FRESH HOPE FOR ECONOMY AS CBN’S POLICY COMMITTEE RESUMES MEETING
FRESH HOPE FOR ECONOMY AS CBN’S POLICY COMMITTEE RESUMES MEETING
The nation’s economy
may be exiting a six-month apathy and cautious mode imposed on it by the
standoff between the federal legislature and the executive, as the decision of
the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will
be ready today.
President Muhammadu
Buhari had in November 2017 sent a list of five nominees to the Senate for
confirmation to fill the vacant positions in the MPC.
Two of them are also
to serve as deputy governors of CBN. But the list was caught in the web of
political standoff, which delayed the lawmakers’ action on it for about six
months.
Within this period,
which analysts have described as characterised by uncertainty, both local and
foreign investors transacted in the nation’s financial market with caution.
Updates on policies
appeared static, particularly the local debt refinancing and long-speculated
interest rate cut.
But two weeks ago,
the lawmakers sheathed their sword and confirmed the nominees, giving a leeway
to the ongoing MPC meeting, the communiqué of which is due today.
The first quarter of
2018 was a period of mixed fortunes for the capital market, with a minimal net
effect in capitalisation and the all-share index at the end of March, compared
to the beginning of the year.
Market operators
attributed the mixed fortunes to a lack of policy pronouncements.
At several trading
sessions in the last three months, which also marked the height of concerns
over policy meetings and direction, the capital market, where most portfolio
investors play, lost billions.
Specifically, trading
yesterday, the first in April and second quarter of the year, sustained the
mixed fortunes in the first quarter as equity transactions declined, following
price losses.
This made the
all-share index to fall by 1.6 per cent, losing 648.87 points or 1.6 per cent
to 40,855.64 from 41,504.51, while the market capitalisation consequently
dipped by N234 billion from N14.992 trillion recorded a few days ago to N14.758
trillion.
On March 20, the
market capitalisation depreciated by N52 billion from N14.964 trillion recorded
on Monday to N14.912 trillion; lost N236 billion or 1.53 per cent from N15.666
trillion to N15.430 trillion on March 7; and lost N139 billion or 0.9 per cent
on February 12, from N15.476 trillion to N15.337 trillion.
Analysts attributed
these developments to the recurring feelings of insecurity by investors, as
they seek a direction and speculate within the period of the absence of MPC
meetings.
The Head of Investor
Relations at the United Bank for Africa (UBA), Rasaq Abiola, said the market
was happy for the return of the meeting, which is the most important thing, and
now awaiting its outcome, in terms of decisions and pronouncements.
“The truth is that no
one likes uncertainty, particularly the financial market. It creates
speculations and panic. During this period, no investor was happy for the
absence, but the monetary policy accommodation maintained by CBN helped to
sustain transactions,” he said.
An honorary policy
adviser, Dr. Uzochukwu Amakom, told The Guardian that the absence of the
meetings in the last six months meant that the yearly monetary and credit
policy guidelines that outline the broad objectives and specific instruments of
monetary policy for the year were either approved unofficially or not packaged
yet.
“As the MPC meets
within the week, it needs to send out a strong message and review extant rates
to tilt the economy on the path of growth and inclusive capture of the gains of
economic growth,” he said.
The Managing Director
and Chief Executive Officer of Network Capital Limited, Oluropo Dada,
corroborated Amakom, saying the market understands the situation as a lack of
policy direction which can bring about distortions and uncertainties.
“The monetary policy
guidelines are tools for managing the economy and the failure of the committee
to meet is a pointer that all is not well with the economy.
“Stockbrokers and
other investment analysts are interested in what happens to the interest rate
now that inflation rate is declining. It is likely that MPR will go down by
some basis points when the MPC eventually meets. But uncertainties, ambiguities
and distortions will persist”, Dada said.
The President of the
Chartered Institute of Stockbrokers (CIS), Oluwaseyi Abe, lamented the delay in
the MPC’s meeting, saying it prevented the announcement of a policy direction
of the CBN on some critical monetary tools which should have enhanced
investment decisions on both the money and capital markets.
“What it means is
that there are no policies that the market can react to. Policy pronouncements
by the MPC drive the economy.
There are certain
things that have been happening that we know, yet they are not announced
officially. Investors, especially those in the international space are now
doing a lot of guesswork,” he said.