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Experts Call For Urgent Solution To Naira Scarcity As MPC Holds Meeting

Some financial experts have urged the Monetary Policy Committee (MPC) of the Cen­tral Bank of Nigeria (CBN) to take urgent steps to address the perennial shortage of cash.

The experts spoke to the News Agency of Nigeria (NAN) on Monday in Abuja, against the backdrop of the 290th meet­ing of the MPC.

The meeting is scheduled to hold on Monday and Tuesday.

According to a financial ex­pert, Mr. Okechukwu Unegbu, the MPC should discuss the cash situation as a matter of priority.

Unegbu, a past president of the Chattered Institute of Bank­ers of Nigeria (CIBN), said that the apex bank’s claim of circu­lating more than N900 billion did not reflect on the Nigerian economy.

He, however, said that the problem would likely amelio­rate as elections had been con­cluded in the country.

“Our biggest challenge pres­ently is the cash situation, and I think the committee should dis­cuss it as a matter of urgency.

“The CBN says it has over N900 billion in the system, but it is not reflecting because cash is still scarce.

“But I believe that with the elections over, cash will start to circulate,” he said.

He urged the committee to also address the “rumblings in the economy’’ in terms of infla­tion and exchange rates.

On the policy rates, Unegbu advised for retention of all ex­isting parameters until the next meeting.

“I suspect that because of rising inflation, which is now 21.91 percent, according to the National Bureau of Statistics (NBS), the MPC may be tempt­ed to raise the rates again.

“But my suggestion is that all the rates should be held con­stant to allow the MPC study the situation until its next meet­ing,’’ he said.

Another financial expert, Mr. Muktar Muhammed, urged the apex bank to explain to Ni­gerians the reasons why naira notes were still scarce.

On policy expectations, Muktar said the MPC would have liked to increase the pre­vailing rates but could be dis­couraged by the already high inflation rate.

Ordinarily, we could see a hike in rates but as it stands now, because of the naira short­age and what it has done to the economy, I do not think they will want to do that.

“Again, inflation is already high and I do not see how hik­ing rates, alongside the cash shortage will help the economy grow better,’’ he said.

According to Uche Uwaleke, a Professor of Capital Market at the Nasarawa State University, Keffi, the use of cash scarcity to stifle demand is not a sustain­able way to tackle inflation.

Uwaleke said that such a step could hurt economic growth and could lead to loss of jobs thereby, fueling unem­ployment.

“Going forward, the CBN should ensure that measures are put in place to ease the cash crunch while gradually imple­menting its cashless policy.

“Inflation rate rose from 21.82 percent in January to 21.91 percent in February, the econ­omy witnessed a slight down­ward pressure in the general prices of commodities.

“This may not be uncon­nected with the cash scarcity which resulted in low demand for goods and services in view of the cash-based nature of the Nigerian economy.

“Recall that as a result of the cash scarcity and low de­mand, many traders who deal in perishable items were forced to sell them at below purchase price or cost of production due to lack of storage facilities,’’ he said.

It would be recalled that at its last meeting in January, MPC increased the Monetary Policy Rate (MPR) by 100 basis points from 16.5 percent to 17.5 percent.

It, however, retained the asymmetric corridor of +100/- 700 basis points around the MPR, the liquidity ratio of 30 percent and the cash reserve ratio (CRR) of 32.5 percent.