Will Nigeria’s MPC sustain hawkish stance?

Nigeria's Monetary Policy Committee is poised to announce its interest rates decision today amidst growing concerns over inflation and currency weakness. Analysts anticipate the committee will uphold the current rates, but there is speculation about a possible rate hike to counter the inflationary pressures. Emmanuel Odiaka, CEO of Ecob Capital, weighed in on the upcoming MPC decision in an interview with CNBC Africa. Odiaka acknowledged the inflationary pressures that have been mounting and suggested that the MPC might lean towards maintaining a hawkish tone to demonstrate a commitment to controlling inflation. With the Consumer Price Index (CPI) on the rise, there is a possibility that the committee will opt to increase monetary policy rates to curb inflationary trends. The conversation then shifted to the effectiveness of past monetary policy decisions in addressing inflation. Odiaka emphasized that monetary policy plays a crucial role in maintaining price stability by establishing an anchor rate. However, he also highlighted the importance of coordination between fiscal and monetary authorities to achieve desired outcomes. Odiaka stressed that while monetary policy can support fiscal efforts, fiscal discipline and productive movements on the fiscal side are equally imperative. Furthermore, Odiaka raised concerns about the potential repercussions of continuous rate hikes. He pointed out distortions in the productive sector, escalating borrowing costs, and the looming threat of increased non-performing loans in banks. Additionally, rising commodity prices are forcing consumers to reassess their spending patterns, underscoring the challenges posed by elevated inflation. Discussing the inflationary trend in the market, Odiaka expressed optimism about a possible deceleration in inflation in the coming months. Despite prolonged double-digit inflation rates over the past two years, he mentioned expectations of a slowdown, particularly in food inflation. The CEO attributed this anticipated ease to the ongoing harvesting season and government interventions to alleviate food supply constraints. In conclusion, Odiaka emphasized the importance of monitoring the MPC's decision closely, considering the potential impacts on the economy. The balance between combating inflation and supporting economic growth remains a critical challenge for Nigerian authorities. As the MPC prepares to unveil its verdict, stakeholders await the outcome with bated breath, anticipating the central bank's next move in navigating the country's economic landscape.