•Prof Kila
As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria prepares to meet today and tomorrow, September 23 to 24, it is safe to say that only one of three outcomes is possible. They will either increase, decrease or keep interest at the same level.
My suggestion for them is to pause the hike in interest rates. However, none of these outcomes will matter to most in the country.
In most organised and noteworthy economies, the MPC meetings are anticipated with anticipation and hope. The outcomes of these meetings have direct impacts on various sectors of the economy, including financial, retail, and real estate, because interest rates matter for and affect everyone.
Such is not the case in the Nigerian system, where a more significant part of the economy is neither captured nor affected by interest rates.
The only rate that affects most Nigerians is the foreign exchange rate, and the MPC cannot directly and impactfully affect that.
Another problem with the MPC is that the inflation rates they use for the analysis do not reflect what most people are experiencing in their everyday lives.
With rates that do not reflect Nigerians’ realities, the MPC’s interventions remain academic exercises or, at best, interventions that affect very few.
For the MPC to matter, the CBN needs to take cognisance of these limits and work towards reviewing its index for measuring inflation, growth, and other economic indices. It should also work towards making interest rates central to people’s lives by deliberately enhancing consumer finance facilities and processes and allowing fiscal policies to take their rightful place in the economy.
•Prof. Anthony Kila is a Commonwealth Institute Director and political economist.
