Nigeria's central bank to hold lending rate at 14% record-high till 2019

The committee will deliberate on the country's increasing inflation rate, declines in global Brent crude oil price as well as the 2019 general elections.

Analysts at FSDH said despite justification for an increase in policy rates owing to rising demand in foreign exchange leading to a consistent decline in the foreign reserves, rising inflation rate, the monetary authority may decide to delay an increase in the monetary policy rate until their January 2019 meeting.

FSDH researchers said although the committee has become increasingly disposed to tightening rates in its last two meetings, they believe the committee will retain the benchmark rate at 14.0 per cent to minimise the downside risks to growth and inflation.

“We believe the MPR will be kept at 14.0% to maintain the delicate balance between the downside risks to inflation, investment outflows and growth. Given that risks to inflation remain moderate and concentrated on the supply side, increasing interest rate will be ineffective to curb inflation.”

Godwin Emefiele, CBN governor ece-auto-gen

They also argued that from the perspective of growth, there is also a need to support the economy by avoiding any further increases to the cost of borrowing given currently high rates.

“To attract and retain capital flows, we expect the CBN to continue utilising other monetary policy tools, such as Open Market Operations (OMO), to guide interest rate movement in a way that compensates investors for a higher risk premium,” FSDH stated.

In the same vein, researchers at Afrinvest say the CBN MPC will maintain status quo on all policy rates.

“To attract and retain capital flows, we expect the CBN to continue utilising other monetary policy tools, such as Open Market Operations (OMO), to guide interest rate movement in a way that compensates investors for a higher risk premium,” they said.

At its meeting in September 2018, the MPC maintained the Monetary Policy Rate (MPR) at 14%, with the asymmetric corridor at +200 and -500 basis points around the MPR; it retained the Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) at 22.50% and 30% respectively.

The rates were first raised in July 2016 to combat rising inflation.

Nigeria's central bank to hold lending rate at 14% record-high till 2019

Analysts at FSDH Research have predicted that the Central Bank of Nigeria (CBN)

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