As the Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) sets to meet between next Monday and Tuesday, March 20- 21, 2017, a financial analyst has projected that there would be no changes in all economic instruments.
At the end of its first meeting in January, 2017, the Committee resolved to retain interest rate at 14 percent, the cash reserve requirement (CRR) at 22.5 percent, held the liquidity ratio at 30 percent, and retained the asymmetric corridor at +200 and -500 basis points around the MPR.
Speaking on phone with our correspondent, an Associate Professor, Dr. Uche Uwaleke, HOD, Banking &Finance, Nasarawa State University, said that the CBN’s lending rate was expected to remain at 14 per cent while Cash Reserve Ratio (CRR) at 22.50 per cent, while liquidity ratio remains at 30 per cent.
Due to the drop in February inflation rate to 17.78 percent, he believed it is a clear indication that the MPC may not want to change any of its instruments.
Dr. Uwaleke, explained that the CBN’s effective policies in the foreign exchange market has impacted positively on foreign reserves, stressing that the committee might not introduce new policy.
According to him, “the decline in Inflation rate is happening for the first time in 15 months from 18.72 per cent to 17.78 per cent in February.
“The MPC members might want to wait further. I don’t think they might want to introduce new rates because of drop in inflation rate, because if the headline inflation rate continuous to move downward, of course it might force to Committee to review the rates in the next meeting.”
He pointed out that the CBN’s foreign exchange interventions have increased liquidity given the further appreciation of the Naira.
According to him, “The CBN interventions are geared towards boosting liquidity and reducing volatility in the foreign exchange market.
“The CBN had intervened in the interbank foreign exchange market by offering over $1.2 billion for both wholesale and retail end users recently and that has help in boosting liquidity in the system.
“As noticed, the naira at the parallel market has been appreciating and it has closed the gap gradually.
“This has been made possible with the growth in foreign reserves as global oil prices has recorded some improvement.
“As long as the global oil market continued to be favourable and improvement in foreign reserve, we can expect that the CBN will have the necessary muscle to continue to intervene
“If those interventions are sustained, they will have positive impact on the foreign exchange rate.”
Meanwhile, the nation’s external reserves gained a total $58million in 11-days to record the Central Bank of Nigeria (CBN) has said external reserves gained $58 million to $30.267 billion as at March 14, 2017, the data by CBN has shown.
This is just as the gap between the interbank market and parallel market end of the foreign exchange market continued to widen. Despite the recent decline in global oil prices, the external reserves continued to increase in March from $29.6 billion it opened in to $30.67 billion as at March 15, 2017.
Organization of Petroleum Exporting Countries (OPEC) reference basket price moderated lower by 8.9 per cent to $48.63 per barrel as at March 14, 2017 from $53.40 it opened this month.
The apex banking regulatory body yet to provide reasons for the recent rise in foreign reserves as experts attributed the recent rise to steady increase in global oil prices, among other factors. Foreign Exchange Reserves has gained $439 million in 2017 from $25.84 billion it opened in 2017 to $30.23 billion it closed on yesterday.
The foreign exchange had fallen by $3.2 billion or 10 per cent in 2016 from $29 billion to $25.8 billion. A group of experts at GTI Securities Limited, a Lagos based securities firm said, “As indicated in earlier Exchange Rate analysis, the external reserves was weak all through 2016 and greatly limited the CBN’s ability to support price stability.
“The weak oil receipts in the course of the year resulted in depletion of the reserves account which eventually hit a 15-year low of $23.89billion in October 19th. The account has since recorded marginal accretion as inflow from International Money Transfer Operations (IMTO) on trade proceeds has helped to boost upside.
“The marginal increase in oil production after the government and Niger-Delta Avengers entered into truce equally contributed to recent rally on the reserves.”
They explained that the output cut agreement reached by OPEC members in late year November and the OPEC and non-OPEC members deal in December is expected to provide boost to the foreign reserves going forward and thereby supporting the fiscal and monetary policies makers in steering the economy out of current recession.
The Naira last traded at N306/Dollar on the official market yesterday, while it was quoted at N453/Dollar on the parallel market.