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    MPC seen hold key rate amid virus resurgence

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    Policy rate: 11.5%
    Inflation rate: 17.75% (June)
    Inflation target: 6% – 9%

    Nigeria’s MPC is expected to hold its key rate for a fifth meeting as it seeks to support the recovery of Africa’s biggest economy.

    While price data suggests inflation that is almost double the ceiling of the central bank’s official target may have already peaked, policy makers have made it clear that they’ll only switch to taming consumer prices after seeing solid growth momentum.

    “Upside risks to inflation in the near term are limited, and this makes standing pat on policy parameters an easy decision to make at the July meeting,” said Mosope Arubayi, an economist at IC Asset Managers.

    “Their stance could change, however, in the last or penultimate meeting of the year if trends in the global economy continue to foster economic wins for Nigeria.”

    Higher oil prices may bolster economic growth in Nigeria, the continent’s top crude producer. But the increased cost of imported refined fuel will also stoke consumer-price growth, adding to pressures of rising food costs.

    Still, multilateral support from the Group of 20 nations that have extended debt-relief measures for some of the world’s poorest countries to year-end, and the allocation of new reserves by the International Monetary Fund should ease fiscal pressures and provide countries with some breathing space to keep rates on hold, Mejabi said.

    What Bloomberg Economics Says…
    “We expect Nigeria’s monetary policy committee — to stay on hold in the coming weeks on growth concerns as the continent continues to grapple with third wave of infections amid a slow vaccine rollout.”

    Still, Nigeria among countries that will get multilateral support from the Group of 20 African nations that have extended debt-relief measures for some of the world’s poorest countries to year-end, and the allocation of new reserves by the International Monetary Fund should ease fiscal pressures and provide countries with some breathing space to keep rates on hold, Mejabi said.

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