MPC: Nigeria Needs FX, Confidence In Naira Most – Razia Khan | Independent Newspapers Limited
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MPC: Nigeria Needs FX, Confidence In Naira Most – Razia Khan

Razia Khan
Posted: Sep 20, 2016 at 1:12 pm   /   by   /   comments (0)

As the Monetary Policy Committee of the Central Bank of Nigeria concludes its two-day 109th meeting today in Abuja, Razia Khan, a well-known commentator on African markets, believes that the nation needs foreign exchange, confidence in the Naira most at this time.

In a series of tweets, Mrs. Khan, London, United Kingdom based ?Regional Head of Economics, Africa at Standard Chartered Bank noted further that “so many opinions get it wrong. In current environment, lower interest rates will do nothing for growth.”

“A clear and consistent focus on stability does not mean desperation. It means credibility.”

Concurring, Pabina Yinkere, ?Head, Research at Vetiva Capital Management tweeted: “I keep saying this and no one listens. FX is what we need to focus on now. (The) Economy is too sensitive to it.”

Khan expects the members of the MPC to tighten rates “today to safeguard foreign exchange stability, send clear and consistent message on policy direction (which are) very necessary for confidence.”

For her, the nation is in a weak growth trajectory and that in a “foreign exchange constrained environment, banks will be cautious about lending. Lower interest rates will achieve little.

She also noted the need for Nigeria to focus on “consistent policy and consistent anti-inflation, pro-Naira stability stance (which) will do much to reduce debt service costs long term.”

On Monday, experts at Access Bank Plc’s Economic Intelligence Unit expressed hope that the MPC meeting would vote to retain the benchmark Monetary Policy Rate at 14 per cent.

This is besides “leaving the asymmetric corridor of +200 basis points and -500 basis unchanged,” especially at a time when “the CBN has sent strong signals to the market that it will prioritize stemming inflation over promoting growth, as well as supporting the return of foreign capital. Thus, despite worries over the poor Q2 GDP outturn we see the MPC holding rates in a bid to signal consistency.

“We expect the Committee will once again reiterate the need for fiscal stimuli to reflate the economy,” by retaining the Cash Reserve Requirement (CRR) at 22.5 per cent; Liquidity Ratio at 30 per cent.

The Ghanaian central bank voted for the fifth time running to hold rates, much in line with the expectations of analysts polled by Reuters, thereby driving inflation down significantly, raising prospects of interest rate cuts.