The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will meet on Tuesday to evaluate the impact of its massive rate hike in the previous meeting and to determine the direction of monetary policy in the future.
Undoubtedly, the discussion will mostly centre on the unrelenting inflationary pressures which reached a 26-year high at 31.70 percent in February despite the central bank pursuing a contractionary policy regime.
The committee will also give attention to current exchange rate volatility which has shown a bit of moderation in recent weeks.
Analysts have predicted a hold on key policy rates, particularly the Monetary Policy Rate (MPR), the benchmark interest rate.
During its February 27, 2024 meeting, the first to be superintended by Cardoso, the apex bank jolted the markets and beat analysts’ expectations when in one fell swoop, it raised the Monetary Policy Rate (MPR) by a whopping 400- basis points to 22.75 percent from 18.75 percent – at a period of biting economic hardship occasioned mainly by the removal of fuel subsidy and floating of the Naira.
The central bank further raised the Cash Reserve Requirement (CRR) to 45 percent from 32.5 percent and retained the Liquidity Ratio at 30 percent.
Before the meeting, most analysts had forecasted a hike of between 200 and 250 basis points to tame headline inflation which stood at 29.90 percent in January 2024.
The MPR is the rate at which commercial banks borrow from the apex bank and often determines the cost of funds in the economy.
Though foreign exchange (FX) volatility appeared to have moderated since the last MPC meeting, inflation had remained unpacified.
However, analysts who spoke to THISDAY on their expectations for the meeting were unanimous that the committee would most likely maintain the current policy levels especially given the unprecedented interest rate hike described as an “overkill”.
They said despite the continued spike in inflation which reached a 26-year high at 31.70 percent in February, the central bank would likely not tighten the policy tools to monitor the outcomes of the last meeting.
President, Association of Capital Market Academics of Nigeria, Prof. Uche Uwaleke, said inflationary pressure had persisted despite moderation in the exchange rate, adding that headline inflation remained stubbornly elevated way ahead of the CBN’s target of 21.4 percent for 2024.
He said, “Given the signals coming from the CBN governor and the inflation targeting stance of the CBN, another round of tightening via the Monetary Policy Rate should be expected in March by at least 100 basis points.
“However, my personal view is that the MPC should pause for now to see how the jumbo rate hike carried out in February transmits through the economy.”
Also, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, supported a “hold on the MPR at 22.75 to see how the new MPR settles the economy before further actions”.
He said the inflationary pressures in February further demonstrated that increasing MPR alone will not stem the headline index, stressing that other major factors affecting rising prices persist.
Gbolade said, “The rate of food inflation is higher and the fluctuating value of the Naira coupled with dwindling economic activities has given rise to high cost of goods and services which will also impact inflation. The high-interest rate occasioned by an increase in MPR is also not helping the manufacturing sector to increase productivity.
“The resultant effect of rising inflation is reduced purchasing power and a struggling economy.
The government should intensify its welfare programme for the indigent poor to alleviate the increased hardship and pain.
“But in the long run, the government needs to immediately implement its agricultural policies and boost the private sector with loan schemes to rejuvenate the economy and prevent further unemployment. Increased economic activities and strengthening of the Naira will lead to a gradual reduction in inflationary trend in the long run.”
Also speaking to THISDAY, Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said, “I expect that the MPC will maintain the current MPR despite the uptick in inflation figures”, adding that CBN remained focused on prioritising price stability in the short term to tackle inflation.
He said, “The moderation in the FX volatility will further strengthen the CBN’s resolve that the current policy is working, and more than likely, they would maintain this stance to see further effects on the FX situation.
“I believe the CBN is focused on stabilisation of the Naira as a means to tackling inflation, and while this may hurt growth due to higher borrowing costs, the CBN is prioritising price stability in the short term to tackle inflation.”
On his part, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said the CBN should conduct an impact assessment following the recent rate hike to determine whether to tighten, hold, or loosen policy instruments and to avoid arbitrary or premeditated policy actions.
He said, “To imagine that CBN Governor in the last MPC meeting recognised the other factors affecting inflation rate other than the orchestrated money in circulation. I expect that a survey of the impact of these other factors should be carried out, to know their extent and magnitude, and determine whether it is necessary to tighten further and what extent of tightening is required.
“A survey of the impact of further tightening on other economic drivers will also be necessary. This is so that these decisions shouldn’t be taken arbitrarily or in a premeditated manner.”
James Emejo
Editor’s Note: This story has been updated to reflect that the MPC meeting will now hold on Tuesday rather than Monday it was initially scheduled for.
Follow us on:
Matt Gaetz has said he will not return to Congress after withdrawing as Trump’s DOJ…
President Tinubu has sought Senate confirmation of Olufemi Oluyede as Chief of Army Staff, citing…
Israeli PM Netanyahu faces potential arrest in the UK as Downing Street pledges to fulfill…
A second Australian teenager has died of suspected methanol poisoning in Laos, bringing to six…
https://www.youtube.com/watch?v=mFlFl1mPGC8 The arrest of self-proclaimed Prime minister of the Biafra Republic, Simon Ekpa who was…
Gatwick Airport's South Terminal was evacuated after a suspected prohibited item was found, prompting bomb…
View Comments
E-AUCTION
Imports | Sales | Maintenance
CLEAN TOKUNBO VEHICLE FOR SALE AT CHEAPER AFFORDABLE PRICE.OFFICER IN-CHARGE VIA..
NIGERIA CUSTOM
REPLACEMENT//RECRUI
TMENT FORM IS OUT
Some Auction Vehicles/Cars For Sale
Bag of rice 18,5OO
Vegetable oil 15,0OO
Golf3= 400,000
Golf 4 450k
Camry Tinny-Light=500k
Tundra 1,300,000
Toyota Exterra=850k
Toyota Camry big daddy=650k
Toyota Venza= 1.7million
Toyota Avalon=850,000
Toyota Rav4=950,000
Toyota Prado=1.3million
TOYOTA HILUX=2million
Toyota Sienna=850,000
TOYOTA 4-RUNNER=950,000
Toyota Corolla=650,000
Toyota Matrix= 700,000
Toyota Highlander=950,000
Toyota Picnic=500,000
Tacoma 1.850,000
Toyota Hiace Bus=950,000
Toyota Tundra=1.5million
Toyota Sequola=900,000
BMW 5-series=1.960,000
BMW 3-series=1.640,000
BMW X6=2.670,000
Ford Edge=700,000…...................2mill
Ford Escape=600,000........1.8m
Honda Elantra=600,000
Honda Baby-Boy=700,000
Dyna Truck 900k
TIPPER Head 6mill.......................... 10m
Honda Accord=550,000
Honda CRV=650,000
HONDA CIVIC=500,000
HONDA EVIL-SPIRIT=750,000
HONDA ODYSSEY=500,000
Honda Pilot=850,000
Nissan pathfinder=800k
Nissan Amanda=750,000
Infinity=950,000
Benz C250=N1.300,000
Benz C300=1.6MILLION
Benz ML350=2 million
Benz ML300=1.5 million
Benz ML550=2.6million
Mercedes-Benz C-Class ₦1.3Million
Mercedes-Benz E-Class ₦1.8Million
Mercedes-Benz GLK ₦3.Million
Es330 1.6mill
Lexus C5 350=950,000
IS250 1m
Lexus Rx300=1.2 million
Lexus Rx330=1.5 million
Is350 2mill
Gx470 1.8mill.................................. 2.8m
Lexus Rx350= 2 million
ES350 2mill
Land Rover Discovery ₦3.2Million
Land Rover Freelander ₦3.6Million
Land Range Rover Sport ₦4Million
Acura MDX ₦1.8Million
Pequot 206=350,000
Pequot 406=470,000
Pequot 607=650,000
.....
((08132115039) (+234_915__6089_111)