The President of the Association of Capital Market Academics of Nigeria, Professor Uche Uwaleke, has warned that any attempt by the Central Bank of Nigeria (CBN) to increase the Monetary Policy Rate (MPR) will push more people into chronic hardship.
The CBN will on Tuesday debate whether to slow down inflation with more rate hikes or a potential reduction in the rates.
Nigerians have not celebrated a win over inflation for years, which worsened to 22.7 per cent in June.
The National Bureau of Statistics computed the rate without factoring in the impact of the fuel subsidy removal and naira depreciation.
At the last Monetary Policy Committee meeting under Godwin Emefiele, the rates were increased to 18.5 per cent from 18.0 per cent.
Uwaleke said: “The decision of the MPC in the July meeting will be influenced by the rising inflation expectations due largely to the sudden removal of fuel subsidy, the pressure on the naira and exchange rate volatility occasioned by the recent naira float.
“These considerations tend to recommend a further rate hike aimed at taming the stubborn inflation.
“The Ag CBN Governor who will be chairing the meeting has been part and parcel of the hawkish MPC stance for months now, and so another rates hike will not come as a surprise.
“Be that as it may, the MPC should equally recognise that the removal of fuel subsidy has slowed down economic activities considerably with an attendant drop in productivity.
“So, economic growth and jobs are already negatively impacted such that a further monetary policy tightening would only worsen the situation through the credit channel as cost of capital is increased, and access to credit by small businesses is made more difficult.”
Since the removal of fuel subsidy and the floating of the naira, manufacturers have repriced their products, while agricultural products have become expensive for consumers.
Transportation, a primary driver of Nigeria’s inflation, has worsened as logistics prices have almost doubled.
The subsidy removal and naira floating have affected many other sectors, including health and education, as school fees are already rising while medication costs have jumped.
