Money market awaits signals as CBN’s MPC holds 1st meeting
Sopuruchi Onwuka
Players in the Nigerian financial markets are in full attention as the new administration of the Central Bank of Nigeria (CBN) convenes its first monetary policy committee (MPC) meeting at the end of February to roll out new rates that would guide activities in the money market.
The CBN released its 2024 schedule for its MPC meetings and announced the first two-day meeting under its new Governor, Olayemi Cardoso, would begin on February 26. At the last MPC meeting held in July, the CBN had raised rates by 25 basis points to 18.75%.
The Oracle Today reports that the prevailing inflationary jumps in the country directly connect to acute foreign exchange deficits in the economy, leading to rapid depreciation in the Naira against key international currencies.
As the MPC meets at the end of February, pundits expect interest rates to jump by significant 550 basis points and clear forward guidance from March.
The outcome of the meeting is expected to be a clear departure from the past when the CBN’s MPC maintained steady rates as part of its artificial pillars in holding up the Naira at the foreign exchange market and taming inflation.
Whereas the former CBN Governor, Mr Godwin Emefiele, had struggled to use monetary policy instruments to control inflation as the economy suffered foreign exchange crunch associated with massive borrowing by former President Muhammadu Buhari, the new government of President Bola Tinubu is set on pulling all artificial pillars that suppress inflation, including removal of all subsidies.
Consequently, consumer prices jumped by record 28.9% in December as the Tinubu government removed subsidy on petrol and relaxed government’s grip on foreign exchange supply to the market.
Under the leadership of the its new Governor, Olayemi Cardoso, the CBN has since introduced a set of tough reforms that have triggered inflation in the economy, including dismantling all inequitable exchange rate compartments in the foreign exchange market and setting higher rates for the government’s open market operation notes.
Analysts are still convinced that Nigeria’s economic crises originate from dynamics that exist outside the CBN and its monetary policies. To arrest the current galloping inflation ravaging the citizenry, analysts point at the need for the country to boost its foreign exchange income by diversifying its exports from falling crude oil production volumes.
