As members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) begin a rescheduled meeting in Abuja today, a large number of stakeholders in the financial sector see no reason for any monetary policy easing at the end of the two-day meeting.

The committee could not meet in January because it could not for a quorum while the Senate failed to approve the nominations of two Deputy Governors and other nominees by President Mohammadu Buhari.

However, the nominees were approved a little over a week ago and as a result, the CBN fixed today and tomorrow for the meeting in Abuja to take decision on the path and the direction the monetary policy will follow in the next two months.


At its last meeting in November 2017, the MPC maintained the MPR at 14 per cent, with the asymmetric corridor at +200 and -500 basis points around the MPR; retained the CRR at 22.50 per cent and Liquidity Ratio (LR) at 30 per cent.

Ayodeji Ebo, Managing Director of Afrinvest Securities Limited, said the call for monetary policy easing may be too early in the year.


His words: “In my view and that of Afrinvest as a company, I expect that the MPC will keep its rates at current level.”

He said this is hinged on the fact that the yield on fixed income investment is almost at the same level with inflation rate and also due to the decision of the US Fed, which just increased rates.

“The Fed’s rate increase reduces the country risk premium and this may not be suitable enough for rate easing in Nigeria. At least for this meeting, members will retain rate,” Ebo added.

Cyril Ampka, an Abuja-based economist, also corroborated Ebo’s position on the need to keep the rates as they were in November.

“If you look at the membership of the current committee you will agree with me that they are novice in monetary policy decision making and they may not want to rock the boat by calling for a shift in decision from the one in November.

“The CBN Governor, Godwin Emefiele, gave the hint in January that the MPC will not tamper with the rates now when he said the committee may start cutting interest rates in the first half of the year as inflation eases.


“With this evidence, I don’t think the MPC will adjust any rate by the end of its meeting on Wednesday.”

Analysts at FBNQuest and United Capital also declared that there would be no change in policy rate in the near term, citing current improvements in key economic variables in spite of instability in the global economy as reason for their assumptions.

They say the decision to tweak policy rates will depend on stability in the global and domestic economy, adding that though the prospect of economic recovery is strengthening in the local economy, conditions in the global market remain largely volatile

Specifically, United Capital research analysts are of the view that events in the global market point to further tightening rather than easing policy rate in the interim.

“We do not foresee any swift policy shift in the monetary policy space in the short to medium term, given that conditions in the global and domestic market environment, which informed a hawkish stance in the first place, remain fragile and unstable,” they noted.

For FBNQuest analysts, they do not see any shift in policy stance now since confidence has returned to both the money and capital markets after the committee had experienced an 18-month’s despair, thanks to the investors’ and exporters’ foreign exchange window.

“We again see no change in stance. The committee has emerged from about 18 months’ despair with growing confidence. The trigger, of course, has been the investors’ and exporters’ fx window (NAFEX), which is evident from a reading of members’ personal statements from their meeting in late May,” they said.
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Since then the CBN has maintained a hawkish policy stance targeted at stoking FX market liquidity amid global economic uncertainties arising from US trade protectionism; unstable commodity prices, policy normalization and steady appreciation of the USD. This has been the mainstay of naira stability in the domestic market.

The FBNQuest analysts point to the fact that the committee and the CBN can see that gross official reserves have stabilized despite the step-up in foreign exchange interventions, that manufacturers have greater access to imported raw materials, and that the retail segment can buy forex to meet its demand for invisible payments, and so would do nothing in the short-term to change rates.

“NAFEX may not yet have attracted the major players in the offshore portfolio community but the committee will surely urge patience. We may well see the catch-phrase ‘fine tuning’ in the communiqué,” the EBNQuest analysts said.

The United Capital analysts noted that with MPR at 14.0 percent relative to a 12-month average inflation rate 17.6 percent, effective rates at the fixed income market have been tracking the weekly OMO auction rates of 18.0 -18.5 percent by the apex bank with average yield at the fixed income space steadying at 17.5 percent since Q3-16 compared to 12.5 percent in Q2-16.

“Consequently, the timing of an adjustment in MPR and the conduct of the CBN at the weekly OMO auction have become the most monitored variables in the fixed income market. This is because any adjustment in rates for forwards or reduction in OMO is expected to trigger a swift repricing of debt securities across tenors,” they pointed out.

However, analysts at FSDH Research have contrary views as they believe that the short-term outlook of the Nigerian economy favours monetary policy easing in order to stimulate credit creation and economic growth.“The easing may be in the form of an adjustment to the Monetary Policy Rate (MPR) or an adjustment to the Cash Reserve Requirement (CRR)”, they said.

Looking at the developments in the international market; FSDH analysts are of the opinion that the economic outlook in the major advanced countries is strong in the short-term to medium-term, necessitating monetary policy normalisation.

“The outlook of the Gross Domestic Product (GDP) growth rate remains strong; the unemployment rate is low in most regions and should remain low in the short-term, while inflation rate is trending up.

“The Federal Open Market Committee (FOMC) of the United States (U.S) Federal Reserve (The Fed) increased the Federal Funds Rate (Fed Rate) at its March 2018 meeting. The Fed increased the Fed Rate to 1.50 per cent – 1.75 per cent from 1.25 -1.50 per cent. FSDH Research expects that the FOMC will increase the Fed Rate to 2.25 – 2.50 per cent by year end.

“The increase in the interest rate should lead to increase in the yields on the fixed income securities in the advanced markets, with the attendant possible increase in capital flights from the emerging markets”, they said.

They added that though the GDP growth rate in Nigeria improved further in Q4 2017 at 1.92 per cent from 1.40 per cent in the third quarter of 2017, the recovery is still very fragile. Thus additional monetary policies are required to stimulate a broad-based growth. FSDH Research’s analysis of the growth patterns in 2017 shows that two sectors: Agriculture and Mining and Quarrying were the major drivers of growth.

“They were the two sectors out of the six largest sectors of the Nigerian economy that recorded growth in 2017. Other leading sectors, which are Trade, Information and Communication, Manufacturing, and Real Estate all contracted. Thus, there is the need for monetary policy easing,” FSDH analysts concluded.

http://www.akelicious.net/2018/04/stakeholders-see-no-rate-easing-as-mpc.html

whatever

Homeboiy:
whatever

Go back to romance section where you belong

Thegeneralqueen:
Go back to romance section where you belong

come and drink

I de table

Homeboiy:

come and drink
I de table

Nop I only eat meat

Thegeneralqueen:
Nop I only eat meat

hmm meat is finished

come on Xmas day

95% of Nigerian youths cannot analyze this report.

Examples cited above.

I just can't comprehend this report.
The only thing I can comprehend is USD/NGN (the price of dollar).
So oga op when your report says $1=N......, then I will be able to comprehend.

donestk:
95% of Nigerian youths cannot analyze this report.

Examples cited above.

I concur. More examples coming below.

At last the hawkish economy and speculation will be over