MPC: Adjusting Asymmetric Corridor Will Jerk Up Cost Of Credit In Banks -Uwaleke
By Sunday Etuka, Abuja
Renowned Professor of Finance and Capital Market at the Nasarawa State University, Uche Uwaleke has expressed concern over the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to adjust the asymmetric corridor around the Monetary Policy Rate (MPR) to +500/-100 from +100/300 basis points.
Prof. Uwaleke, who expressed this concern in a Chat with TheFact Daily on Tuesday said, the MPC communique did not provide any explanation for increasing the SLR from +100 to +500 and the SDR from -300 to -100.
He said, “by implication, with an MPR of 26.75%, banks will now get loans from the CBN at 31.75% while they will be remunerated for their excess deposits at 25.75%.
“This will further squeeze liquidity from the banking system and jerk up cost of credit with adverse consequences on output and the equities market.
“The MPC communique should have made it clear why it was better to mask the tightening in the asymmetric corridor than reveal it in the MPR”, he said.
Prof. Uwaleke who is also the First Capital Market Professor in Nigeria, however, stated that having done 750 basis points between February and May this year, he had predicted that the MPC would do a minimum of 50 basis points or a max of 100 basis points in July.
“I am glad to note that they chose the floor which is a sign that a complete halt is most likely in their next scheduled meeting in September.
“But the adjustment to the asymmetric corridor around the MPR is a major source of concern for me”, he said.
He, observed that unlike previous MPC communiques, the recent ones are silent regarding how the members voted.
“This information is useful at this stage even before their personal statements are published”, Uwaleke said.
He, however, submitted that as far as taming the current elevated inflation in Nigeria is concerned in view of its major non-monetary drivers, the fiscal side holds the ace.
