Tuesday, 21 November 2023 04:39

CBN, again, scraps Rate meeting amid falling Naira, worsening inflation

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Central Bank of Nigeria scrapped a meeting of its monetary policy committee for a second time since Governor Olayemi Cardoso was nominated to the post in September, raising concerns about attempts to bolster the nation’s currency that’s plunged about 42% this year and is fueling inflation.

A calendar of MPC meetings published on the central bank’s website had scheduled the next gathering for Monday and Tuesday. The “MPC is not holding” a meeting this week, Isa Abdulmumin, spokesman for the bank, said by text message on Monday. He didn’t give a date for when it would be held.

Investors have been looking to the MPC meeting for signals on how the central bank will rein in inflation that’s accelerating at the fastest pace in almost two decades. They were also anticipating an update on the overhaul of the nation’s foreign-exchange controls initiated by President Bola Tinubu in June.

Nigeria Postpones Rate Decision as Inflation Quickens

Price growth is at an almost two-decade high

“Postponing two successive meetings is not a good sign” if you want to stabilize the naira and attract investment to the country, Mosope Arubayi, an economist at IC Group said by phone from Lagos. The meeting will “enable investors to assess the direction of the new MPC board. The most important information for foreign investors is the interest rate.”

The naira was trading at a wide spread at the official market, compared with the parallel market rate because of dollar shortages. It closed 791.74 a dollar on Friday, according to Lagos-based FMDQ, which tracks the data. That compares with 1,138 naira to the dollar it traded on the streets of Lagos on Monday — a 30% spread, Abubakar Mohammed, chief executive officer of Forward Marketing Bureau de Change Ltd., which compiles the data said by phone.

A Bloomberg survey of 12 economists had forecast the central bank will raise its benchmark rate by as much as 325 basis points from 18.75%.

CBN held its last monetary policy meeting in July when it raised the benchmark by 25 basis points to curb inflation, which was 22.8% in June. The price index has since climbed to 27.3% in October, pressured by the depreciation in the local currency and a jump in fuel costs after the removal of subsidies on gasoline.

The new CBN leadership has instead signaled an intention to tighten borrowing costs and control liquidity by raising yields on short-term papers.

“While rising OMO yields are the most important signal yet of the CBN’s tightening intent, formalizing this with an MPC statement would also help reinforce the message,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, referring to open market operations conducted by the authority.

Cardoso may give some indication of the central bank’s policy direction on Nov. 24 when he speaks at a dinner organized by the Chartered Institute of Bankers of Nigeria, Lagos-based Thisday newspapers reported on Monday, citing a statement from the industry group.

 

Bloomberg

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