05/03/2024
Let address the issue raised by governor obaseki that seem to be eliciting praises in some quarters. He query the logic behind MPC of CBN increasing mpr rate, he argues increase investment and it subsequent job creation is the way forward in these mire will find ourself.
Mpr is one of the monetary policy instrument use for controlling the proportion in circulation. In economic parlance excess money in circulation presupposit more disposable income which translate to more money chasing fewer goods(inflation). Excess money in circulation spurs and encourage inflation, by raising mpr it makes investments unattractive since investors are expected to pay premium price to accesses badly neededCapital, yeah there's a merit in the governor argument as privy from the explanation i gave. Going forward i think the governor understood, investment will not yield dividend until the medium and long-term period, the question now? is what then happens in the immediate time period, should CBN fold it hands and allow inflation to erode the actual income of Nigerians without taken drastic actions. It's a standard policy to increase mpr when a country is experiencing galloping inflation, it's meant to fend off inflation. These same argument is what the Turkish government put forward resisting attempt to increase it mpr rate, insisting single interest will attract more investment,More investment means more jobs it also means more goods and services. More goods and services will help correct the imbalance between money in circulation and available goods and services thus inflation will naturally fall. Lol 😆 simple a logic right? but reality is daunting. The Turkish economy was overwhelmed by inflation, the central bank governor was sack, and a new central bank governor was appointed to sphere head the radical economics policies, her first action was to increase their country mpr from a single digit to 40% inflation fell from 80% to the region of 40% there about.
