Peter Obi Blasts CBN’s 22.75 per cent Interest Rate Hike, Says It Will Hurt Nigerians and the Economy

Peter Obi, the Labour Party’s presidential candidate in the last election, has slammed the Central Bank of Nigeria (CBN) for raising the interest rate and the cash reserve ratio, saying it will harm Nigerians and the economy.

Obi said the CBN’s decision was misguided and ineffective, as it would not control the money supply or curb inflation. He said it would only lead to more job losses, especially in the manufacturing and other sectors that depend on bank loans and credit facilities.

The CBN’s Monetary Policy Committee (MPC) announced on Tuesday that it had increased the benchmark interest rate by 400 basis points to a record 22.75%, and the cash reserve ratio by 500 basis points to 45%. The CBN Governor, Olayemi Cardoso, said the move was aimed at addressing the rising inflation and exchange rate pressures.

But Obi, in a statement on Thursday on his X handle, said the CBN was wrong to tighten liquidity in the financial system, as it would not improve productivity, especially food production, which he said was the main driver of inflation in Nigeria. He said only 12% of the N3.6 trillion in circulation was in the banking system, while 88%, or N3.2 trillion, was outside the banking system.

He said the CBN’s measures would backfire, as they would not achieve the intended purpose of managing the money supply. He said they would instead starve the real sector of funds, and push the interest rate on loans to above 30%, which would be very hard for the real sector operators, especially manufacturers and SMEs, to repay. He said this would result in more bad loans and a worsening of the economic situation.

Obi said the most urgent way to tackle the high inflation and low production was for the government to address the issue of insecurity in the country, which he said was affecting food and crude oil production, and the overall level of production. He said this would make products, especially food, more affordable and available.

He said this would also boost the productivity of the economy and restore the confidence of foreign direct investors and portfolio investors to come back to the country.

He said the Nigerian economy needed practical and original solutions, not classical economic theories that would only deepen the crisis.

He said he had the experience and the vision to revive the economy and create jobs for Nigerians, if elected as president in the next election.