Uche Usim, Abuja
As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) sits for its 263rd meeting in Abuja from September 24-25, finance experts have predicted that the committee will retain all the key economic indices as was the case at the 262nd meeting in July.
Professor of Capital Market and Head of Department, Banking and Finance, Nassarawa State University, Keffi, Prof. Uche Uwaleke, told Daily Sun that he was not expecting any change in the policy parameters when the MPC meets. He added that the committee was not likely to lower rates for a number of reasons.
“There is interest rate hike in the US, which is triggering capital flows out of Nigeria leading to a drop in external reserves. There is also the threat on crude oil price volatility from US-China trade war and reversal in downward trend in inflation. There is also labour’s demand for minimum wage implementation, increasing FAAC allocation and rising pre-election spending.
“That said, I do not foresee further tightening of monetary policy due more to political reasons since experience has shown that governments try as much as possible to avoid unpopular policies with the approach of general elections,” he explained.
At the last MPC meeting in Abuja, members rose with a clear advice that the country must save for rainy day, especially as oil prices go up.
The apex bank apparently saw that the government was treading on the same dangerous path to austerity as was the case between 2011 and 2014, when the global oil price skyrocketed to about $140/barrel and yet the government did not save, until the prices crashed to unimaginable low levels in 2015/2016 ($28/barrel), plunging the country into one of the worst recessions in a quarter of a century.
The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, who briefed the media after the last MPC meeting said the committee observed that as the prices of crude oil increased in 2017 and 2018, the monthly allocation to various tiers of government also increased, suggesting that the Federal Government was not conscious of saving for the rainy day.
He added that the committee was concerned about the liquidity impact of the 2018 expansionary fiscal budget and increasing FAAC distributions due to rising prices of crude oil as well as the build up in election related activities.