Analysts have forecasted a rate cut by the next Monetary Policy Committee meeting in November following positive macroeconomic conditions in the country.
The value of the naira firmed at the parallel market last week following the outcome of the Monetary Policy Committee (MPC) meeting, which saw benchmark interest rate left untouched at a high of 14 per cent even as analysts say they foresee a rate cut by the next meeting in November.
The value of the naira which had been trading at N367 to the dollar on the streets since last week firmed to N365 during the week before closing at N366 while at the Investors and Exporters window the naira traded around N360 to the dollar.
Although the Central Bank of Nigeria (CBN) has sustained its intervention at the foreign exchange market, the external reserves of the country had continued to accrue standing close to $33 billion. Analysts say if inflation continues to trend downwards they would expect the MPC to take an accommodative stance at its next meeting.
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Managing Director and Chief Executive of Financial Derivatives Company Limited, Bismark Rewane, said with the rising level of the reserves “and inflows of $7 billion in five months at the I&E window, the CBN has no reason not to pursue an accommodative slant in its open market operations between now and its next meeting in November.”
He noted that the CBN has put caution above audacity, and wisdom above courage in arriving at its decision which he said enables it to buy more time, to see if the current growth momentum and the inflation reduction are sustainable.
On his part, Research Analyst at FXTM, Lukman Otunuga noted that it is becoming clear that the nation’s improving macroeconomic conditions and stabilizing interest rates, both present an argument for rates to be cut in an effort to support the current recovery.
“Although some may still view the Nigerian economy as fragile, especially after its exit from the worst economic slump in 25 years, a rate cut could offer the economy a shot in the arm.
Market players will be closely scrutinizing inflation data and core economic metrics ahead of November’s policy meeting, for more clues on when the CBN plans to take action” he said.