CBN MPC Meeting: All eyes on Shonunbi as Nigeria awaits interest rate decision
Amidst economic uncertainty, all eyes are set on the acting Central Bank of Nigeria (CBN) Governor, Fola Shonubi, as the Monetary Policy Committee (MPC) convenes for their crucial bi-monthly meeting on Monday and Tuesday, July 24th and 25th, respectively.
Key economic decisions, including the future of Nigeria’s interest rates, will be deliberated upon, with predictions hinting towards a potential rate increase.
At the last MPC meeting held in May, the committee agreed to raise the interest rate to 18.5% in an attempt to tame the soaring inflation rate, which then stood at 22.41%.
Now, with the inflation rate slightly edging upwards to 22.79%, the same outcome could be expected.
This decision will be heavily influenced by external factors, including the recent rate hike in Ghana where rates were escalated to 30% amidst an inflation rate of 42.45%.
This upcoming MPC meeting is particularly significant as it marks Shonubi’s first in the acting Governor role since the suspension of his predecessor, Godwin Emefiele.
The decisions taken and his handling of the proceedings will undoubtedly set the tone for his tenure and potentially determine the future direction of Nigeria’s monetary policy.
In addition to deciding on the interest rates, the MPC meeting is also expected to address other critical issues affecting the Nigerian economy.
One such matter is the new foreign exchange managed float that was launched a little over a month ago. Analysts are keenly anticipating Shonubi’s perspective on this initiative, including its implementation and subsequent impact.
The persisting inflation rate predicament and the interest rate conundrum are also expected to take centre stage. In an environment where government securities’ interest rates have remained low despite the inflation surge, the MPC will need to provide solid strategies and clear direction.
Analysts at CSL Stockbrokers opine that an increase in the pace of rate hikes in reaction to the expected spike in headline inflation, “will jeopardize the country’s fragile growth while doing little to reduce inflation.”
They also forecast a 50bps rise in rates at the end of tomorrow’s meeting.
Another issue likely to surface during the meeting is the probable reintroduction of Open Market Operation (OMO) bills. Several analysts who have spoken to Nairametrics have opined that the apex bank might need to bring back OMO bills at a rate that reflects the current inflation rate.
This they opine will incentivize foreign investors.
Shonubi’s comment on this matter will be of significant interest, given its potential implications on the nation’s monetary policy and overall economic health.
As the MPC meeting draws near, Shonubi’s debut at the helm comes with a hefty list of complex economic issues that demand immediate attention.
His responses and the committee’s subsequent decisions will be critical in shaping Nigeria’s economic trajectory amidst ongoing inflationary pressures and an unpredictable global economic landscape.
Hence, as the title suggests, all eyes will indeed be on Shonubi.