• Friday, March 29, 2024
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BusinessDay

Experts call for review of policies as MPC decides on rate today

Godwin Emefiele

Stakeholders in the financial services sector are advocating a review of the subsisting policies of the Central Bank of Nigeria (CBN), third quarter activities of the industry and the economy as the Monetary Policy Committee (MPC) takes a decision on interest rate direction today.

Some of the most recent policies of the CBN include cashless policy, which comes with the introduction of charges on excess cash deposit and withdrawal, the Loan to Deposit Ratio (LDR), among others.

“I expect the MPC to hold rates and watch the impact of various policy changes recently announced by government which will take effect later in the year or early 2020,” Taiwo Oyedele, head, tax and regulatory services at PwC, said.

These include the proposed increase in VAT rate, cost-reflective electricity tariffs, forex restrictions for imported food items and implementation of minimum wage.

The CBN on Tuesday rescheduled the number 269 Monetary Policy Committee (MPC) earlier scheduled for Monday, September 23, and Tuesday, September 24, 2019, to now hold on Thursday, September 19, and Friday, September 20, 2019.

Uju Ogubunka, president, Bank Customers Association of Nigeria (BCAN), said his personal expectation is that the MPC should look at some of the CBN’s policies and also to assess the impact of such policies as the third quarter comes to an end.

He said Nigerians have been clamouring for single-digit interest rate. As a result, the MPC should look at factors that can help bring down interest rate for the benefit of the populace.

Federal Reserve policymakers lowered their main interest rate for a second time this year and Chairman Jerome Powell said that “moderate” policy moves should be sufficient to sustain the US expansion, Bloomberg reports.

In a statement signed by Isaac Okorafor, director, corporate communications, the CBN regretted all inconveniences caused by the change.

Efforts by BusinessDay on Tuesday to know the reason for the reschedule was not successful as the CBN spokesman did not respond to his calls.

Analysts in the financial market expect no change in the Monetary Policy Rate (MPR) as the MPC takes decisions today.

Ayodele Akinwunmi of FSDH Merchant Bank Limited said he sees the MPC maintaining the current rates.

Ayodeji Ebo, managing director, Afrinvest Securities Limited, said the MPC may be looking at the level of compliance by banks to the CBN’s policies, particularly the 60 percent Loan to Deposit Ratio (LDR).

Apart from that, he expects to see the move of the fiscal authority regarding the state of the economy.

The CBN had given the banks September 30 deadline for the commencement of 60 percent LDR, which was targeted at increasing credit to the real sector of the economy.

The regulator said after the July MPC meeting that it would after September 30, 2019 begin a month-by-month monitoring of compliance to LDR by Deposit Money Banks.

Johnson Chukwu, managing director, Cowry Asset Management Limited, expects the CBN to keep rate at current level.

He said although inflation rate moderated further to 11.02 percent year-on-year (from 11.22 percent in July 2019), the slowdown in Gross Domestic Product (GDP) calls for greater concern.

The National Bureau of Statistics (NBS) released the second quarter GDP data recently and the numbers were disappointing. GDP growth rate slowed to 1.94 percent despite a more than 5 percent growth in oil GDP.

“A disappointing GDP result yet again for Nigeria, with growth decelerating to 1.9 percent year/year in second quarter (Q2_ 2019, from a revised 2.1 percent y/y in first quarter (Q1),” said Razia Khan, managing director/chief economist, Africa and Middle East, Global Research, Standard Chartered Bank.

“Although Q2 disappointed our expectation, weak growth itself should not have been too much of a surprise,” she said.

 

HOPE MOSES-ASHIKE