By Chinwendu Obienyi
As the first Monetary Policy Committee (MPC) for the year 2022 kicks off this week, analysts have said they expect the committee to retain the Monetary Policy Rate (MPR) at 11.5 per cent alongside other monetary policy parameters.
The meeting, Daily Sun gathered, is expected to be centered around global and domestic growth prospects for the year within the context of rising cases of the Omicron variant amid the ongoing unwinding of monetary stimulus by global central banks.
Although the Committee signalled at the last policy meeting in November that it would likely revert its accommodative monetary stance if global financing conditions tightened due to the unwinding of asset purchase programmes by global central banks, analysts who spoke to Daily Sun, said that they do not expect changes to policy rates at the meeting.
Economist and financial analyst at Cordros Research, Abdulazeez Kuranga, believes that while the Bank of England hiked interest rates at the tail end of last year and with the US Fed expected to follow suit in March 2022, the Committee will adopt a “wait and see” approach.
Kuranga noted that the preceding is to examine the magnitude of external sector pressures before raising the policy rate as the first line of defence to mitigate the impact of capital flow reversals.
According to him, historically, the MPC has often adopted a reactive stance instead of a proactive stance in responding to the exodus of foreign investments from emerging economies.
“This lends credence to our view that the Committee will attach a more vital weight to an accommodative monetary policy stance to enable economic growth to gain a strong foothold.
We believe the Committee will reiterate that hiking interest rates to curtail inflationary pressures would limit the flow of credit to the real sectors, undermine the recovery process, and widen the negative output gap.
Moreover, given that the MPR is increasingly becoming a signalling tool for market rates, we believe the Committee will continue using its FX demand management strategies and administrative measures to achieve the competing goals of price/exchange rate stability and supporting economic growth recovery.All in, we expect the Committee to retain the MPR at 11.5 per cent alongside other monetary policy parameters”.
For his part, Group Managing Director, Afrinvest, Ike Chioke, said the monetary policy environment should remain relatively accommodative, while adding that Afrinvest does not expect any switch in the current FX management policy of the Central Bank of Nigeria (CBN).
Chioke said: “Despite the anticipated electioneering pressures, fiscal policy is expected to become more hawkish as the government seeks to raise revenue generation to fund a N17.1 trillion budget with a planned deficit of N6.4 trillion.