Peter Obi Raises Alarm Over CBN’s 22.75 Per Cent Interest Rate

The Monetary Policy Committee recently decided to raise the Monetary Policy Rate (MPR) to 22.5% and the Cash Reserve Ratio (CRR) to 45%. Mr. Peter Obi, the presidential candidate of the Labour Party in the most recent general election, has criticised this decision, claiming it will worsen the financial situation of the majority of Nigerian households.

Obi claimed that because the policy would not address the objective goal of regulating the money supply, it would be unproductive.

He claimed that more job losses in the productive sector—particularly in manufacturing and other industries that depend on bank loans and credit facilities for funding—were inevitable as a result of the development.

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According to Anaedoonline.ng, the Central Bank of Nigeria’s MPC Policy Committee raised the benchmark interest rate by 400 basis points to a record 22.75%.

This was declared by CBN Governor Olayemi Cardoso on Tuesday in Abuja during the reading of the minutes of the first MPC meeting of the year.

But Obi contended in a statement posted on his X account on Thursday that reducing the amount of liquidity in the banking system does not increase productivity—particularly in the area of food production, which he said was the primary driver of inflation in Nigeria.

The former governor of Anambra State made recommendations for what needed to be done, saying that the government’s response to the nation’s high rate of inflation and production decline was the most important step.

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He emphasised that this would enable more production of food, crude oil, and other goods, which will make items, particularly food, cheaper.

The statement read: “Let me confess that the label of being a vintage Onitsha-based trader does not in any way confer on me the status of an economic expert.

“With my vast trading knowledge and my involvement in the real sector, I am of the strong opinion that the recent decision of the Monetary Policy Committee to increase the Monetary Policy Rate, MPR, to 22.5% and the Cash Reserve Ratio, CRR, to 45% will further worsen the economic situation of most Nigerian households as 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.

“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% of N3.6 trillion of the total money in circulation is in the banking system which means that 88%, about N3.2 trillion is outside the banking system.

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“So, this measure would rather be counterproductive as it would not address the intended purpose of managing the money supply.

“These new measures will worsen the fragile economy as the supply of funds would dry up for the real sector, and the new MPR rate hike will push the interest rate on loans to above 30%, which would be very difficult for the real sector operators especially manufacturers and SMEs to repay; resulting, obviously, in increased bad loans, and worsening the nation’s economic situation.

“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.

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“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”.

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