Discordant views from the Finance Minister, Kemi Adeosun, and Central Bank of Nigeria (CBN) governor, Godwin Emefiele, on key fiscal and monetary policy decisions this week, highlight cracks in President Muhammadu Buhari’s economic direction, financial experts and economists saidon Wednesday.
Between Monday and Tuesday, the two top members of the government’s economic team, canvassed opposing views on the best way to grow the country’s economy out of recession.
On Monday, Mrs. Adeosun, apparently voicing the concern of manufacturers, urged the CBN to consider cutting the current 14 per cent benchmark interest rate by banks, to support government stimulus plan to borrow cheap funds locally, to bail out the economy.
Ahead of last Tuesday’s Monetary Policy Committee (MPC) meeting, analysts had expected the CBN to heed the suggestion, to stimulate borrowing from banks to finance productive activities to grow the economy.
However, the unanimous decision of the MPC to keep the prevailing rates unchanged betrayed the lack of consensus among members of the government economic team on the best way to guide the economy out of recession, experts said.
In its resolution, the MPC decided to retain the monetary policy rate (MPR), which sets the lending rate for banks and businesses at 14 per cent.
The committee also kept the cash reserve (CRR), which specifies the minimum fraction of customers’ total deposits commercial banks could hold as reserves either in cash or deposits with the CBN, at 22.5 per cent.
The CBN governor said the MPC’s decision to ignore the Mrs. Adeosun’s proposal in favour of retaining the rates was informed by the bank’s resolve to continue to tighten liquidity in the monetary policy to limit the balance of risks currently weighing against one of its key functions of stabilizing price.
Mr. Emefiele is under pressure to protect the interest of the banks, which is his primary constituency. The banks are comfortable if the status quo remains,” Mr. Enwegbara argued.