By Thompson ABISOLA
A financial expert, Prof. Uche Uwaleke, predicted that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) would retain policy rates due to likely campaign spending ahead of the 2019 polls.
Uwaleke, Head of Banking and Finance Department, Nasarawa State University Keffi, said on Monday that the MPC would retain policy parameters due to inherent risks.
NAN reports that the MPC of the apex bank will meet on Nov. 21 and 22 in Abuja for its last meeting of the year to decide on whether to reduce, increase or retain policy rates.
“At the end of the day, the balance of risks will be in favour of holding the policy rate. So, I see a majority of the MPC members voting to retain the policy parameters during their next meeting,” Uwaleke said.
He noted that the option to reduce would not arise because inflationary pressure was rebuilding with headline inflation moving further away from the CBN nine per cent upper target.
Uwaleke added that the MPC members would not reduce the rates due to likely increase in campaign spending and issues around minimum wage and impact on inflation.
He said fiscal surprises arising from the implementation of the 2018 budget, increase in FAAC allocation and its impact on system liquidity would make it difficult for MPC to reduce rates.
“It is also not likely that the MPC will raise the Monetary Policy Rate due to the weak GDP growth and the need to help the real sector.” he said.
Uwaleke added that increase in interest rate would raise the risk of banking sector instability due to high non-performing loans.
After the September MPC, the CBN expressed worry over rising election spending, saying it was impacting negatively on inflation.
The CBN noted that reversal of Nigeria’s inflation that trended downwards for 18 consecutive months was also responsible for holding interest rate at 14 per cent along other parameters.
