A financial expert has criticized the Central Bank of Nigeria (CBN) for implementing monetary policies that may be exacerbating the country's economic challenges rather than alleviating them.
Professor Sebastian Uremadu, a Banking and Finance expert, called on the CBN to reconsider its current monetary control measures and high interest rate policies during his delivery of the 60th Inaugural Lecture at Michael Okpara University of Agriculture, Umudike, Abia State on Wednesday.
Impact of High Interest Rates on Investment
According to Professor Uremadu, the CBN's interest rates are "about the highest in the world," creating significant barriers for both local and foreign investors seeking to access capital for business development.
"Interest rates fixed by the CBN is about the highest in the world and this scares away domestic and foreign investors from taking loans," he stated during his lecture.
The professor further explained that these high rates make it extremely difficult for companies and individual investors to access funds or repay existing loans, ultimately undermining investor confidence in Nigeria's business environment.
Cash Reserve Ratio Concerns
Another policy criticized by the expert is the CBN's mandate requiring commercial banks to maintain a 50% cash reserve ratio (CRR), which he argues severely restricts liquidity in the banking system.
"How can the banks be told to keep 50% of the customers deposit with the CBN? Where will the banks get the money to lend to the investors or fund investments and how can they have enough money to pay their customers?" Professor Uremadu questioned.
He emphasized that research has shown these CBN policies, combined with fuel subsidy removal, have significantly contributed to inflation and the broader economic crisis facing the country.
Recommendations for Economic Growth
The professor highlighted Foreign Direct Investment (FDI) as a crucial catalyst for capital formation that could substantially boost Nigeria's economic development. He urged policymakers to create a more favorable investment climate to attract both foreign and domestic investors.
Additionally, Professor Uremadu called on the Federal Government to reduce Nigeria's overdependence on foreign capital by increasing spending in key sectors such as health, education, and infrastructure to drive sustainable economic growth.
He identified several macroeconomic variables as contributors to rising inflation, including fiscal deficit, uncontrolled growth in money supply, high interest rates, and exchange rate volatility.
The professor also expressed concerns about the accuracy of economic data released by the National Bureau of Statistics (NBS), suggesting that these figures may not accurately reflect Nigeria's actual economic situation.
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