Experts Predicts Rates Retention At Next MPC Meeting
Analysts and economic experts have expressed optimism that the Central Bank of Nigeria (CBN) at its first Monetary Policy Committee (MPC) meeting in 2019,would retain the benchmark indexes due to current inflation increase, the impending political spending as well as hostilities in the global market.
The Central bank of Nigeria (CBN) is scheduled to have it’s 265th meeting of its monetary policy committee next Monday 21 January, 2019 and Tuesday 22 January, 2019 at the bank’s headquarters in Abuja.
As touchy as the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN), Uche Joe Uwaleke, a Professor of Capital Market and a Head of Department at the Nasarawa State University, Keffi, said he was not anticipating changes in the parameters from next week’s meeting.
“I am not expecting any change in the policy parameters when the MPC meets next week. The committee is not likely to lower rates because of the following reasons: Firstly, interest rate hike in the US which is triggering capital flows out of Nigeria leading to a drop in external reserves. Secondly: the threat on crude oil price from US-China trade war. Thirdly: the reversal in downward trend in inflation. Fourthly: the unsettled rancor between the government and labour’s demand for minimum wage implementation. Fifthly: the increasing FAAC allocation and the rising pre-election spending.”
Mr Garba Krufi of GTI Securities opined that the most appropriate monetary policy decision under the current economic and financial market situation is to hold policy rates at the current levels despite new pressure points.
Mr Teslim Shittabey, financial and economic experts in a chat with InsideBusiness stated that
MPC is likely to retain policies adopted over a period of two and a half years. Policy rate will remain 14%. Liquidity ratio and Cash Reserve Ratio will equally remain the same. With inflation at 11.44% by year end 2018 the CBN is locked in a hawkish mode.
He further said although there were some arguments to increase rates, the need to provide necessary incentives for the Nigerian economy to achieve inclusive growth negated an option of a rate increase.
Mr Aruna Kebira of Globalview Capital said, ‘’A rate hike may further increase global yields with its attendant impact on capital flights from up-and-coming markets and demand pressure at the foreign exchange market. Thus, a rate cut in Nigeria is not suitable under these situations.”
They said the sluggish growth rate of 1.5 per cent the Nigerian economy recorded in Q2 2018 called for urgent policy measures and engagements to boost economic activities.
Although the fragile growth was driven by the non-oil sector, the fact that dominant sectors of the economy either recorded low growth or contracted in Q3 2018 indicates that urgent action is required.
They, therefore, argued that, “A tight monetary policy stance in the form of increase in interest rates would not be appropriate, looking at possible policy options open to the MPC.”
Aruna hinted that members of the MPC will vote to maintain interest rates at the current levels.
“The CBN can continue to use the Open Market Operations (OMO) to manage liquidity in the banking industry in order to maintain price stability’’, it said.