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FSDH forecasts 10% MPR for 2021

 

PREDICTION
Apex bank will continue to drive economic recovery

 

Analysts at FSDH Merchant Bank have predicted that as part of efforts to drive economic recovery, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) is likely to cut the benchmark interest rate-the Monetary Policy Rate (MPR)- to 10.0 per cent in 2021.

 

The financial institution stated this in its macroeconomic review and outlook, titled, “Nigeria 2021 Outlook: COVID-19 Recession and the Long Road to Economic Recovery,” obtained by New Telegraph yesterday.

 

 

Citing the need to stimulate the economy to tackle the impact of the coronavirus (Covid-19) pandemic, the MPC initially reduced the MPR to 12.5 per cent from 13.5 per cent in May this year, before further cutting the rate to 11.5 per cent in September.
According to the FSDH analysts, “with the need to drive economic recovery, the MPC will likely cut the benchmark rate in 2021. The MPC will also be concerned about the misalignment of interest rates in the fixed income market. This could further support rate cut in 2021.

 

“The introduction of the new CBN Special Bill as an alternative investment vehicle, will absorb a proportion of the liquidity in the system and stabilize the interest rate environment, at least in the short run.

 

“As regards price stability, the monetary authority had earlier hinted that structural factors are more responsible for the increase in inflation rate. This view therefore creates more room for expansionary monetary policy in 2021.”

 

The analysts also forecast real Gross Domestic Product (GDP) of 1.3 per cent and inflation rate of 13.5 per cent for next year.

 

In addition, they are projecting an exchange rate of N440 per dollar at the Bureaux De Change (BDC) segment of the forex market in 2021.

 

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