By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-Analysts at Afrinvest West Africa has called on the Monetary Policy Committee (MPC) to cut in the Monetary Policy Rate (MPR) in order to prevent the economy from further decline as revealed in the Gross Dometsic Product (GDP) figures.

According to the Research Note from Afrinvest MPC Communiqué March 2013 and made available to InvestAdvocate, data from the National Bureau of Statistics (NBS) indicates that real GDP grew by 6.58% in Q4 2012, up from 6.48% in Q3 2012.

Following this, Afrinvest Research maintains its argument in favour of a cut in the MPR in order to prevent the economy from further decline.

Analysts at Afrinvest affirmed that while they concede that the transmission mechanism of Monetary Policy remains relatively weak, they believe that a reduction in the MPR will help lower bank lending rate thereby reducing cost of funds for the small and medium scale firms.

“We believe that any economy desirous of growth must encourage growth of the real sector by facilitating easy access to low cost funding and create an enabling environment for infrastructure delivery” the Afrinvest Analysts said.

However, the Afrinvest Analysts say they see the decision of the Central Bank of Nigeria (CBN) to hold rates as one that will encourage further foreign funds inflow into the economy and by implication stabiliSe the exchange rate.

“In addition, the decision to hold rates steady rather than lowering them would favour Banks which are the largest holders of Government Bonds in terms of reduce yield to maturity” the Analysts said.

Click to download Afrinvest Research NoteMPC Communiqué
March 2013