Global Central Banks including the Federal Reserve, European Central Bank (ECB) and perhaps even the Bank of Japan are all set to ease monetary policy in coming months.
Fed Chairman Jerome Powell last week confirmed he would cut interest rates this month, while ECB President Mario Draghi is leaning in the same direction.
This is coming as the Nigeria’s Monetary Policy Committee (MPC), chaired by Godwin Emefiele, governor of the country’s central bank (CBN), is scheduled to hold next week Monday, July 22, and Tuesday, July 23, 2019, with financial market expecting a slight cut in the Monetary Policy Rate (MPR).
Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited, expects the MPC to reduce the benchmark interest rate by 0.5 percent.
Nigeria’s inflation rate dropped to 11.22 percent year on year in June 2019, a 0.18 percent points decrease compared to 11.40 percent recorded in May.
The CBN at the last MPC meeting in May retained all benchmark lending parameters, including the MPR at 13.5 percent, Cash Reserve Ratio (CRR) at 22.5 percent, Liquidity Ratio at 30 percent, as well as asymmetric corridor of +200/-500 basis point around the MPR.
Global central bankers are again in the driving seat when it comes to propping up the world economy, but many are demanding governments join them in the rescue effort, according to Bloomberg report.
Johnson Chukwu, managing director/CEO, Cowry Asset Management, sees this as a general statement that is not specific for Nigeria.
Central bankers and finance ministers from the Group of Seven nations meet today north of Paris for talks on the global economy as an unpredictable trade war risks precipitating a deeper downturn, and some bond markets hint at a growing possibility of a recession.
The Bloomberg report quoted Andrew Bosomworth, a portfolio manager at Pacific Investment Management Co., to have said, “We would expect to see fiscal policy being the new monetary policy going forward.”
Taiwo Oyedele, head, tax and regulatory services, PwC, said the central bank alone cannot drive economic growth without the collaboration of and in cohesion with fiscal authorities.
“Essentially, monetary policy interventions are short-term in nature while fiscal policies usually have long-term impacts both of which must work hand in hand to drive the economy,” Oyedele said.
In Europe, Draghi has complained that monetary policy has taken on a “disproportionate” burden in the last decade.
The CBN has released its strategic agenda to drive the growth of the Nigerian economy in the next five years. It has also released some circulars to put its goals into actions. The goals will be achieved if there are complementary fiscal supports in the areas of improving business environment to enable businesses thrive, Akinwunmi said.
He said the fiscal authority will have to complement the CBN’s measures in the areas of provision of growth enhancing infrastructure (appropriate transport network), signing appropriate bills into law, particularly in oil and gas to stimulate lending, rule of law, judicial reforms that will enhance the speedy adjudication of disputes arising from commercial transactions, port and border reforms, political will to make adjustments to electricity and Premium Motor Spirit (PMS) prices, provision of security to protect lives and property and more collaborations between regulators and business operators.
Hope Moses-Ashike
