Unconventional policies leave analysts confused

Seven of the 19 economists surveyed predicted that the rate will be cut by as much as 50 basis points to 100 basis points, while the remaining economists say it will stay at 13 percent.

Central Bank Governor Godwin Emefiele speaks at the monthly MPC meeting in Abuja, Nigeria,  September 22, 2015.    REUTERS/Afolabi Sotunde

Analysts are confused as to the unconventional economic policies put in place by the Central Bank of Nigeria (CBN), as they become more and more difficult to predict.

While central banks from South Africa to Ghana have opted to tighten monetary policy to protect their economies from downward spiraling currencies, Bloomberg reports that speculation in financial circles suggest that CBN governor, Godwin Emefiele will reduce the benchmark rate on Tuesday for the first time in the past six years.

According to the report, seven of the 19 economists surveyed predicted that the rate will be cut by as much as 50 basis points to 100 basis points, while the remaining economists say it will stay at 13 percent.

“People are divided because they are starting to believe that decisions are being made devoid of any economic rationale,”Bismarck Rewane, chief executive officer of the Financial Derivatives Co., said by phone from Lagos. “Some of the decisions being made now are made with political rationale,” he added, according to the report.

Even though oil prices have plunged significantly, Emefiele, 54, has not gone with the devaluation of the Naira this year, but instead imposing stricter restrictions on imports to limit demand, a policy that has been endorsed by both President Muhammadu Buhari and VP Yemi Osinbajo.

As the Buhari administration ramps up lending to finance the budget and compensate for a drop in oil revenue, it will be helped by lower interest rates.

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