The Monetary Policy Committee of the Central Bank of Nigeria is expected to cut the Monetary Policy Rate, also known as the benchmark interest rate, before the end of the year. FocusEconomics, in its latest report, FocusEconomics Consensus Forecast Sub-Saharan Africa, noted that the MPC left the MPR and all other monetary policy parameters unchanged at its first meeting of the year.
“As a result, the monetary policy rate remains at a record high of 14 per cent and the asymmetric corridor at plus 200 and minus 500 basis points around the monetary policy rate. In addition, the committee left the liquidity ratio unchanged at 30 per cent and the cash reserve ratio stable at 22.50 per cent.
“The Bank’s decision to hold the monetary policy rate unchanged at a record high reflects stubbornly high inflation in Nigeria’s economy.” The report noted that although inflation had eased somewhat since peaking at 18.7 per cent in January 2017, pressure from food prices along with rising energy prices had kept price pressures elevated and inflation remained well above the CBN’s target of six per cent to nine per cent.
FocusEconomics said, “Looking forward, the CBN struck a broadly neutral tone in its communique, mentioning that the positive trend seen in key macroeconomic indicators as a result of the tight stance should be allowed more time to fully manifest.
“However, inflation is forecast to retreat further over the coming months, and assuming the Foreign Exchange market continues to remain stable or exhibit positive tendencies, the Bank’s preferences are likely to swing more towards a rate cut going forward.”
The next MPC meeting is scheduled for the May 21st and 23rd. The report said, “All of FocusEconomics Consensus Forecast panelists expect the CBN to cut the monetary policy rate before the end of the year, with consensus for the rate to end 2018 at 12.11 per cent. In 2019, the panel sees the monetary policy rate ending the year at 11.75 per cent.
“The economy ended 2017 on a firmer note, with growth picking up to a two-year high. Activity is expected to have continued gaining steam in the first quarter of 2018, supported by higher Oil prices and greater Foreign Exchange rate supply. “Accordingly, recent economic data has pointed up, and the Purchasing Managers’ Index rose to a record high in March. However, authorities have still not passed the 2018 budget, delaying its implementation and an expected boost in Government spending.”
FocusEconomics panelists expect GDP growth to accelerate in 2018 and clock in at 2.6 per cent, the report stated. It said, “Higher Oil prices, looser fiscal policy and improved Fx allocation should support the economy’s momentum this year. That said, several challenges to growth still linger including exchange rate distortions, poor infrastructure and likely political tensions ahead of the February 2019 general elections. Next year, growth is seen increasing mildly to 3.1 per cent.”
According to FocusEconomics, growth in sub-Saharan Africa’s economy is projected to gain momentum this year, thanks to firmer commodity prices. FocusEconomics panelists see regional GDP expanding 3.5 per cent in 2018. The report said, “While the economic panorama is improving, several weak spots remain, including high debt loads and large imbalances, which could threaten the region’s outlook. Next year, growth is seen accelerating to 3.7 per cent.”