#TheAnalystSpeaks: Implications of the 279th Central Bank of Nigeria MPC Meeting

Proshare

Wednesday, May 26, 2021 / 10:45 AM / Ayomide Oguntoye for WebTV / Header Image Credit: Ecographics


Following the recent Monetary Policy Committee MPC quarterly meeting of the Central Bank of Nigeria to review the economic and the financial conditions of the economy, Proshare hosted a special edition of The Analyst Speaks which had as its theme, "What Nigerians Should Know about the Central Bank's MPC Decisions".


The Governor of the Central Bank, Godwin Emefiele, during the 279th MPC meeting announced that the 10 members of the committee, unanimously voted to retain the Monetary Policy Rate, MPR  at 11.5%, alongside other parameters the Cash Reserve Ratio 27.5%, Liquidity Ratio  30% and Asymmetrical corridor +100/-700 basis points.


Mr. Ayodeji Ebo, Head, Retail Investment of Chapel Hill Denham, in his reaction to the MPC decision said that it was a  dovish approach as anticipated, pointing out that the Central Bank was focused on driving growth rather than reining in inflation.


Speaking on the implications of the retention of the interest rates on Nigerian households, he mentioned that there was no change in the key policy rates and as such there would be less reaction by the average Nigerian household. He also stated that according to the Governor of the Central Bank, the intervention funds made available to Nigerians across all sectors would be sustained, such as The Nigerian Youths Investment Funds, Anchors Borrowers Scheme, etc.


He recommended that rather than focus on the Central Bank's intervention funds, there was a need for a structure that would encourage domestic private participation in the economy to increase output.


He however noted that there could have been an impact on the equities market and fixed income market if the rates had increased, leading to a downward trend. Ebo Ayodeji advised investors to trade with caution in the market. He further suggested that if there was complete removal of petroleum subsidy, there will be an adverse impact on the cost of energy alongside other tariffs.


With the current state of stagflation in the country, Mr. Teslim Shitta-Bey, Chief economist and Managing Editor of Proshare pointed to the fact that security remains a major challenge, which is primarily an economic issue as there is an interconnectivity between security and the economy. He explained that security remained a major threat to the agricultural sector and until it is resolved, a substantial level of growth will not be recorded.


According to him "It is not about how much is pumped into the agricultural sector, rather it is about the efficiency of the agricultural sector value chain".


He called for robust and targeted economic reforms from the fiscal policy side that could support the efforts of the monetary authority.


Proshare's Chief Economist said the MPC approach in the second half of the year would be pro-growth, but tasked the fiscal policymakers with the responsibility of supporting investment in domestic infrastructure, thereby creating an enabling environment that would attract further foreign and domestic investments to the economy.


On the prospects for Diaspora Bonds, he welcomed the development but emphasized the importance of addressing the challenges in the domestic economy.


He noted that countries like China and India have benefitted immensely from diaspora investments driving economic growth and development.


Looking at the opportunities for households, he agreed with Ebo Ayodeji that the CBN interventions in the agro, creative, healthcare sectors, MSMEs, and Youth empowerment schemes are areas to explore.


He admitted that monetary policy is limited and emphasized the need to align fiscal and monetary policies, while he suggested that the CBN roll back its interventions.


Proshare Nigeria Pvt. Ltd.


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 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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