Little room for manoeuvre for the MPC


Monday, March 21, 2016 9:15AM /FBNQuest Research

The next meeting of the monetary policy committee (MPC) takes place in Abuja today and tomorrow. It has to contend with the slowdown in growth (to 2.1% y/y in Q4 2015) and a pick-up in inflation well above the “tolerance” range (to 11.4% y/y in February).

The policy rate of 11.00% stands below prevailing inflation, which undermines the case for easing to boost flagging growth. A hike would be the textbook response to the inflation data but would be unlikely in view of the GDP numbers and signs of a pro-growth stance in the committee.  

We expect some overdue clarification of the current tolerance range for inflation of between 6% y/y and 9.0%.

The committee would value some support from the fiscal authorities to lighten its policymaking load and encourage economic recovery.

It will be impatient for the passage of the 2016 budget, an increase in non-oil revenue collection and the release of funds for capital spending. We share these concerns but caution that the desired impact on the broader economy will not be felt until H2 2016.

Any changes to exchange-rate policy would be surprising in our view, and we suspect that the offshore portfolio community is finally resigned to the fact. The committee could point out that official reserves have increased by US$40m this month (through to 17 March), and have been stable for six weeks. This stability may well have been achieved at the expense of additional unmet fx demand but is nonetheless welcome to policymakers.

Related NEWS

1.          MPC Decision Review and Outlook: Growing Monetary Policy Dilemma

2.         Inflation Rises to 3-Year High; GDP Growth at 16-Year Low as Risk of Negative Real Growth Looms

3.       CBN Holds 249th MPC Meeting on 21st & 22nd of March 2016 

4.      Volatile naira pushes Inflation to 3 year high of 11.38%

5.   Damned if you do, damned if you don’t; Inflation will still reflect the new rate

6.      Nigeria’s Inflation Rate Rises to Double Digit; Increases by 11.4% YoY in February 2016

7.        Nigeria’s GDP Grows by 2.11% in Q4’15; Lower by 0.73% from Growth Recorded in Q3’15

8.   Contrasting Views on the Economy, Markets & Monetary Policy - Doyin Salami v Godwin Emefiele

9.        Personal Statements of Members at the 105 MPC Meeting of Jan. 25-26, 2016

10.   CBN Communiqué No. 105 of MPC Meeting – Jan 25-26, 2016

11.     CBN Communiqué No. 104 of MPC Meeting – Nov 23-24, 2015

12.    CBN Communiqué No. 103 of MPC Meeting – Sep 21-22, 2015

13.    CBN Communique No. 102 of MPC Meeting of July 23 and 24, 2015

Related News