CBN increase of Monetary Policy Rate will worsen the economy – Peter Obi  

…As LP lawmakers donate 6-months’ salary to ‘alleviate suffering’

Labour Party (LP) presidential candidate, Mr. Peter Obi, has warned that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as it is bound to cause more job losses in the productive sector.

In a series of posts made on his verified X handle, the former governor of Anambra State said that this measure would rather be counterproductive as it would not address the intended purpose of managing the money supply. He said 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.

“Let me confess that the label of being a vintage Onitsha-based trader does not in any way confer on me the status of an economic expert. But with my vast trading knowledge and my involvement in the real sector, I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as 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, ie food production, which is the major cause of inflation in Nigeria. Moreover, only about 12% of N3.6 trillion of the total money in circulation is in the banking system which means that 88%, 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. 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%, which would be very difficult for the real sector operators especially manufacturers and SMEs to repay; resulting, obviously, in increased bad loans, and worsening the nation’s economic situation.

“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 said.

In a related development, the members of Anambra State House of Assembly elected on the platform of the Labour Party (LP), have declared that they would be forfeiting their six months salary in order to help alleviate the suffering of residents of the state.

In a statement signed by all eight members of the LP in the Assembly, said: “We, the Labour Party House of Assembly members wish to lend our voice to the cry of our dear leader, Mr. Peter Obi on the state of the nation after our emergency caucus meeting sitting. We, therefore advise the Federal and State governments as follows: President Bola Tinubu should suspend work on all other sectors including infrastructure for the next six months and declare state of emergency on security and hunger in the nation.

“All state governors including our dear governor, Prof. Charles Soludo to suspend all infrastructural development in their various states for the next six months and declare state of emergency on security and hunger. We, the Labour Party House of Assembly members will relinquish our basic salary for six months to be our contribution to alleviate the suffering of the masses. Majority of Nigerians are suffering. People are dying every day as a result of hunger and insecurity. Thus, there is need for the Federal and State governments to adhere to the advice given by our leader, Mr. Peter Obi and we commend him for this selfless effort to ensure the stability and growth of our nation.”