By Blaise Udunze
AS the Central Bank of Nigeria (CBN) concludes the Monetary Policy Committee (MPC) meeting for 2015 today, financial industry experts are already predicting it would leave rates unchanged, especially with the expansion in the Gross Domestic Product (GDP) and marginal ease in inflation figures.
There were, however, indications the development could make the CBN to try out further use of administrative measures to manage foreign exchange rates (and conserve external reserves) while also keeping the financial system liquid to stimulate lending and growth.
The meeting is coming against the backdrop of concerns surrounding CBN’s handling of FX rate and calls for further devaluation of the local currency, slow GDP growth, unrelenting inflationary pressure, robust liquidity levels in the financial system as well as the increasing expectation for a FED rate hike in December 2015.
This was as recent statistics by National Bureau of Statistics (NBS) showed the GDP figures for Q3:2015 expanded 2.8 per cent Year- on-Year (to N18 trillion) in Q3:2015, 0.5 per cent higher than 2.4 per cent recorded in Q2:2015 but 3.4 per cent lower than 6.2 per cent recorded in prior year.
In a pre-MPC meeting outlook at the weekend, London-based, Chief Economist, Africa Global
Research, Standard Chartered Bank, Razia Khan, said she expects the CBN to keep its monetary policy rate unchanged with further adjustment to the cash reserve ratio (CRR) tentatively, while policy decisions will be scrutinised for clues on future FX regime intentions.
She, however, noted that inflation was unlikely to be the key policy consideration.
According to her, any policy shifts announced today will be scrutinised for clues on future FX regime intentions, rather than a view of where inflation is likely to head.
“We expect the CBN to keep the MPR unchanged at 31per cent on Tuesday. There is a greater likelihood of an adjustment to the cash reserve ratio (CRR), in order to ease pressure on liquidity, following Nigeria’s Treasury Single Account (TSA) being made operational.
“Consistently low rates of private-sector credit growth, economic slowdown concerns, and a doubling in the mandatory provisioning for performing loans, to 2 per cent in November, may encourage efforts to provide further relief to Nigerian banks by cutting the CRR yet again,” Khan stated.
She further hinted that as- yet-unclear plans for a more expansionary fiscal stance may also require lower rates, easing the authorities’ ability to finance any deficit through domestic borrowing.
Source : SunOnline