CBN To Slash Interest Rate Before Year Ends

The Central Bank of Nigeria (CBN) is expected to slash the Monetary Policy Rate, better known as the benchmark interest rate, before the year runs out.

According to the FocusEconomics, in its latest FocusEconomics Consensus Forecast Sub-Saharan Africa, the MPC left the MPR and all other monetary policy parameters unchanged at its first meeting of the year, 2017.

“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 report revealed.

“The bank’s decision to hold the monetary policy rate unchanged at a record high reflects stubbornly high inflation in Nigeria’s economy.”

In addition, 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.

“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.”