Nigerians and investors anticipate the outcome of the Central Bank of Nigeria’s Monetary Policy Committee meeting at the 284th meeting of the committee begins today.
The Central Bank of Nigeria’s Monetary Policy Committee met on the 24th and 25th of January for the first time in the year 2022, and unanimously decided to hold the benchmark interest rate at 11.5% while keeping all other monetary parameters unchanged.
This was due to the committee’s consideration of the economy’s recovery from the pandemic in 2021 and its expansion path. The committee was of the opinion to steer increased positive growth of output within the economy in the year 2022 despite the inflation rise in December 2021.
However, with swing of economic trends in the year already, ranging from the supply shocks resulting from the Russia-Ukraine crisis, the fuel scarcity, and the reaction to the CBN’s e-invoice program and the consistent rise in the inflation rates, the CBN is in a tight position to decide.
Things the CBN will consider
- The increase in the inflation rate as it rose from 15.6% in January 2022 to 15.7% in February 2022. Representing, a 0.1% point increase.
- The increase in inflation steered by the sanctions imposed on Russia and the energy supply disruptions.
- The introduction of the cash collection centres called Bank Neutral Cash Hubby the Central Bank of Nigeria (CBN). This is to enable it to reduce cost and improve operational efficiency in the country’s cash management value chain.
- The Central Bank of Nigeria (CBN) stated that commercial banks’ non-performing loans (NPLs) levels in Nigeria fell below 5% to 4.94% at the end of December 2021, for the first time in about a decade.
- In February 2022, the CBN extended the Naira for Dollar scheme from the IMTOs to the IEFX window. Specifically, the CBN released instructions that outline that it will facilitate payment of N65 for every US dollar repatriated and sold at the Investors and Exporters Window.
- The Nigerian banks have informed their customers that the limit on the Naira Card has been reduced due to dollar scarcity.
What an expert is saying
Adebola Sunday, an economist and Vice President of Edgefield Capital Management Limited, a stockbroking firm in Lagos, stated that, “the increase in inflation rate we have now is structural precipitated by fuel and energy crisis. This is not due to the excess money in the economy. Hence, I do not think increase in MPR is a way to go. Rather, the committee need to address the fundamental issues causing spike in the inflation rate. Raising the MPR will worsen the economy because other rates will go up and more Nigerians would be thrown into the ocean of unemployment and increased poverty levels. Therefore, I think, the MPC will retain the MPR and leave all other monetary parameters unchanged.” He went ahead to urge the government to intensify their efforts in addressing the issues of fuel supply and Megawatts of electricity.