You dont have javascript enabled! Please enable it! BREAKING: CBN’s Decision To Raise Benchmark Lending Rate To 22.75% ‘An Overkill’ For Nigeria’s Economy— Uwaleke - 247Updates

BREAKING: CBN’s Decision To Raise Benchmark Lending Rate To 22.75% ‘An Overkill’ For Nigeria’s Economy— Uwaleke

Nigeria’s first Professor of Capital Market Studies, Uche Uwaleke on Tuesday described the decision of the Central Bank of Nigeria to raise the benchmark lending rate by 400 basis point to 22.75 per cent as “an overkill.”...CONTINUE READING

Uwaleke who said this in his reactions to the CBN decision, stated that it was dangerous to raise the Monetary Policy Rate by more than 200 basis points since the Monetary Policy Committee has another opportunity to meet next month and review impact.

He said one of the negative impacts of the decision of the CBN would be lower Gross Domestic Product numbers especially from agric and industry sectors as well as a surge in unemployment levels.

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Uwaleke said, “Jerking up the MPR by 400 basis points in one fell swoop is simply an overkill. Why not by not more than 200 basis points since they have another opportunity to meet next month and review impact?

“They didn’t stop at MPR, they also jerked up the CRR to 45 per cent which at the previous level of 32.5 per cent was among the highest in Sub Saharan Africa.

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“The CBN Governor had assured that policies of the bank would be evidence-based. Which empirical results support this aggressive move?

“I pity the real sectors of the economy. The implication is that for every deposit in the bank, CRR takes 45 per cent of it while Liquidity ratio takes 30 per cent. So, it is only 25 per cent of the deposit that banks can lend.

“This has negative implications for access to credit, cost of capital for firms, cost of debt service by the government and asset quality of banks.

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“Expect banks to quickly reprice their loans with negative consequences for non-performing loans and financial soundness indicators.

“By this overkill on the economy in a bid to crash elevated inflation which by the way has numerous non-monetary factors driving it, output is bound to shrink.

“So, expect lower GDP numbers especially from Agric and Industry sectors as well as a surge in unemployment levels. This is not a welcome development.”