Saturday, December 4, 2021

    MPC seen retain benchmark rate at 11.5% with focus to tackle rising inflation

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    Godwin Okafor
    Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

    Policy rate: 11.5%
    Inflation: 14.2% (October)

    High food prices have kept Nigerian inflation above target since 2015

    After a surprise 100 basis point interest-rate cut in September, Nigeria’s central bank will probably leave its benchmark rate on hold as it tries to support growth in Africa’s largest economy.

    While the MPC is unlikely to change its short-term policy stance, naira depreciation and rising costs suggest upside risks to inflation forecasts, said Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital.

    Foreign exchange restrictions have helped keep the currency under pressure, while border closures, violent farm attacks, and clashes between herders and farmers are driving up food prices.

    Post COVID19 economic crisis
    Following aggressive interest rate cuts when coronavirus restrictions shut down output, African central bankers meeting for the final time this year may find that they’ve exhausted their monetary-policy options.

    Activity has improved as economies reopen, yet balancing the threat of resurgent infections against inflation that’s on the rise means most policy makers in the region will probably hold rates as they seek to support economic growth. That’s as fiscal space remains limited and relatively depressed commodity prices continue to weigh on exporters.

    “Although African central banks maintain that they still target inflation, it is clear that the focus this year has shifted firmly to growth,” said Ayomide Mejabi, chief economist for sub-Saharan Africa at JPMorgan Chase Bank NA. “We expect that to continue well into next year, but the space for formal policy rate cuts is narrowing.”

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