By Olamilekan Okeowo
Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) would sustain key monetary rates for the fifth consecutive time at the end of its 256th bi-monthly meeting starting on Monday, financial analysts have projected.
MPC would hold its third meeting in 2017 on Monday and Tuesday in Abuja to review the economy indices. The committee held Monetary Policy Rate (MPR) at 14 percent, with the asymmetric corridor at +200 basis points and -700 basis points, Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) at 22.50 percent and 30 percent respectively for the fourth time at its March meeting.
Mr Abayomi Ajayi, Research Analyst, Edc Securities told The New Diplomat in a telephone chat in Lagos that the need to stimulate growth would spur the MPC to sustain rates at the current level.
“We are gradually recovering from the economic recession, so they won’t want to change any of the rates,” he explained.
Nigeria’s Gross Domestic Product (GDP) growth rate slowed to -1.3 percent in Q1 2017 from -2.24 percent at the end of 2016. Latest data from National Bureau of Statistics (NBS) showed that the country’s inflation rate declined to 17.24 percent in April compared to 17.26 percent in the previous month.
Dr Muda Yusuf, Director General of the Lagos Chamber of Commerce, also believed committee would maintain the status quo on the key monetary rates, because of its determination to curtail high inflation rate.
“The inflation rate and foreign exchange rate have shown signs of improvement in the last few weeks, a change in monetary policy might be too soon.
“We believe more time is required before a monetary policy change can be effective under the current situation,” he posited.
The foreign exchange volatility in the country has eased since the apex started its aggressive intervention in the forex market in February, injecting almost $5 billion into the market in the last three months. The CBN recently created the investors’ and exporters’ forex window, which further boost liquidity in the market and narrow the gap between the parallel market and the official market.
The apex bank also mandate banks to sell forex to customers who demand for invisible such as personal travel allowance (PAT), Basic Transport Allowance (BAT), school fees and medical fees, asking them to create special desk for them in their branches. The CBN also increase its weekly allocation to Bureau de Change operator from $10,000 to $40,000 weekly to further increase forex supply at the retail end of the market.
The naira ended the week at N305.45 per dollar at the official window, $/N381.61 at the investors’ and exporters’ window, appreciating 39 kobo in the process. It was traded $/N380 at the black market on Friday.
Mr Robert Omotunde, analyst, Afrinvest West Africa Limited said the MPC would use its May meeting to review the recent improvement in the macroeconomic indices and its intervention in the forex market.
He maintained that the committee would give the apex bank the nod to continue its aggressive intervention in the forex market and retain rates at the current level.
