Peter Obi, the Presidential candidate for the Labour Party (LP) in the 2023 general elections has revealed that the Monetary Policy Committee’s recent decision to raise the Monetary Policy Rate (MPR) to 22.5% and the Cash Reserve Ratio (CRR) to 45% will worsen the financial situation of the majority of Nigerian households.
Obi who spoke via his verified X handle on Thursday evening said there would inevitably be a rise in job losses within the productive sector and a rise in bank loan interest rates to 30%.
According to him, managing the nation’s high rate of inflation and production reduction would require solving the insecurity issues facing the nation.
He said: “I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the MPR to 22.5 per cent and the Cash Reserve Ratio, to 45 per cent will further worsen the economic situation of most Nigerian households.
“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.
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“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 per cent of N3.6 trillion of the total money in circulation is in the banking system which means that 88 per cent, about N3.2 trillion is outside the banking system.
“So, this measure would rather be counterproductive as it would not address the intended purpose of managing the money supply.
“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.
“This way, we would increase our productivity as well as restore the confidence of FDIs and FPIs to come back to the country.
“I must caution that what the Nigerian economy needs now is hard-headed practical originality and results. Tinkering with classical economic theories can only deepen our crisis.”
