Peter Obi, the presidential candidate of the Labour Party in the last general election, has criticized the recent increase of the Monetary Policy Rate (MPR) to 22.5% and the Cash Reserve Ratio (CRR) to 45%, arguing that the move will adversely affect the already fragile economy.
Obi has been a strong government critic, offering support when necessary but also expressing disagreement with policies he deems unfit.
Reacting to the development in a post on his LinkedIn page, Obi said the sharp increase in MPR and CRR will result in job loss in the productive and manufacturing sectors that are dependent on credit facilities.
This, according to him, will make loan repayment difficult, resulting in increased bad loans and worsening the nation’s economic situation.
What Peter Obi said:
“I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as it is bound to cause more job losses in the productive sector, especially manufacturing and other sectors that rely on bank loans and credit facilities for their funding needs,”
“Tightening liquidity in the financial system does not improve productivity, ie food production, which is the major cause of inflation in Nigeria,”
“Moreover, only about 12% of N3.6 trillion of the total money in circulation is in the banking system which means that 88%, about N3.2 trillion is outside the banking system,” he said.
Peter Obi’s solutions
According to him, the Central Bank of Nigeria (CBN) should have adopted an alternative strategy to address the increasing inflation rate, which has risen from 28.92% in December to 29.90% in January.
“The most critical way to manage our high rate of inflation and decline in production is for the government to address the issue of insecurity in the country, which will allow for increased food, and crude oil production, and an overall increase in production, which will make products, especially food, cheaper,” he said.
He stressed that adopting this approach would enhance the country’s productivity and restore the confidence of Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) to return to the country.
However, he cautioned that what the Nigerian economy needs now is pragmatic and effective solutions. “Tinkering with classical economic theories can only deepen our crisis,” Obi added
