Hike in interest rate will not grow Nigeria's economy — Ex-CBN director

Dr Titus Okunrounmu, former Director of Research at the Central Bank of Nigeria (CBN), has disclosed that the continuous increase of the Monetary Policy Rate (MPR) by the bank’s Monetary Policy Committee (MPC) will not help the economy to grow.

Okunrounmu disclosed this to the News Agency of Nigeria (NAN) on Wednesday in Ota.

He spoke while reacting to CBN Gov. Olayemi Cardoso’s announcement of the increase of MPR from 22.75 per cent to 24.75 after its two-day Monetary Policy Committee (MPC) Meeting on Tuesday in Abuja.

MPR is a short-term, often overnight rate that banks charge one another to borrow funds. Cardoso had announced the rise in a communiqué he read on the 294th meeting of the MPC.

Cardoso had also on Tuesday in Abuja, announced that the MPC adjusted the Asymmetric Corridor to +100/-300 basis points around the MPR and retained Cash Reserve Ratio at 45 per cent.

The former CBN director said the MPC of the apex bank was looking at data available to make key decisions but it was not making the economy grow because no one would be willing to borrow at a higher interest rate.

“The continuous raising of MPC is not helping the economy because everybody is crying and who wants to borrow at 25 per cent.

“That is the question we should ask ourselves, apart from looking at the data, as lowering the rate would have helped the economy to grow.”

He appealed to the Federal Government to effectively use the funds borrowed from the CBN on capital projects as they were also borrowing at a higher interest rate.

The former CBN director appealed to the government to redouble its efforts towards looking for alternative sources of generating power supply in the country.

He said that with a stable power supply, the productive sector would be able to produce sufficient goods for both local consumption and for exported purposes.

He said this would in turn generate foreign exchange for the country and reduce pressure on currency.

Okunrounmu said it would also drastically bring down the inflation rate and stabilise the foreign exchange.