June 1, 2020/Coronation Report

Last week the Central Bank of Nigeria (CBN) surprised the market by cutting its policy rate from 13.50% to 12.50%, a clear signal that it approves of market interest rates (see sidebar) that are all below inflation.

The CBN’s idea is to avert a recession with a monetary stimulus after a weak GDP print (growth of 1.87% y/y for Q1). Clearly, the CBN is relaxed about the currency, given recent inflows into its FX reserves, even though the parallel rate is well above the interbank rate.

Meanwhile recent forecasts from the International Monetary Fund (IMF) suggest starkly different outcomes for different countries’ economic planning over the coming two years.

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