Obaseki to CBN: Increasing interest rate will not lead to economic growth

Godwin Obaseki, governor of Edo state, says fundamentally and fiscally, an increase in the monetary policy rate (MPR) will not lead to economic growth.

On February 27, 2024, the monetary policy committee of the Central Bank of Nigeria (CBN) raised the MPR, which benchmarks interest rates, from 18.75 percent to 22.75 percent.

Speaking during the recent annual dinner of Edo zone bankers’ committee, Obaseki said the policies that have been rolled out by the CBN will not “support growth in our economy”.

“Interest rates are already very high and jacking up the interest rates clearly will not allow small borrowers, small businesses access to credit at a price to help them grow their businesses,” he said.  

“And when an economy is in this state, it needs all the push and support it can. So, I understand the rationale for increasing MPR  but fundamentally and fiscally, it is not going to lead to growth in our economy.

“We must focus on the fundamentals, which is increasing production, making sure our citizens produce the goods and services we consume and depend less on imports.”

He said Nigeria’s economic and monetary policies can not be determined by the exchange rate alone. 

“So, this whole issue of increasing cash reserves in a bid to tighten liquidity is going to be detrimental to our economy.

“I understand the challenges the monetary authorities face but unfortunately you can not clap with one hand.

“The economy is about fiscal and monetary policies. Both must work hand in hand, and when they don’t as they don’t in Nigeria, we have a crisis.”

The governor said the country must focus on fiscal issues so that “we can grow our economy out of the challenges we have”.

“We should not panic too much because of foreign exchange. We must focus on how we can do things within our economy, how we can grow our economy to earn more FX if foreign exchange is our problem,” he said. 

Obaseki said providing jobs for young people should be a top priority for the entire country at the moment.