In spite of the weak fiscal position of the country, members of the Central Bank of Nigeria’s (CBN’s) monetary policy committee (MPC), which commenced their 244th meeting on Monday, May 18, are likely to vote for the retention of the benchmark interest rate and other monetary policy tools.
The two-day meeting, which would be the third this year, is expected to focus on critical policy decisions relating to the economy. Following the successful completions of the elections, the financial market has witnessed a relative calm, even as investors have taken cautious trading steps and actions amidst uncertainty in monetary policy and fiscal direction of the incoming administration.
The MPC had this year taken certain bold policy decisions relating to currency devaluation, net open position (NOP) and the monetary policy rate (MPR) in light of daunting fiscal and monetary policy challenges.
Latest inflation figures showed that the consumer price index (CPI) continued northwards for the fifth consecutive month as it stood at 8.7 per cent in April 2015. Nigeria’s external reserves stood at N29.787 billion as at last Thursday, just as the price of Brent crude ended at $66.81 a barrel on Friday.
According to analysts at Afrinvest West Africa Limited, out of all issues to be considered, the recent pressure on exchange rate, external reserves position, rising price level and slowing domestic economic growth would likely take the centre stage.
They added: “In this light, we look through our crystal ball that the decisions of the MPC would most probably be to maintain the status quo on major policy rates while postponing the possible further devaluation of the naira to a later meeting after installation of new administration.
“However, we believe pressure in the fiscal and monetary policy space also accounted for the sluggish performance of the economy. Whilst this may be of concern to MPC, we note that it may likely count for less in monetary policy decisions for May given other overriding issues that should take precedence.”