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Rates’ meetings begin without hope of policy adjustments

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Photographer: Tom Saater/Bloomberg

Though the nation’s economy has recorded moderations on risks, through falling inflation and brighter outlook on capital flight, policymakers, who will resume meetings today, appear not to let go their grips on high interest rates.

The Central Bank of Nigeria (CBN) has held intact all monetary policy rates for 32 months in its three-fold fight against inflation, exchange rate manipulations and attraction of foreign inflows, even as real sector operators call for rate cut.

Specifically, the Federal Reserve Bank of the United States and Bank of England shelved their plans for rate hike, which usually stokes capital flight, but the monetary authorities are not fully convinced, leaving hopes of rate adjustments uncertain.

Analysts at Afrinvest Securities Limited said since the last meeting, global and domestic economic conditions have remained favourable, as monetary policy is now accommodative, supporting the return of investors into Emerging and Frontier markets, including Nigeria.

Head of Research, Robert Omotunde, in a weekly update, noted that the case for monetary easing has become compelling, adding that CBN appears more comfortable using security instruments to guide yields rather than the policy rates.

On its part, FSDH Merchant Bank Limited, through its Head of Research, Ayodele Akinwunmi, noted that recent data on inflation rate, exchange and interest rates on fixed income securities in the country had shown temporary improvement, indicating that things are getting rosy.

The bank said the temporary stability in key indicators from January to March 21, 2019 might support an argument for reduction in interest rate and other measures that could push more money into the financial system, especially with the general election and its negative calculations gone.

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