Economists at Bloomberg forecasted that Nigeria’s current Monetary Policy Rate (MPR) at 14 percent will remain constant till the end of H2 2018. If that happens it means that the rate which has been constant at 14 percent since July 2016 will remain unchanged till end-year 2018.
“Economists say a reconfiguration of the monetary policy committee (MPC) in late 2017 and the early 2018 has increased the sway of Godwin Emefele over the Central Bank of Nigeria (CBN) to keep the policy rate on hold at 14 percent in 2018,” Mark Bohlund, Economist, Bloomberg Africa said in an article.
“Nigeria’s inflation rate dropped from a high of close to 20 percent in early 2017 to around 11.6 percent in May. But the CBN expects it to be subject to upward pressure in the second half of the year, thanks to fiscal stimulus. The Naira peg against the U.S dollar is likely to remain in place beyond 2019 elections,” Bohlund added
Analysts in Nigeria have agreed to this forecast saying holding the rate constant till the rest of the year is logical especially in the light of heightened electioneering activities coming up in the second half of the year.
“The fact that budget disbarsement will start earnest and we have a N2.87 trillion capital expenditure that the government will want to disburse quickly, coupled with the huge election expenses that will come into the financial system could make the CBN to hold the rate,” Johnson Chukwu, MD of Cowry Asset Limited explained.
“This thing will exact a lot of pressure on liquidity situation and on the FX. The CBN will do everything to manage the liquidity. So while they have that pressure, they are not likely to worsen it by reducing it under the cash reserve ratio or MPR because if they do they will be using their hand to shoot themselves,”
“In the same vein, they cannot increase the rate because the economy is still recovering at a sluggish rate of 1.95 percent. So the option they have is to keep the rate at the current level,” Chukwu concluded.
The MPC is a committee saddled with the statutory responsibility of managing the monetary and exchange rate policy of the economy. The MPC meeting is held bimonthly, making it six times every year. The next MPC meeting is scheduled to hold between 23rd and 24th July, 2018, according to CBN
Ayodeji Ebo, MD of Afrinvest Securities limited said that he agrees with the forecast and that it is not the best time to bring down the rate so as to maintain the stability in the FX market till the rest of the year.
The CBN has a target of lowering the country’s inflation rate to single digits in 2018. As at May 2018, inflation rate was 11.6 percent according to data from the National Bureau of Statistics (NBS).
“As long as inflation is double digits, it is unlikely that they will reduce the MPR. We are entering elections soon so they might want to be very careful, Dolapo Ashiru, a Lagos-based stockbroker said.
