Financial analysts have predicted a hold on all monetary policy parameters ahead of the Monetary Policy Committee (MPC) meeting scheduled to hold on the 26th and 27th of July. The MPC meeting of the Central Bank of Nigeria (CBN) which will be the fourth edition in 2021; is where monetary policy decisions are taken and it is chaired by the CBN Governor.
“On a balance of factors, we expect the Committee to maintain the status quo on all monetary policy parameters at this meeting. However, we expect the underlying tone of the Committee to be neutral, given the still elevated domestic inflationary pressures and imbalances in the external sector,” experts at Cordros Research said. A review of the performance of the economy according to Cordros research, showed that the domestic economic activities continue to expand, albeit slowly, on account of the (1) sustained opening of the economy, (2) increased cross-border activities, (3) lagging impact of government inter-vention to critical sectors and (4) rally in oil prices. Since the last policy meeting in May, economic activities have continued to improve despite the emergence of a delta variant of the COVID-19 virus worldwide (first spotted in Nigeria on 8th July).
“Given the impact of lockdown measures on activities last year amidst weak public finances, we do not think the government will rekindle lockdown measures. Instead, we believe efforts will be concentrated on improving vaccination and creating awareness to the citizens on the potential impact of a third wave.” Cordros said it expects the economy to grow by 3.37% y/y in Q2-21 (Q1- 21: +0.51% y/y), primarily driven by the favourable base effect from the prior year amidst a moderate improvement in econom-ic activities. Consequently, we believe the Committee would be cautious with the growth outlook given that the Q2-21 GDP figures would be flattered by a favourable base effect from the prior year. With the domestic economy still vulnerable to external shocks, we believe it would induce the Committee to favour standing pat on its monetary policy decisions.