After Monetary Policy Committee (MPC) bimonthly meeting today, CSL stockbrokers limited predicted the MPC of the central Bank of Nigeria (CBN) to likely satisfy its hawkish mood with a 100 basis point rate hike.
The CBN will conclude its first Monetary Policy Committee (MPC) meeting under the CBN Governor Yemi Cardoso today and in a commentary note, analysts said they anticipate sustenance of its contractionary monetary measures.
Despite the administration’s preference for a low-interest rate environment, CSL Stockbrokers said it expects a 100bps increase in the Monetary Policy Rate (MPR).
“We believe price pressures and the need to attract foreign portfolio investors (FPIs) will remain top on the committee’s mind, necessitating a rate hike. We, however, expect the other policy parameters such as the Cash Reserve Ratio (CRR), liquidity ratio and asymmetric corridor to remain unchanged”.
The firm recalled that in 2023, the MPC raised the MPR rate by a cumulative 225 basis points in a bid to stem rising inflation. Analysts said they maintain view that continuous rate hikes will further limit and put the country’s fragile growth at risk while having a minimal effect in combating inflation and attracting foreign inflows.
“Nigeria’s Headline inflation continues to soar to record breaking heights due to the direct and indirect impact of the continuous depreciation of the Naira, the removal of petrol subsidies and the worsening insecurity situation in the food producing regions and we believe that this will be on the forefront of the committee’s mind.
“In January, Nigeria witnessed a surge in headline inflation, reaching 29.90%, marking a 98 basis points increase from December 2023’s 28.92%. The surge was propelled by a notable uptick in food inflation, rising by 148 basis points to 35.41% from December’s 33.93%.
“Additionally, core inflation climbed to 23.59% from 23.06%, reflecting a 53 basis points increase. It is crucial to highlight that prior rate hikes have demonstrated limited efficacy in curbing inflation, with supply-side factors remaining predominant.
“Addressing the country’s structural challenges, such as insecurity in key food-producing areas, ensuring exchange rate stability, and enhancing the power supply, is imperative to tackle the surging inflationary pressures”, the investment firm explained in a commentary note today.