Ahead of the next meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), analysts have said chances are slim that the benchmark interest rate will be adjusted.
The meeting, scheduled to be held next Monday and Tuesday, is coming at a time when there are concerns around inflation rate, fragile growth, rising oil prices and the impact of Russia-Ukraine conflict on the economy.
Nigeria’s headline inflation increased from 15.60 percent in January to 15.70 percent in February 2022, according to the report released by the National Bureau of Statistics (NBS) on Tuesday.
Analysts polled by BusinessDay expressed worry that the rising international prices of crude oil are not benefitting Nigeria due to the country’s low production level.
The MPC members, at their last meeting in January, voted unanimously to maintain the monetary policy rate at 11.5 percent and keep all other parameters unchanged, due to weak growth and inflation concerns.
“I expect the CBN to keep rates unchanged. The CBN will want to observe and assess for a while how much of an impact the Russia-Ukraine war will have on the Nigerian economy,” Ayodeji Ebo, head of retail investment, Chapel Hill Denham, said.
He said the major highlight would be on the low oil production and foreign exchange.
According to the International Monetary Fund (IMF), the war in Ukraine and sanctions on Russia are upending shipments and possibly production for two of the world’s largest agricultural producers.
The two countries account for nearly 30 percent of world wheat exports and 18 percent of corn, most of which is shipped through Black Sea ports that are now closed. Wheat futures traded in Chicago, the global benchmark, recently rose to a record.
Taiwo Oyedele, head of tax and corporate advisory services at PwC, said the ongoing Russia-Ukraine conflict had added additional complexity and uncertainty to the economic mix which the monetary authorities have to contend with.
“We are already witnessing the impact by way of higher prices of major consumption items like fuel products, wheat and other grains and their by-products. However, given the expectation that the conflict will hopefully be temporary, I do not expect it to trigger a change in policy stance by the MPC in the short term,” he said.
Global food prices are poised to keep climbing even after jumping to a record in February, placing the heaviest burden on vulnerable populations while adding to headwinds for the global economic recovery, the IMF said in a new report on Wednesday.
Food commodity prices rose 23.1 percent last year, the fastest pace in more than a decade, according to inflation-adjusted figures from the United Nations Food and Agriculture Organization. February’s reading was the highest since 1961 for the gauge tracking prices for meat, dairy, cereals, oils, and sugar.
Food costs account for 17 percent of consumer spending in advanced economies, but 40 percent in sub-Saharan Africa. Though this region is highly import-dependent for wheat, the grain constitutes only a minor share of the total caloric needs.
“With the fragile economic growth and rising inflation (Feb figures recently published at 15.60 percent, 10bps increase from Jan figures), it is likely that there will be no alterations to current monetary policies parameters,” said Ola Oladele, vice president, global market at Parthian Partners, Africa’s premier inter-dealer broker.
In the last MPC meeting, Godwin Emefiele, CBN governor, signalled that the existing monetary policy stance could be allowed to continue for a little longer to achieve the committee’s mandate of sustainable growth while unfolding global developments.
He added that the uptick in inflation was likely a temporary development.