BY CHINYERE OBIORA, LAGOS – Financial analysts insist there is no dramatic change to warrant the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) shifting grounds on the current 14 per cent Monetary Policy Rate (MPR) as it meets today, Monday and Tuesday, May 22 and 23, 2017 in Abuja to brainstorm on issues within the nation’s monetary system.
Signals emerging from a Lagos based investment company, Cowry Assets Management Limited (CAML), indicate the experts are upbeat on the MPR’s outlook based on expectations the monetary authority is favourably disposed to encouraging foreign portfolio inflows through positive real returns for investors against the backdrop of relatively high inflation rate.
In the same vein, their forecast is that the liquidity ratio may be kept at 30 per cent with no modifications anticipated on the Standing Lending Facility (SLFR) Rate and Standing Deposit Facility Rate (SDFR) currently at +2 per cent and -5 per cent respectively.
However, there are also permutations that the Cash Reserve Ratio (CRR) requirement will be reviewed downwards by 250 basis points from 22.5 per cent to 20 per cent on account of persistent liquidity strain in the financial system. This is due, in part, to crowding out effect of increased public sector borrowing to finance the fiscal deficit, a development that has placed lenders in a difficult position to finance foreign exchange demands of end users.
In their explanation, they said “Our expectation is corroborated by the increasing borrowing by banks at the SLF window observed at a monthly average of N316.68 billion in April compared to N249.74 billion in March and N224.57 billion in February.”
At its 112th meeting in March 2017, the MPC had kept a tight monetary standpoint with the retention of all key policy rates. Interestingly, the Committee had based its decision on observable headwinds in the domestic economy and the perceived fears in the global environment.
In the process, the MPC maintained the MPR at 14 per cent; Liquidity Ratio at 30 per cent; and CRR at 22.5 per cent. Others are Standing Deposit Facility (SDF) rate at 9 per cent; and Standing Lending Facility (SLF) rate at 16 per cent.
Meanwhile, the local currency, the Naira appreciated week on week at the Bureaux De Change (BDCs) and parallel market segment of foreign exchange market by 2.60 per cent and 2.31 per cent at close of business on Friday to stay at N375 and N381.00 to a dollar respectively.
However, the inter-bank market segment did not enjoy such luxury as the Naira depreciated to N325 per dollar in the absence of CBN’s intervention sales during the week
