What will Nigeria’s Monetary Policy Committee do?

The Monetary Policy Committee (MPC) of Nigeria is set to announce its final monetary decision for the year, amidst a backdrop of global economic uncertainty. The last meeting held by the MPC focused on various external factors such as the trade tensions between the US and China, geopolitical conflicts in the Middle East, and the overall stability of financial markets worldwide. These factors, coupled with mixed growth levels in both emerging and developed economies, have contributed to a sense of caution among policymakers. The concern over slow domestic growth, high unemployment rates, and ongoing security issues has also weighed heavily on the committee's decision-making process. Despite a slight improvement in GDP growth in the third quarter of 2019 compared to the previous quarter, the overall performance still lags behind expectations. The committee acknowledges the increase in credit to the private sector following new regulations in the money markets, but remains cautious about the effectiveness of these measures. The decision to segment the fixed income market has created a more complex interest rate system, with yields hovering around 11%. There is speculation about whether the Central Bank of Nigeria (CBN) will maintain its current stance or take a more proactive approach in light of recent policy changes. The implementation of the loan to deposit ratios, which require banks to lend out a certain percentage of their deposits, has shown signs of improvement in credit access for businesses. However, the committee may opt to wait and assess the full impact of these measures before making any significant adjustments. In addition, recent data on capital importation revealed a marginal decline, signaling a potential decrease in foreign portfolio investments in the country. The moderation of inflows into money market instruments further underscores the need for a cautious approach to monetary policy decisions. Despite the anticipation surrounding the MPC meeting, experts, including Abiodun Keripe, Head of Investment Research at Afrinvest Securities, believe that the committee is likely to maintain current interest rates. This decision is driven by a desire to monitor the effects of recent policy changes and assess the overall economic landscape before making any significant adjustments. Investors and analysts will be closely watching the MPC announcement to gain insights into the committee's outlook on the economy and its approach to monetary policy in the coming months. The decision to hold rates could provide stability in the short term, but continued vigilance and flexibility will be essential as Nigeria navigates the challenges of a volatile global economic environment.