The Naira Tuesday was stable at N358 per dollar in the parallel market, it however, appreciated by 32 kobo in the Investors and Exporters (I&E) window.

Data from FMDQ showed that the indicative exchange rate for the window dropped to N361.68 per dollar yesterday from N362 per dollar on Monday, indicating 32 kobo appreciation of the naira.

It is interesting how the Naira has witnessed stability against the Dollar after the Nigerian Central Bank kept its monetary policy rate (MPR) unchanged at 14% in July.

Signs of easing inflationary pressures in Nigeria present a solid argument for an interest rate cut. However, a rate cut could accelerate capital outflows, especially when considering how the Federal Reserve is expected to raise interest rates twice this year.

If economic growth in Nigeria builds momentum, inflation cools to single digits and oil prices remain at elevated levels, the central bank could cut interest rates the final quarter of 2018.
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Recall that seven out of nine members of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) had on Tuesday voted to leave the monetary policy rate unchanged at 14 percent on the back that tightening of the MPR could help keep investors in the country.

Godwin Emefiele, the CBN governor announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja, adding that seven members agreed to maintain the current monetary policy stance while others wanted rates to be increased.

He said apart from the MPR, which was retained at 14 percent, the committee also retained the cash reserves ratio at 22.5 percent.

The liquidity ratio was left at 30 percent; and the asymmetric window was left at +200 and -500 basis points around the MPR.