Wednesday, April 25, 2018 11:15:06 PM- Nigerian Stock Exchange.



  3-Cheers for MPC for maintaining the MPR at 14%

      

April 6 (Lagos) - Monetary Policy Committee of the Central Bank of Nigeria left the key benchmark lending rate at 14% this week. While calls to reduce the interest rates came from different quarters with vested interests,  we must commend the MPC for not making any change which could destabilize the economy at this moment. 

 

Let us not forget that interest rates affect currency exchange rates directly and if interest rates are reduced, it has a weakening effect on the Country's currency. 

 

 In the United States the US Federal Reserve increased their benchmark interest rate last month and is planning to do so at least two more times this year. That would lead to strengthening of the US Dollar against other currencies. 

 

 So for Nigeria's MPC to even consider reducing interest rate at this point could send the Naira into another tailspin and that is something we cannot risk. The economy of Nigeria has already suffered enough due to the flip-flops of the MPC since this government came to power.

 

 Let us go back to November 2015 and subsequently Q1 2016 when MPC cut rates and increased rates in a massive failure of Policy.

 

 In late 2015, the MPC had reduced the interest rates while led to immediate destruction of Naira value against the US Dollar. While there were other reasons also for Naira to hit rock bottom, the decision to cut interest rate at that November 2015 meeting started the effect which led to economic destruction and erosion of buying power of Nigerian consumers.

 

 Few months later, the MPC met again and decided to increase the rate back. In those 2-3 months the damage to the economy of Nigeria was immense and can be felt till now. The flip flop cost Nigerian consumers dearly. Products and services became much more expensive. Naira hit levels that no one expected at some point crossing 500 to 1 dollar in parallel market. Nigerians travelling abroad could not use their debit cards. 

 

 So coming back to present. Let us not fix something which is not broken. 

 

 Now is not the time to reduce interest rates and let us hope the MPC does not do so for the sake of upcoming elections in 2019. 

  

let us wait for Naira to appreciate around N 220 to 1 Dollar before the MPC should consider taking steps which would lead to weakening of the Naira.

  

It is possible for Naira to gain to those levels because of the current Crude oil prices. If the CBN decides that from next week, they will sell Dollar at 220, that will do it. 

  

After that they can surely cut interest rates. 

 

 Let us change for the better and not worse. 

 

 Also this week marks 50 years since Martin Luther King Jr was assassinated in USA. We salute the Great leader for his sacrifices that enable us to live in an equal world today. 

 

reporting for easykobo.com on Friday, April 6 2018 from Lagos, Nigeria




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