CBN’s MPC to review domestic growth, risk

In from Ali Smart …
As the Nigerian Monetary Policy Committee (MPC) prepares to sit from Monday and Tuesday, indications are that the think-tank group of the Central Bank of Nigeria (CBN) hopes to review developments in the global and domestic economy, together with the financial market since its last meeting (23rd and 24th July 2015), Ripples has learnt.
A source at the apex who confided in Ripples on Friday, said it is expected that deliberation at the meeting will focus on pressing issues including the slowing domestic growth, persistent exchange rate uncertainty, increasing risk perception in the local market in the light of the JP Morgan planned phase out of Nigeria from the Emerging Market index, among others.
Since the last MPC meeting in July, the Bureau of Statistics (NBS) reported that Q2:2015 GDP growth slowed to 2.4% from 4.0% in Q1:2015, while inflation rate continued tiptoeing northwards Y-o-Y, berthing at 9.3% in August from 9.2% in July.
According to the source, the MPC will deliberate on alternative methods to further strengthen foreign participation in the Nigerian capital market given its current stance on foreign exchange rate.
Besides, the MPC is expected to deliberate on how to improve currency market liquidity to reduce foreign exchange rate uncertainty while assessing the current financial system liquidity.

Read also: Economy: MPC maintains status quo

“Given the stance of the apex bank (with backing from the presidency) on not considering a devaluation, we imagine that the MPC decision would favour one of the following possible scenarios including reduction of the credit adequacy ratio in order to repress the strains of the Treasury Single Account implementation on financial system liquidity and banking cost of funds; leave MPR and official exchange rate unchanged at 13.0% and N197.00/US$1.00 respectively.”
Pressed further, the source said, while foreign investors continue to express concerns on the current regulation and the uncertainties surrounding the value of the naira amid JP Morgan’s announcement to eject the country from its Bond index, a statement attributed to President Buhari during the week on his stance against the devaluation of the naira, appear to have further dampened any hope of a likely devaluation in the interim.
This, the source maintained, are sure signs the economy will rebound in the coming weeks.

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