MPC may cut interest rates before July–Emefiele
The Central Bank of Nigeria’s Monetary Policy Committee may start cutting interest rates in the first half of the year as inflation eases, the CBN Governor, Godwin Emefiele, has said.
Once inflation gets to low double digits “and high single digit happens, then it should be easy for the MPC to begin to look at easing,” Emefiele said on Wednesday in an interview at his office in Abuja, Bloomberg reported on Wednesday.
“I want to think that between the end of the first and second quarter, we should begin to see easing,” he added.
While inflation slowed to a 20-month low of 15.4 per cent in December, it’s still above the CBN’s six per cent to nine per cent target band.
The MPC didn’t meet as scheduled this week and the central bank’s key rate remained at 14 per cent, where it’s been since July 2016. The MPC has been trying to balance bringing down inflation and boosting an economy that contracted in 2016.
Inflation is “treading downwards, but a little bit sticky downwards,” Emefiele said.
“We believe that the rate of moderation will improve in the coming months,” he added.
Emefiele said the central bank was engaging with the National Assembly and he was optimistic that the new members of the MPC, including a new CBN deputy governor, would eventually be confirmed.
The CBN governor, however, said the committee would not yet have lowered the monetary policy rate if it did meet this week.
According to him, increases in the price and shipment of oil, Nigeria’s biggest foreign-currency earner, and improved investor confidence mean the central bank can build its reserves to $60bn in the next 12 to 18 months, from $40bn currently.
Emefiele said, “Things are looking up. No one ever thought the price of crude would hit $70 in such a short period of time.”
The MPC failed to meet this week because it lacked a quorum after the Senate refused to confirm President Muhammadu Buhari’s nominees for the committee.
That is part of a longstanding battle between the president and his parliament.
The standoff between the Presidency and the National Assembly is “a key political risk for Nigeria this year as it may get in the way of the effective functioning of the economy,” according to the Head, Macroeconomic Research at Standard Chartered Bank Plc in London, Razia Khan.
“The belief is that in time the new MPC members will be appointed. If we get to the next set of meetings and they still can’t be held, there would be some disquiet among investors and concerns about the workability of Nigeria’s political system,” she added.