Reps Cautions CBN against Unintended Consequences of High Interest Rates

Reps Cautions CBN against Unintended Consequences of High Interest Rates

The House of Representatives Committee on National Planning and Economic Development has cautioned the Central Bank of Nigeria (CBN) against the unintended consequences of high interest rates aimed at curbing inflation in the country.

Chairman of the committee, Gboyega Isiaka (APC-Ogun), stated this on Wednesday in Abuja during a meeting with the Statistician-General of the Federation and Chief Executive Officer of National Bureau of Statistics, Adeyemi Adeniran.

Nasiru said that the caution had become necessary as the CBN holds its 300th Monetary Policy Committee (MPC) meeting next week.

He said that there seemed to be a majority opinion that the current government had taken bold steps and pursued market-driven reforms that had been yielding results.

Nasiru acknowledged that the policy had yielded great results, as the economy was getting stabilised and confidence being restored.

He noted that Nigeria’s capital market had surged by about 100 per cent in the last two years, while CBN recorded the highest level of external reserves in over three years.

The lawmaker said that the apex bank was also reported to have recorded a profit of N38.8 billion, a remarkable turnaround from the N1.15 trillion loss recorded in 2023.

He, however, said that high interest rates had negatively impacted the manufacturing, agriculture and small and medium enterprise (SME) sector, which was a significant employer of labour.

“The Monetary Policy Rate (MPR) has been raised 10 times since January 2023 and currently standing at 27.5 percent from 16.5 percent in 2023, with the aim of curbing demand+pull inflation.

“However, it appears that the effectiveness of this policy has been undermined by structural bottlenecks, supply chain inefficiencies etc.

“It is, therefore, our view that considering the current economic landscape, the monetary authorities, as they meet next week, should consider a more accommodative stance that also promotes growth and employment generation,” he said.

In his presentation, Adeniran said that the latest reference period published by the Bureau for Q2, 2024, reported an unemployment rate of 4.3 per cent, down from 5.3 per cent in the previous quarter.

He said that unemployment was more prevalent among females (5.1 per cent) than males (3.4 per cent) and was higher in urban areas (5.2 per cent) compared to rural areas (2.8 per cent).

Adeniran said young people faced a relatively higher unemployment rate of 6.5 per cent compared to the headline figure.

Additionally, he said that 12.5 per cent of youths were not in employment, education or training, with the rate higher among young females (14.3 per cent) compared to young males (10.9 per cent).

The statistician-general said that the Q3 and Q4 2024 reports were being finalised after which they would be disseminated to the public.