Uwaleke Prescribes Fiscal Measures to Tame Galloping Inflation
Ndubuisi Francis in Abuja
The President of the Association of Capital Market Academics of Nigeria (ACMAN), Prof. Uche Uwaleke, has declared that in view of the fact that the major drivers of the current elevated inflation in the country are non-monetary, the problem would require fiscal measures to tame.
Reacting to Tuesday’s decision of the Monetary Policy Committee (MPC) to raise the Monetary Policy Rate ((MPR) by 50 basis points (bps), 26.25 per cent to 26.75 per cent was expected, but expressed concern on the adjustment to the asymmetric corridor around the MPR.
In his position, which he made available to THISDAY, Uwaleke said: “Having done 750 basis points between February and May this year, I had predicted they would do a minimum of 50bps or a max of 100bps 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.
“The MPC communique did not provide any explanation for increasing the SLR from +100 to +500 and the SDR from -300 to -100.
“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 jack up cost of credit with adverse consequences on output and the equities market.”
According to him, the MPC communiqué should have made it clear why it was better to mask the tightening in the asymmetric corridor than reveal it in the MPR.
Uwaleke, who is also the Director, Institute of Capital Market Studies, Nasarawa State University, added: “May I observe that unlike previous MPC communiqués, recent ones are silent regarding how the members voted. This information is useful at this stage even before their personal statements are published.
“I submit 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.”
