LAGOS/JOHANNESBURG: Nigeria's central bank is likely to maintain a tight monetary policy at its next interest-rate meeting on Tuesday, to curb liquidity in Africa's second biggest economy and support its currency, despite the ousting of its governor last month.
Tuesday's will be the first meeting of the monetary policy committee since Nigerian President Jonathan suspended Central Bank Governor Lamido Sanusi, a monetary-policy hawk, and it will be closely monitored by foreign investors, analysts say. Six out of 10 economists in a Reuters poll expect the central bank to keep rates on hold at 12 percent for the 15th straight meeting.
Analysts at Renaissance Capital expect a 0.50 percent hike. Economists at Morgan Stanley and FBN Capital both forecast a 13 percent increase. Standard Bank expects a hike to 14 percent and a tightening of cash requirements on deposits.
"We expect ongoing naira weakness and concerns about its inflationary impact to force the central bank into hiking mode shortly," economists at Morgan Stanley wrote in a note.
Jonathan suspended Sanusi last month, removing an outspoken critic of government's record on corruption. His move spooked financial markets and cast doubt on the direction of monetary policy.
But acting central bank governor Sarah Alade has said a leadership change at the bank will not affect policy and the bank has no immediate plans to devalue the naira .
"We think monetary policy will stay tight given the consistently hawkish views expressed in the last few MPC meetings," analysts at Lagos-based investment firm Financial Directives Limited said.
The president has appointed the managing director of Zenith Bank Godwin Emefiele as the new governor, subject to senate approval.
"The central bank's decision will come amid a period of ... pressure on the naira, which has produced a sustained erosion of FX reserves, capital outflows and weak domestic confidence," Standard Bank's Samir Gadio said.
The naira has come under pressure after Sanusi was suspended last month, hitting a record low 169 naira to the dollar. It has since recovered to 164.89 naira, its closing rate on Friday, on central bank interventions and dollar sales of around $400 million at its regular forex auctions over the past month.
But the interventions are depleting reserves, which were down to $38.13 billion by March 20 from $43.27 billion in January. Some analysts worry the bank won't be able to keep the 150-160 naira trading band against the dollar.
"The MPC decision will provide a clearer idea of the central bank without Sanusi," Standard Bank's Gadio said. "So far the central bank has continued to support the naira.
Under Sanusi, the bank pursued a tight monetary policy for more than three years. He kept interest rates at 12 percent for more than two years, tightening liquidity in the banking system to support the naira and curb inflation.
Sanusi also hiked the cash reserve requirements for lenders to hold government deposits to 75 percent at his last meeting in January, before his suspension, from 50 percent, further tightening liquidity.
Comments
Comments are closed.