Two financial experts on Sunday expressed divergent views on whether the apex bank should retain or reduce the lending rate ahead of the Monetary Policy Committee (MPC) meeting this week.
The News Agency of Nigeria (NAN) reports that the MPC meeting had been scheduled to hold in Abuja between March 20 and 21.
In separate interviews with NAN in Lagos, one expert supported a reduction in the interest rate to grow small businesses, while the other called for its retention, citing liquidity challenges.
According to Prof. Sherrifdeen Tella, a Senior Economist at the Olabisi Onabanjo University, Ago-Iwoye, Ogun, the current high lending rate portends great danger for the economy.
Tella said that a lower interest rate would allow the private sector to borrow money competitively.
He explained that encouraging a savings culture could only be brought about by the availability of income.
“When the lending rate is high, banks prefer to sell bonds and treasury bills.
“We continue to appeal to the CBN to listen to our cry for the reduction of the interest rate for the overall good of the economy, especially small businesses,’’ Tella said.
On his part, Dr Chijioke Mgbame, Associate Professor of Accounting, University of Benin, said that the CBN should retain the lending rate because of the liquidity problem in the economy.
Mgbame noted that addressing the nation’s economic problems “defy an economic model’’ because of the different interests manipulating the economy.
“Sometimes we need some abnormal policies to correct the problems of the economy,’’ Mgbame said.
He explained that since the economy was witnessing some level of recovery, he expected the CBN to keep up the momentum and retain some of the monetary policy parameters.
NAN reports that the CBN rose from its last MPC meeting on Jan. 24, retaining the Monetary Policy Ratio (MPR) at 14 per cent, alongside other monetary policy parameters.
Its resolution came in spite of appeals by experts to lower the MPR or lending rate to stimulate the economy. (NAN)