Financial market analysts at the FSDH Securities Limited have advised the Central Bank of Nigeria (CBN) not to tamper with the Monetary Policy Rate (MPR) this year, advising the regulator to adopt other monetary policy tools.

The research and investment firm gave this advice in its weekly Nigerian Capital and Money Market Report made available to THISDAY on Monday. The CBN’s Monetary Policy Committee (MPC), which has operational independence in the setting of the benchmark interest rates in the country raised the MPR by 85 per cent in 2011, from 6.5 per cent in January to its current position of 12 per cent.

The MPR is the interest rate at which the  commercial banks  borrow from the CBN. The MPR sets the benchmark for the interest rate  in the money market and thereby affects the supply of credit, savings and investments (which affects full employment and Gross Domestic Products).

FSDH said: “In 2012, we expect the CBN to employ other monetary tools to manage liquidity in the system, other than raising the Monetary Policy Rate (MPR). We expect the CBN to lower the MPR to 11.5 per cent around second quarter of 2012 and this should cause yields on fixed income securities to drop while prices rise.”

For the forex market, it predicted that the value of the naira would depreciate slightly against the United States dollar due to demand pressure.

It urged the federal government to pay more attention to agri-business, saying that the sub-sector had the potential to ameliorate poverty and generate substantial employment for the economy.

According to the firm, oil price volatility remains one of the impediments to the sustainability of Nigeria’s revenue as an oil dependent economy.

“We note the efforts of the government in diversifying the revenue base of the country, but the distortions created by the mono-product income nature of the Nigerian economy would persist if there is no urgent structural re-balance of the productive base of the economy. Particular attention should be given to agri-business as it has the potential to ameliorate poverty and generate substantial employment for the country.

“Non-OPEC oil supply forecast in 2011 encountered various revisions in both directions. In second and third quarter 2011 non-OPEC supply suffered various setbacks due to political, technical, geopolitical and weather factors. In 2012, non-OPEC supply is forecast to grow by 0.7 million barrels per day.

The risk associated with the forecast remains high, given that growth is expected to be supported by the return to normal output in some countries from levels curtailed due to political and technical difficulties, as well as from unfavourable weather conditions,” the report added.

Source: ThisDay/Obinna Chima