Amidst mild protest by analysts over the ‘deflating’ average change in prices of goods and services and leap in economic growth, as released by the National Bureau for Statistics (NBS) last week, there is general belief that the Monetary Policy Committee (MPC) will retain benchmark rate this week.
The last meeting of the Central Bank of Nigeria (CBN)’s MPC is scheduled to hold Wednesday and analysts believe the NBS has handed the monetary authorities the reason to keep rates unchanged.
Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives Company (FDC) Limited said, MPC is likely to maintain status quo as inflation moderates and GDP remains positive.
The MPC meeting will hold next week (November 22/23). The positive growth (4.03%) and moderating inflation (15.99 per cent) may persuade the committee to maintain status quo in its policy stance.
Analysts at Afrinvest also think along the same line with Bismarck. “Notwithstanding, we believe the third quarter of 2021 GDP performance, the further moderation in the year-on-year (y/y) headline inflation rate, and favourable external conditions such as the recent increase in Nigeria’s oil production quota to 1.67mbpd (from 1.65mbpd), the stabilisation of crude oil prices above $80.00/bbl., and the surprise extension of dovish monetary policy stance in the US would provide comfort for the CBN to maintain status-quo at next week’s Monetary Policy Committee (MPC) meeting”, said Afrinvest.
The NBS released the the third quarter GDP report last week, seven days ahead of the scheduled date (November 24). In line with expectations, the economy sustained its positive growth even though it declined to 4.03 per cent from 5.01 per cent. This brings the average annual growth rate to 3.18 per cent in 2021, which exceeds the IMF (2.6 per cent) and World Bank (2.4 per cent) forecasts.
The growth momentum was largely supported by a sustained recovery in the non-oil sectors primarily, transport (33.31 per cent), financial institutions (25.50 per cent), telecoms (10.87 per cent) and construction (4.10 per cent). The two sectors that are pivotal to the economy – petroleum, which contracted sharply and agriculture, which remains a laggard, are a cause for concern to policy makers. The petroleum sector is a major source of foreign exchange earnings and balance of trade, while the agriculture sector is the highest contributor to GDP (29.94 per cent) and the largest employer of labour (54.7 per cent).
