Analysts See CBN Holding Policy Rate Steady, Await Resumption of Emefiele

When the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rises from its statutory meeting tomorrow, financial analysts are convinced the benchmark rate, otherwise known as the Monetary Policy Rate (MPR) will remain unchanged.
They hinged their position on the fact that, the naira which earlier depreciated has been buoyed by increased portfolio investors, though still way ahead of the plus/minus three percent peg by the apex bank.
Also, they argued that, the new deputy governor of the CBN, Adebayo Adelabu will instead use this meeting which is his first to properly study the monetary policy before deciding on what steps to take.
Besides, they believe that it is only proper for the incoming central bank governor, Godwin Emefiele to dictate the policy direction.
“We expect the Central Bank of Nigeria (CBN) to hold all policy rates steady when it announces its decision on Tuesday”, said Razia Khan, Regional Head of Research, Africa, Global Research, Standard Chartered Bank.
She acknowledged that although the naira has recovered earlier losses, following increased portfolio investor interest, it remains outside of the CBN’s official +/-3 percent band around a mid-rate of N155.
“Market conditions remain liquid. T-bills have rallied. Interbank rates have been persistently close to the lower end of the corridor. Nonetheless, the naira has appreciated on the parallel market, to a reported N168 from N172 against the dollar, suggesting that there is little immediate need for further tightening”, said Khan.
For now, she said with investor interest in Nigeria still healthy, inflation in single digits, and budget execution still reportedly benign, more Open Market Operations (OMOs) may be the preferred response to managing excess liquidity.
“Bigger policy moves would be justified only with a material change to pressure on the foreign exchange rate.
The CBN governor-designate, Godwin Emefiele is expected to assume his position next month.
More so, the meeting would give industry watchers the opportunity to examine the monetary policy views of Adebayo Adelabu, who recently assumed his new role as the Deputy Governor, Financial System Stability of the CBN. This would be Adelabu’s first MPC meeting.

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