy will worsen the economic situation in the country and will seriously affect the productive sector and lead to job loss.
Writing on his X handle on Thursday, he said, “Let me confess that theof being a vintage Onitsha-based trader does not in any way confer on me the status of an economic expert.
“With my vast trading knowledge and my involvement in the real sector, I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as it is bound to cause more job losses in the productive sector, especially manufacturing and other sectors that rely on bank loans for their funding needs.
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“Tightening liquidity in the financial system does not improve productivity, ie food production, which is the major cause of inflation in Nigeria. Moreover, only about 12% of N3.6 trillion total money, in circulation, is in the banking system which means that 88%, about N3.2 trillion is outside the banking system.
“So, this measure would rather be counterproductive as it would not address the intended purpose of managing the money supply.”
Obi said the MPR rate hike will push interest rate on loans to above 30%, which would be very difficult for the real sector operators especially manufacturers and SMEs to repay.
This, he noted, would consequently result in increased bad loans and ultimately worsen the nation’s economic situation.
“The most critical way to manage our high rate of inflation and decline in production is for the government to address the issue of insecurity in the country, which will allow for increased food, and crude oil production, and the overall increase in production, which will make products, especially foods, cheaper.
“This way we would increase our productivity as well as restore the confidence of FDIs and FPIs to come back to the country,” he added.