As the financial markets and businesses await the outcome of the ongoing meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), economists and analysts expect the MPC to retain the key monetary policy stance.
The MPC, which has the statutory duty to manage the central bank’s interest and exchange rate policies, is scheduled to announce its decision today at the end of a two-day meeting from Monday, 25th through Tuesday, 26th, according to a statement on CBN’s website.
Analysts at FSDH Research, the research arm of the FSDH Merchant Bank Limited, believe the decision of the MPC will be based on what will happen to price stability if there is an adjustment to the pump price of Petroleum Motor Spirit (PMS) and the electricity tariff sometime this year.
The analysts, headed by Ayodele Ajinwunmi, however, believe the short-term outlook for the
Nigerian economy justifies a hold decision on policy rates at the current levels.
In January 2019, the committee voted unanimously for an unchanged stance. This was, however, expected due to the then imminent elections.
“We see it repeated this week because we are in a domestic political transition, because the global landscape has improved from a Nigerian view and because inflationary pressures have calmed,” FBNQuest said in its Daily Note on Monday.
The CBN governor, Godwin Emefiele, said at the BusinessDay Post-Election Outlook Conference last week that Nigeria’s tight “monetary policy will continue in the near term and the central bank will increase its funding to the agricultural sector”.
Emefiele said the apex bank would be able to maintain a stable exchange rate given the strength of Nigeria’s reserves.
“We believe the CBN would maintain all policy rates to manage the delicate balance between growth, inflation and exchange rate stability,” analysts at Afrinvest Securities Limited said.
The country’s highest interest rate at 14 percent has remained unchanged for almost three years since July 2016 when the committee voted by five to three for a 200 basis point hike to 14 percent in a response that was aimed to fight inflation.
Meanwhile, the rate at which the prices of goods and services increased in Nigeria (inflation) eased year-on-year to 11.31 percent in February 2019. This marked the third consecutive month of disinflation (slowdown in the inflation rate, though still positive) since December 2018, although the rate still remains well above the country’s 6-9 percent preferred band.
The most recent figures by the National Bureau of Statistics (NBS) revealed that the inflation rate for the review month is 0.06 percent points lower than the 11.37 percent recorded in January 2019.
The CBN governor said as from May 2019 when President Muhammadu Buhari’s second term formally begins, “Nigeria’s economy will witness more growth and reduced unemployment.”
Nigeria’s full-year 2018 real GDP growth rate stood at 1.93 percent, higher than the 0.82 percent recorded in 2017. However, the country’s highest quarter growth rate of 2.38 percent in Q4 2018 since its exit from recession in Q2 2017 is nothing close to Ghana’s 7.4 percent in Q3 2018 and Ethiopia’s almost 8 percent.
HOPE MOSES-ASHIKE & ENDURANCE OKAFOR
