Peter Obi Slams CBN's Drastic Moves

Peter Obi, Former Presidential Candidate 

The economy will deteriorate if the CBN raises MPR to 22.75%, according to Peter Obi

The Labour Party's nominee for president in the most recent general election, Peter Obi, has voiced concerns about the potential negative effects on the economy of increasing the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) to 22.75% and 45%, respectively.

The former governor of Anambra State claimed in a statement released on Thursday that the manufacturing and productive sectors would lose jobs as a result of the significant increase in MPR and CRR.

Obi stated that the rate increase is counterproductive and that the country's problems with the money supply will not be resolved by the policy.

Read: Forex Crisis: Peter Obi Challenges The FG's Clampdown On BDC Operators

As Obi pointed out, “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.”

Obi contends that the CBN ought to have taken a different tack in order to deal with the nation's skyrocketing inflation rate.