By Dipo Olowookere
As the Central Bank of Nigeria (CBN) holds its last Monetary Policy Committee (MPC) meeting this week, many observers are not expect any cut in the interest rate.
At the moment, the benchmark interest rate is 14 percent and it has remained so for many months.
With the inflation gradually retreating, some economic experts say a drop in the interest rate would not be a bad idea.
However, most of them are not expecting such to happen this year, probably from the first quarter of next year.
The National Bureau of Statistics (NBS) is releasing the Gross Domestic Product (GDP) for the third quarter of this year on Monday (tomorrow) and observers are a further growth in the period. The country’s GDP slightly rose by 0.55 percent in the second quarter of 2017.
Commenting on the MPC meeting that begins on Monday and ends on Tuesday, analysts at Afrinvest said they expect the committee to retain the interest rate at 14 percent.
Afrinvest’s analysts noted that, “The (MPC) meeting is coming against the backdrop of a synchronised global growth expansion, underlying recent moves by systemic central banks to begin phasing out ultra-accommodative monetary policy hitherto put in place to buoy growth, rising commodity prices and improving domestic macroeconomic conditions anchored by recovery in external sector variables.
“Despite the noticeable easing of external sector pressures and improving growth prospect, we believe that in line with outcomes of previous meetings held this year, the MPC would retain rates at current level, owing to the fragility of the economic recovery and disappointing inflation numbers witnessed so far in Q3:2017.”
For analysts at Cowry Asset, “We opine that the Monetary Policy Committee (MPC), scheduled to meet on Monday and Tuesday, October 20 and 21, 2017 respectively, will retain the benchmark interest rate, MPR, at 14 percent despite sustained moderations in inflation rate amid falling food prices, increase in global crude oil prices with attendant boost in external reserves, convergence of multiple foreign exchange rates and the return to and expected sustenance of economic growth.
“Our opinion is partly predicated on anticipated increase in public sector spending, in addition to anticipated increased seasonal household spending amid end-of-year festivities.
“A key consideration will also be likely increase in interest in the United States amid improving economic developments.
On the part of analysts at FSDH Research, “The short-term outlook of the Nigerian economy favours a monetary policy easing.
“The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) may either reduce the Monetary Policy Rate (MPR) by a few basis points or adjust the rates around the asymmetric corridor of the MPR at its meetings scheduled to hold on 20 and 21 November, 2017.
“The current tight monetary policy stance was justified in order to maintain stability in the foreign exchange market and curb the high inflation rate.
“At its September 2017 meeting, the MPC maintained the Monetary Policy Rate (MPR) at 14%, with the asymmetric corridor at +200 and -500 basis points around the MPR; retained the Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) at 22.50% and 30% respectively.”
Adedapo Adesanya