Analysts Predict CBN Will Retain MPR, CRR, Others | Independent Newspapers Limited
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Analysts Predict CBN Will Retain MPR, CRR, Others

Posted: May 17, 2015 at 10:12 am   /   by   /   comments (0)

By Sola Alabadan,  Lagos


As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) set to hold its meeting on May 18 and 19, analysts say they expect the MPC to retain Monetary Policy Rate (MPR) at 13 percent, as well as retain the Cash Reserve Requirement (CRR) for private and public sector funds at 20 percent and 75 percent, respectively.

According to the analysts, the prediction is based on the review of international and domestic economic developments.

The experts pointed out that major highlights of the meeting are likely going to be the retention of MPR at 13 percent, leaving the +/-200basis points corridor, while also retaining Prevailing Order-Based Exchange Rate Regime.

The committee is also expected to retain the Cash Reserve Requirement (CRR) for private and public sector funds at 20 percent and 75 percent, respectively.

Besides, the analysts expect the MPC to retain Liquidity Ratio at 30 percent, while equally retaining the net open position limit (NOPL) on foreign exchange trading positions of banks at 0.5 percent.

Based on analysis of the prospects for global growth, domestic output, inflation, foreign reserves, financial stability concerns, as well as developments in money markets, the Committee will determine the configuration of monetary policy for the near-term.

The liquidity conditions have improved since the last meeting of the MPC boosted by large cash injections into the banking system from redemption of government bonds and treasury bills.

On the foreign exchange front, the local currency remained range-bound due to the order-based quoting system introduced by the financial regulator in February. The stability has, however, been achieved at a high cost to foreign reserves that are 21 percent lower compared to one year ago. In an attempt to conserve the foreign exchange and support the naira, the apex bank in April reduced the limit on debit card spending abroad to $50,000 from $150,000 per person per annum.

Nigeria’s foreign reserves have continued to trend steadily lower following the sharp drop in international crude oil prices during the second-half of 2014. The latest figures made available by the CBN show that Nigeria’s external reserves stood at $29.73 billion on May 12th, representing a year-to-date decline of $4.73 billion or 13.73 percent.

According to new figures released by the National Bureau of Statistics (NBS), Nigeria’s consumer price inflation continued its upward trend in April, although the core index increased at a slower pace. The overall consumer price index (CPI) increased by 0.8 percent month-on-month in April, which raised the year-on-year (year-on-year) rate to 8.7 percent, up from 8.5 percent in March.

According to the NBS, the Nigerian economy expanded at a slower pace during the first quarter of 2015. Specifically, real GDP growth at factor cost slowed to 3.96 percent y-o-y (a 24-month low) during Q1 2015, down from 5.94 percent y-o-y in Q4 2014. The NBS highlights that the oil industry contracted by 8.15 percent y-o-y in Q1, mainly on account of a drop in crude oil output to 2.18 million barrels per day (bpd) from 2.24 million bpd in Q1 2014 a year earlier.