The much awaited verdict of the monetary policy committee is out and we are spot on PageOne Markets. The MPC has voted that there will be a hold on interest rate at 14% to curb inflation and get the confidence of foreign investors.
Nigeria’s economy is currently in recession and it is expected to remain in sluggish growth in the next three quarters. While the Finance Minister, Kemi Adeosun proposed a cut in rates to boost growth in a recessing economy, the Central Bank of Nigeria, CBN is looking the other way.
The National Bureau of Statistics, NBS released the inflation data for August showing inflation rate increased from 17.5% in July to 17.6% in August. While the rate of inflation tend to be slowing down, the survey shows that food prices are still a major driver of consumer prices.
Many multinationals in the oil and gas sector, retailing and adjunct services have either cut jobs or suspended operations. Another data from the NBS that shows how bad the economy has gone is the fact that Nigeria only generated about 90,000 jobs in the first quarter of the year as opposed to over 500,000 generated within the same quarter last year.
The Bigger Picture
The decision of the monetary policy committee and the varying view of the Finance Minister goes a long way to show the lack of coordination of the government’s policy on reviving the economy. While the Finance Minister is free to express her views, it is expected that such principal officer would have aligned with another principal officer in the person of the CBN governor.
The Vice President, Professor Yemi Osinbajo has also blamed the militants in the Niger Delta for Nigeria’s recession. While his points are valid, the pussy-footing of his government in taking vital decisions at the time they are needed precipitated the economic crisis.
While Emefiele has not proposed a coherent policy so far, the MPC could not have done anything different. Cutting interest rate is a recipe for more disaster as inflation will be hard to tame.