President of Time Economics Dr Ogho Okiti has said that the Monetary Policy Committee (MPC) retention of the Monetary Policy Rate (MPR) and other fiscal policy parameters at existing levels was a “right step in the right direction’’.
He made this known in an interview with the News Agency of Nigeria on Thursday in Abuja.
The MPC, which met for the first time in 2018, unanimously agreed to retain the MPR at 14.0 per cent alongside all other policy parameters.
Cash Reserve Ratio (CRR) was left at 22.5 per cent, Liquidity Ratio at 30.0 per cent and Asymmetric corridor at +200 and -500 basis points around the MPR.
The committee also urged the Federal Government to initiate strong stabilisation programmes and freeze the growth in its aggregate expenditure and Federation Account Allocation Committee (FAAC) distributions in order to create savings.
This, it said was needed to stabilise the economy against future oil price related shocks.
Okiti said the decision to retain the parameters was right because though inflation was falling, it was still above the MPR.
“Any reduction would have meant a wider negative real interest rate.
“Data shows that the economic conditions are improving, but not dramatically and significant yet,’’ Okiti explained.
He also said most of the MPC members were new, so it was sensible for them to be cautious at their first meeting and leave rates at existing levels.
Okiti also said the nation was not saving enough, and that the rate of borrowing by the government was staggering.
“This can only lead to decline in potential output of the economy, except we start to correct the trend and focus on improving production and productivity across all sectors of the economy,’’ the economist said.
The committee also predicted a fragile economic growth for the nation in 2018.