As the Monetary Policy Committee of the Central Bank of Nigeria prepares to meet for the second time this year, financial analysts have predicted that the Monetary Policy Rate may be left untouched.

The MPR, which is also known as the benchmark lending rate, is the rate at which the CBN lends to Deposit Money Banks.

According to the analysts, the MPC ought not to react to a temporary increase in inflation figure.

The Head of Research, Africa, Standard Chartered Bank Group, Ms. Razia Khan, said the increase in January inflation rate was not enough for the MPC to raise lending rate.

Khan said in a note emailed to our correspondent on Friday, “We expect the CBN to keep its MPR on hold at 12 per cent when it meets on Tuesday. This is despite the surge in January CPI to 12.6 per cent from 10.3 per cent year-on-year previously, following the partial lifting of Nigeria’s fuel subsidy.

“Although inflation is expected to continue to rise modestly in the coming months, on a 12 months smoothed basis, it remains at 10.9 per cent.

“Real interest rates are still positive, and the naira has appreciated on the inter-bank market, reflecting-in part – an increase in demand for FGN bonds from offshore investors, as well as a softening in forex demand domestically, most likely due to moderation in economic activity.”

She pointed out that interest rates were likely to be on hold, unless there was an emergence of more broad-based inflationary pressure.

Khan added that earnings reports from Nigeria’s Fast Moving Consumer Goods sector pointed to a softening in demand even prior to the fuel reforms.

“Although Nigeria’s parliament has passed a 2012 budget increasing spending to N4.88tn, from a previously-suggested N4.65tn, this has yet to be approved by the Presidency. Moreover, the accompanying increase in the benchmark price of oil, to $72/bbl (lower, in fact, than 2011’s $75/bbl), is unlikely to be a game changer for the CBN,” she noted.

The Managing Director, Sotice Investment Company Limited, Mr. Adedayo Toluwase, said it would be preferable to hold rate rather than increase it based on statistics on ground.

Source: Punch/Ademola Alawiye