Economic Recession: CBN, Finance Minister Disagree Over Monetary Policy

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The Central Bank of Nigeria, CBN, has remained adamant in pursuance of its Monetary Policy Rate which pegs interest rate at 14 percent.

The decision retained by the Monetary Policy Committee of the Central Bank of Nigeria on Tuesday however comes in contrary to the earlier call by the Finance Minister, Kemi Adeosun for a lowered interest rate.

Kemi Adeosun had on Monday called on the apex bank to lower its lending rate to create opportunity for the government to borrow money domestically thereby boosting the nation’s failing economy and reducing debt servicing cost.

According to the CBN Governor, Godwin Emefiele who spoke to newsmen after the two-day Monetary Policy Committee meeting, the committee’s stand to retain the Monetary Policy Rate at 14 percent and against the Finance Minister’s call was in order to achieve price stability in the economy.

He further noted that the decision was unanimously voted for by the 10-member committee adding that the committee also decided to leave the Cash Reserve Ratio and the Liquidity Ratio unchanged at 22.5 per cent and 30 per cent, respectively.

The decision to leave the lending rate unchanged however downs the expectations of economic analysts, manufacturers and some government officials.

Eemefiele however advised the Federal Government to emulate other developed countries such as the United States that adjusted its tax policy during the period of economic recession to stimulate consumer demand.

He said: “In the United States and other economies, when you have situations like this, there are those who are naturally vulnerable – the weak, the low and middle-income people. What the government can do is to reduce their tax rates; and for the rich, increase their tax rates so that they can pay more, and this balances out.

“In fact, you can increase more for the high-income earners so that the disposable income for the poor and vulnerable, and middle-income earners can increase so that they can pump liquidity and use it to boost consumption spending.”

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