Despite food prices remaining stubbornly high, concerns over sluggish economic growth amid a resurgence of COVID-19 infections, driven by the virulent delta variant, may push the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) to leave rates unchanged at the end of its two-day meeting tomorrow, financial analysts have said.
Although the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) shows that inflation dropped for the third consecutive month to 17.75 per cent in June compared to 17.93 per cent in the preceding month, the data indicated that prices continued to rise in June, but at a slightly slower increase than it did in May.
Similarly, the NBS’ numbers also show that food inflation remains disturbingly high, even though it eased to 21.83 per cent in June, compared to 22.28 per cent in May. In fact, prior to release of the NBS’ report, the surge in food prices in recent months had led some analysts to predict an increase in the inflation rate for June.
Specifically, the Chief Executive Officer, Financial Derivatives Company Limited, (FDC), Mr. Bismarck Rewane, had forecast that inflation would climb back up to 18.10 per cent in June. He, however, stated that the projected increase in inflation was not likely to make members of MPC to vote to alter rates at the end of their meeting tomorrow, adding that “they (MPC members) are more likely to adopt a waitand- see approach this time around.”
Also, Bloomberg, last week, reported analysts as predicting that monetary authorities in Nigeria, South Africa, Kenya, Ghana, Mauritius and Mozambique, are likely to leave borrowing costs unchanged over the coming weeks as a resurgence of coronavirus infections driven by the highly transmissible delta variant threatens to hinder already sluggish economic recoveries.
It quoted Africa economist, Boingotlo Gasealahwe, as saying “we expect Africa’s major central banks – South Africa, Nigeria, Kenya and Ghana – to stay on hold in the coming weeks on growth concerns as the continent continues to grapple with third wave of infections amid a slow vaccine rollout.”
The report noted that while price data in Nigeria suggests inflation that is almost double the ceiling of CBN’s official target – 6-9 per cent – may have already peaked, policy makers have made it clear that they’ll only switch to taming consumer prices after seeing solid growth momentum.
It quoted Mosope Arubayi, an economist at IC Asset Managers, as saying that “upside risks to inflation in the near term are limited, and this makes standing pat on policy parameters an easy decision to make at the July meeting.
Their stance could change, however, in the last or penultimate meeting of the year if trends in the global economy continue to foster economic wins for Nigeria.”
New Telegraph reports that members of MPC voted to hold all policy parameters constant at their last meeting in May, on the grounds that adopting a tightening stance will hamper CBN’s objectives of “providing low cost credit to households, Micro Small and Medium Enterprises (MSMEs), Agriculture and other output growth and employment stimulating sectors of the economy.”
Thus, the committee held the Monetary Policy Rate (MPR) at 11.5 per cent; retained the asymmetric corridor of +100/-700 basis points around the MPR; kept the Cash Reserve Requirement (CRR) and Liquidity Ratio at 27.5 per cent and 30 per cent respectively.