As the ongoing Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) comes to an end on Tuesday, there are strong indications that the meeting may raise the MPR from the current 12 per cent by between 50 and 250 basis point.
The committee may not have choice but to look in the direction of increasing the MPR, an analyst said in Lagos.
According to Bloomberg, “Despite the weak economy, inflation at around a six-year high of 13.7 percent will force it to raise the policy rate of 12 percent by between 50 and 250 basis points, according to 18 of 20 analysts in a Bloomberg survey”.
Its report also pointed out that the regulator may also loosen its stranglehold on the naira, which has been pegged at 197-199 per dollar since March 2015, by introducing multiple exchange rates or ending some of its capital o controls, according to banks including Barclays Plc and Goldman Sachs Group Inc.
It would be recalled that on May 11, Vice President Yemi Osinbajo announced a policy review that “may feature” devaluation, suggesting a shift from administration’s previous comments ruling out such a move.
However, in contrast to the direction of the economy, Nigerian stocks entered a bull market as investors bought equities in anticipation of a currency devaluation that would boost share prices.
The Nigerian Stock Exchange All Share Index closed at 27,129.41 on Friday, more than 20 percent above a three-year-low in mid-January. The market fell for the first time in four days on Monday, dropping 0.6 percent to 26,978.6 to remain in bull-market territory.
The bourse has gained 7.7 percent this month, compared with a 6 percent loss for the MSCI Emerging Markets Index, after President Buhari signed a record budget in early May to stimulate the economy.
Comments are closed.