Muoghalu Backs CBN over MPR

...charges the apex bank to go hard on forex speculators 


Professor Kingsley Muoghalu,  a former Deputy governor of the Central Bank of Nigeria (CBN) has said he is solidly behind the CBN on its recent monetary policy stance, especially the raising of the Monetary Policy rate by 400 basis points.

He advised the apex bank  to continue its recently announced monetary policy stance of tightening the money supply until inflation is brought under firm control in the single digits.

Muoghalu who was the keynote speaker at the 16 edition of Leadership annual conference and awards held in Abuja  said at a moment of crisis such as this, a choice must be made between macroeconomic stability, in particular price stability and growth.

“Some have criticized the central bank’s rate hike by a dramatic 400 basis points (4%), noting that Nigeria’s present hyper-inflation is much cost- push in nature but demand pull,” he said. “This criticism, while understandable, does not  take the full picture into consideration. 

“First, forex instability is a major cause of cost-push inflation. Loads of Naira sloshing around in loose monetary conditions contributes to the huge demand pressure on the US dollar and other foreign currencies as capital flight intensifies. This vicious cycle must be broken. Doing so will help achieve both price stability and exchange rate stability in the medium term. 

“It is also calculated to increase confidence among investors, who need attractive yields in order to bring in portfolio investments that will help stabilize the exchange rate and do not wish to invest in high-inflation environments that erode value.”

He said the CBN must also keep an eye on financial stability, as high interest rates will stress the ability of businesses to repay or obtain loans. 

“Non- performing loan rates will likely increase. The CBN must now proactively wear its risk management hat to manage the implication of its new found hawkish monetary policy stance for the banking sector.”

The former presidential candidate of the Young Progressive Party, said granted, the CBNs actions are geared more to the short or medium term, and the Bank needs to develop a longer term perspective regarding its mandate. 

“But the Bank’s efforts are part of a necessary multidimensional onslaught. Our weakest link in the financial sector, however, remains Nigeria’s fiscal management.

“Beyond the current actions by the CBN, the Bank must demonstrate a willingness to go hard on forex speculation that is going on in Nigeria’s banking sector. It is not enough to focus on cryptocurrency P2P (peer to peer) such as Binance who do not have political godfathers in Nigeria. 

“The central bank must have the political will of a regulator to crack down on erring banks and bankers. Making examples of a few proven cases of forex hoarding will undoubtedly set heads straight and improve the forex situation. 

“As is well known, the CBN under the overall leadership of Sanusi Lamido Sanusi (during which period I served as deputy governor) boldly and successfully cracked down on corruption in the banking sector after the global financial crisis. This approach helped save Nigeria’s banking sector, and thus the economy.”



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