MPC: Adedipe urges rates hike to boost investment, curb inflation

BRANDPOWER reports that the committee will hold its first meeting on Feb. 26 and Feb. 27, since the CBN Gov. Olayemi Cardoso resumed office.

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MPC: Adedipe urges rates hike to boost investment, curb inflationDr ‘Biodun Adedipe, Chief Consultant of B. Adedipe Associates Ltd., has advised the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate (MPR) to increase the real interest rate and encourage investment.

Adedipe said this at the 10th National Economic Outlook, organised by the Chartered Institute of Bankers of Nigeria Centre for Financial Studies, in collaboration with B. Adedipe Associates Ltd., on Tuesday in Lagos.

BRANDPOWER reports that the meeting has the theme, “Implications for Businesses in 2024’’.

BRANDPOWER reports that the committee will hold its first meeting on Feb. 26 and Feb. 27, since the CBN Gov. Olayemi Cardoso resumed office.

The MPC was last held in July 2023 and was presided over by Folashodun Shonubi, former Acting Governor of CBN.

He said that the current situation in Nigeria with a high inflation rate and low interest rates had led to a negative real interest rate, which in turn had been discouraging investment.

Adedipe, also the founder of the compay, said that this negative real interest rate occurs when the inflation rate subtracted from the interest rate results in a negative value.

Adedipe emphasised that economic growth and development rely heavily on investment, which is being hindered by the current conditions.

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Adedipe, therefore, anticipated the committee to raise interest rates to address the issue and encourage economic growth.

He said, “inflation rate latest figure for December 28. 92 per cent, Monetary Policy Rate, 18. 75 per cent, that’s a real differential which when interpreted means negative interest rate.

“So ordinarily for any central or reserved bank in the world, they want to reduce that differential and move it more to a positive real interest rate in which case, that is what will incentivize investment. That is a typical approach to orthodoxy in monetary policy.

“So, if we look at that alone, then we should expect that monetary policy rate will be raised by the monetary policy committee which of course we have now a tentative agenda of its meeting commencing February this year.’’

Meanwhile, Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research, University of Lagos, told NAN in an interview that the monetary policy committee decisions were crucial in addressing these challenges.

The financial economist urged the MPC to take decisive action at its upcoming meeting to address the urgent issue of foreign exchange instability.

This, he said, could help control inflation and potentially pave the way for lower interest rates and economic stability.

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Ndubisi said, “I think the MPC meeting is very important at this stage of the country’s development. Given the myriad of economic challenges in relation to inflation, interest rates, and exchange rate instability; the policy intervention by the CBN through the MPC is very critical.

“Most importantly, there’s the need to urgently stem the tide in the instability in the foreign exchange; this has strong pass-through effects on inflation and interest rates, among others.’’