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An international finance house has expressed mixed feelings to measures the Central Bank of Nigeria (CBN) has adopted to resuscitate the economy.
Rand Merchant Bank (RMB), in its latest Global Markets Update released on Wednesday, noted in a somewhat surprising move, the CBN tightened its grip on monetary policy by amending some metrics fundamental to its framework.
CBN increased policy rate (MPR) and Cash Reserve Requirement (CRR) while the liquidity ratio was retained.
“The monetary policy outlook is shrouded in uncertainty. Though encouraged by yesterday’s tightening, we are concerned that a lack of policy coordination will keep the CBN in a state of flux,” RMB stated in reaction to the CBN moves.
RMB said there looked to be little opposition to the CBN’s turnabout from the accommodative stance that it adopted in the last quarter of 2015.
The bank argued the CBN’s sudden change of heart was the result of rampant inflation which registered a three-year high of 11,4 percent in February.
“Yet, the committee’s actions are rather puzzling considering that it lowered interest rates at its gathering in November 2015, despite a quickening in headline CPI (consumer price index).”
The MPC, RMB stated, and more particularly, the governor, appear to have abandoned the notion that the central bank has the ability to stimulate demand growth without the attendant fiscal and structural policy changes.
“The communique (on Tuesday) stressed the need to sustain, deepen and speed up reforms designed to ensure focused coordination of monetary and fiscal policies, but experience tells us that this is likely to be a measured process.”
CBN is under pressure to retain the value of the Naira, which is on a freefall against major currencies owing to prevailing economic challenges.
– CAJ News
