Labour Party (LP) presidential candidate in the 2023 general elections, Peter Obi, has revealed that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate (MPR) to 22.5 percent and the Cash Reserve Ratio (CRR) to 45 percent will further worsen the economic situation of most Nigerian households.
He argued that it is bound to cause more job losses in the productive sector, and push interest rate on bank loans to 30 percent.
Obi, in a statement on his X handle on Thursday, opined that addressing insecurity challenges in the country remains the only way to manage the country’s high inflation rate and decline in production.
“I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the MPR to 22.5 percent and the Cash Reserve Ratio to 45 percent will further worsen the economic situation of most Nigerian households.
“It is bound to cause more job losses in the productive sector, especially manufacturing and other sectors that rely on bank loans and credit facilities for their funding needs.
“Tightening liquidity in the financial system does not improve productivity, i.e. food production, which is the major cause of inflation in Nigeria.
“Moreover, only about 12 percent of N3.6 trillion of the total money in circulation is in the banking system which means that 88 percent, 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,” he said.
According to him, these new measures will worsen the fragile economy as the supply of funds would dry up for the real sector, and the new MPR rate hike will push the interest rate on loans to above 30 percent.
“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 an overall increase in production, which will make products, especially food, cheaper.
“This way, we would increase our productivity as well as restore the confidence of FDIs and FPIs to come back to the country.
“I must caution that what the Nigerian economy needs now is hard headed practical originality and results. Tinkering with classical economic theories can only deepen our crisis,” he added.
Sunday Ehigiator
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