Inflation, Capital Flow Top Agenda As MPC Meets.

 Inflation, Capital Flow Top Agenda As MPC Meets.

MEMBERS of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) will today converge on Abuja for a two-day meeting.

They are expected to take measures for more foreign capital inflow and curtail capital flow reversals and rising inflation ahead of the elections next month.

The consumer price index, which measures inflation, rose to 11.44 per cent last December, the National Bureau of Statistics said. The increase, the bureau said, is 0.16 per cent points higher than the rate recorded in November 2018 and is expected to trend northwards as ahead of the elections.

The 265th meeting of the MPC and the first for the year, is expected to keep all policy rates unchanged as with all meetings since July 2016. That decision will prevail despite rising calls from economic experts for the committee to lower benchmark interest rate.

Expectedly, the MPC will retain the Monetary Policy Rate (MPR) – benchmark interest rate at 14 per cent; Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30 per cent as well as the retention of the Asymmetric corridor at +200 and -500 basis points around the MPR.

Speaking on the development, Managing Director, Afrinvest West Africa Limited, Ike Chioke, said the committee will maintain status quo on all policy rates. He said the committee will not want to tamper with the policy rates at this period of electioneering.

He said: “I do not see the MPC members making any policy adjustment at this period. The elections will be held next month and this is not the time to make any changes,” he said during the presentation of the company’s 2019 economic outlook in Lagos at the weekend.

According to other analysts at the investment and research firm, developments in the global economy and financial markets are likely to be viewed with mixed feelings by the MPC.

“Higher commodity prices are boons to Nigeria’s external sector stability and fiscal balance, but it also comes with attendant risk of ballooning state’s petrol subsidy. On a balance of risks, we believe that external sector developments remain broadly favorable for Nigeria, supportive for economic growth and current monetary policy stance. Yet, the MPC will likely maintain its cautious view due to emerging downside risk of capital flow reversals,” they said.

At their last meeting, the MPC members assessed the macroeconomic environment in 2018 and noted the modest stability thus far achieved in domestic prices, output growth and the financial system.

The committee noted that the economy was on the right path but some key sectors continued to experience significant challenges.

The MPC, however, expressed concern about the tepid growth expectations and growing uncertainty in the global financial markets arising from the poor reception of the Brexit deal by British politicians, continuing trade war between the US and her major trading partners, as well as the commencement of U.S. sanctions on Iran.

The committee believed that although the domestic economy was recovering modestly from recession, however, the recovery was tepid and efforts should be stepped up to strengthen aggregate output and demand.

Ayomide Oyewole

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