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Don says CBN’s proposed interest rate increase will stabilise prices

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A don, Dr Bright Erega, has said the proposed interest rate increase by the Central Bank of Nigeria (CBN) was healthy for the economy because it would enthrone price stability.

Erega, who lectures Economics at the University of Lagos, said this in an interview with the News Agency of Nigeria (NAN) on Wednesday in Lagos.

He said the proposed plan would curb the inflation that would be caused by electioneering campaign ahead of the 2019 general election.

“I am in support of the apex bank initiative, because jacking up the rate will reduce the volume of money in the economy.

“The initiative will slow down the inflation rate, which is expected to rise because of the season of politics,” he said.

He said the argument that jacking up the rate would increase the cost of borrowing was not tenable because the plan was for the ultimate good of the economy.

According to him, the planned increase will protect the local currency, especially as political campaign begins.

“The decision is about the best for now; may be after the election when political activities would have dipped, the rate can be reduced,” he said.

NAN reports that the CBN on Monday hinted of the plan to increase the interest rate to tighten the money in circulation in response to higher inflation ahead of the general election in February, 2019.

The apex bank’s Deputy Governor, Dr Joseph Nnanna, gave the indication on the sidelines of a conference in Sharm El-Sheikh, Egypt.

He said virtually all members of the Monetary Policy Committee (MPC) had supported the idea that “the Monetary Policy Rate should increase if inflationary pressures build up.”

But finance and economic experts have expressed divergent views on the issue with those opposed to the idea saying increasing the MPR would make it difficult for businesses to raise funds.

The MPC has held its key rate at a record 14 per cent since 2016 in a bid to prop up the naira and tame inflation. (NAN)

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