Experts predict rates retention as CBN beings MPC meeting today in Abuja
The Central Bank of Nigeria (CBN) will this Monday morning, begin another round of Monetary Policy Committee (MPC) to review the performances of given monetary indices in the weight of recent policies and happenstances in the economy.
In the last meeting held in March, MPC had relied on “data and forecasts of key economic variables as well as the newly released Federal Government’s Economic Recovery and Growth Plan (ERGP), indicate prospects of output recovery in 2017”, to retain all the rates.
Besides, deputy governor of the bank, Joseph Nnanna, said before an interest rate announcement next week, the apex bank will keep the monetary policy tight as dollar shortages persist.
According to him, “Now is not the time to ease policy, he said in an interview with Bloomberg in Abuja. Inflation slowed for a third month in April, but at 17.2 per cent remains almost double the upper limit of the bank’s six per cent to nine per cent target”.
“We are battling with liquidity as it were, so tight monetary policy will be for now,” he added.
The MPC, of which Nnanna is a member, is scheduled to announce its decision on May 23. All but one of 21 economists surveyed by Bloomberg predicts it will keep the main rate at a record high of 14 per cent, a level it’s been at since July.
However, the head of Africa macro research at Standard Chartered Plc, Razia Khan, forecasts a cut of 100 basis points.
Nnanna said he would probably replace Sarah Alade as head of economic policy at the central bank, a role that’s key to wooing back foreign investors and helping the nation alleviate its dollar-squeeze.
Alade retired in March and was the best-known of Nigeria’s four deputy governors among global bond and stock investors, often accompanying Governor Godwin Emefiele on road shows. Nnanna is currently in charge of financial system stability and has overseen the economic policy brief since Alade’s departure.
Chairman of the Committee and Governor of the CBN, Dr. Godwin Emefiele had announced then at the end of the two-day meeting that “The Committee, in consideration of the headwinds in the domestic economy and the uncertainties in the global environment, decided by 9 out of 10 members to retain the MPR at 14.0 per cent alongside all other policy parameters.
One member voted to raise the MPR. In summary, the MPC decided to:
(i) Retain the MPR at 14 per cent;
(ii) Retain the CRR at 22.5 per cent;
(iii) Retain the Liquidity Ratio at 30.00 per cent; and
(iv) Retain the Asymmetric corridor at +200 and -500 basis points around the MPR”.
Many of the finance analysts have predicted that considering the not so certain status of the economy and markets, it may not be out of place if the MPC decides to retain all rates.
Analysts are upbeat that not so much, if any has changed that will warrant any recalibration of rates.
