The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) reconvenes today to discuss the nation’s economic trajectory.
With inflation rates still disturbingly high at 32.15%, the MPC faces a critical decision: maintain the current interest rate or adjust it to stimulate economic growth.
Key considerations for the MPC include the inflation rate, which, although slowed down in July and August, remains a significant concern.
The recent slowdown in inflation raised hopes that the central bank might reevaluate its contractionary monetary policy position and lower interest rates, but new concerns about growing energy prices, particularly the 50.5% increase in the base price of PMS, and the depreciation of the naira could temper such hopes.
The Naira’s volatility persists due to limited FX supply and increased demand, while Nigeria’s GDP growth remains resilient, but the MPC must consider the impact of its decisions on economic stability.
Analysts predict the MPC will retain the Monetary Policy Rate (MPR) at 26.75% or slightly increase it to reinforce gains from prior adjustments. Professor Uche Uwaleke advises against further rate hikes, citing their adverse impact on economic growth and employment. Other experts, such as Dr. Chijioke Ekechukwu and Mr. Idakolo Gbolade, also recommend maintaining the current interest rate.
Possible outcomes of the MPC meeting include a rate cut, which is unlikely due to high inflation, a rate hike, which is possible but not recommended by most analysts, or maintaining the status quo to support economic stability.
The MPC must carefully weigh its options, considering the interconnectedness of economic factors. Professor Anthony Kila suggests that interest rate adjustments have a limited impact on the broader Nigerian economy and that the MPC’s influence on the foreign exchange rate remains limited.
He emphasizes the need for the CBN to review its economic indices and improve consumer finance structures to make MPC decisions more impactful.
Mr. Olayemi Cardoso, governor of the CBN, reiterated the bank’s resolve to target inflation in order to achieve price stability.
