There are strong indications that the Central Bank of Nigeria’s (CBN’s) Monetary Policy Committee (MPC), which commences its 232nd meeting today will leave all its monetary policy tools unchanged at the end of the two-day meeting.

This, according to findings by THISDAY, would be based on the continued volatility in prices of crude oil in the international market, which has also led a slight decline in the level of Nigeria’s external reserves.

Also, the latest inflation figures, which showed an uptick in the composite Consumer Price Index (CPI), may also necessitate the retention of interest rate.
According to the National Bureau of Statistics, Nigeria’s inflation climbed to 9.1 per cent in April, from the 8.6 per cent it attained in March.  

The MPC, which determines interest rate has for over one year, kept the Monetary Policy Rate (MPR) at 12 per cent. Also the Cash Reserve Requirement (CRR) and the Liquidity Ratio are currently at 12 per cent and 30 per cent respectively.

For crude oil, the benchmark oil for June delivery closed at $95.16per barrel on the New York Mercantile Exchange on Friday, after falling as low as $93.23 per barrel. Also, the Brent crude, a benchmark for many international oil varieties, rose closed at $103.78 a barrel on Friday.  Consequently, Nigeria’s foreign exchange reserves which was upbeat early in the year, has continued to decline gradually since this month. For instance, the foreign exchange reserves, which was at $48.857 billion as at May 2, this year, dropped to $48.480 billion on May 16th.

Analysts at the Consolidated Discount House Limited (CDL) also forecasted that the MPC would maintain the benchmark rate at 12 per cent.

“The central bank’s MPC has kept the benchmark rates at a record high of 12 per cent for nine straight meetings. As the committee commences its closely watched 2-day meeting, we do not envisage a change in rates. However, we acknowledge that there may be compelling reasons for a moderate cut in rates, say by 25 basis points especially as the inflationary outlook seems benign, credit to small businesses remains patchy while economic growth will have to be closely watched for now.

“The central bank may have become a hostage to its policy guidance thus hurting flexibility to set monetary policy. The forward guidance of the bank indicates that it will consistently maintain a tightening regime to keep the exchange rate within the target region (N155/$ within a +/-3 per cent band) while seeking to push foreign reserves to the $50 billion target,” the CDL stated.
On its part, the FSDH Merchant Bank Limited said: “At the end of the meeting we expect the MPC to hold the MPR at 12 per cent.”

Source: Thisday(by Obinna Chima)