MPC uncertainty: Investor & Exporter FX window turnover declines to $78.5m

……Policy parameters unchanged
The continuous uncertainty surrounding the likely outcome of the last Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) for 2017, has pushed Importer & Exporter FX daily turnover down to $78.5 million as at end of Tuesday’s trading activities, compared to $346.90m sold on Monday.

The I&E FX window, began yesterday’s trading at N359.51 to the US Dollar, against 359.75 sold the previous day, as well as the closing rate of 359.87 per dollar compared to 360.42 traded on Monday.

Although, the held its benchmark interest rate at 14 per cent at the end of its two days’ meeting on Tuesday, saying that the recovery of Africa’s biggest economy from its first recession in a generation remained fragile.

However, the local currency, at the official forex market traded flat at 305.90, the same rate it exchanged on Monday, but better than 305.95 traded to the US Dollar on Friday.

At the parallel market, the local currency closed at an appreciable rate of 364 per dollar, slightly stronger than 365 sold on Monday, while Pound sterling remained unchanged at 476 and 426 to the Euro, weaker than 425 settled during the weekend.

Meanwhile, the Governor of Central Bank, Godwin Emefiele, after the MPC meeting, said that eight committee members had voted to hold the main rate, while one voted for a cut. All other policy parameters were kept unchanged.

“Inflation in particular requires very close monitoring to gain clarity on the medium-term optimum path of monetary policy,” Emefiele told a news conference.

The OPEC member’s economy shrank by 1.5 percent in 2016, its first annual contraction in 25 years. The recession was largely caused by low oil prices since the country relies on crude oil sales for around two-thirds of government revenue.

Inflation is slowing but remained at an elevated 16 per cent on an annual basis in October. At the media conference Governor Emefiele said he was optimistic consumer price-growth would moderate to one-digit levels in 2018.

Financial experts, who spoke on the likely outcome of the committee, had said that the MPC cannot relax monetary policy for now because it may completely affect the micro economy stability that has been achieved so far.

The Managing Director/CEO, Highcap Security Ltd, David Adorin, said:“May be if the inflation rate decline to a single digit to about nine or so, then there would be bases for the MPC to relax the benchmark interest rate.

“But at it is now, the changes is not material. So, I don’t foresee any changes in monetary policy”, he said.

Adorin, further explained that the benchmark interest rate monitors the inflation rate and the fact that the inflation rate is currently at double digit, adding that it will difficult for the MPC to change the MPR.

According to him, “We are not going to see changes in the MPR not until the inflation declines, before they could have the justification to change the MPR. But if it declines within the current rate is too marginal and does not justify any changes in the MPR yet.”

In the same direction, Managing Director/CEO, Maxifund Investment and Security Plc, Mazi Okechukwu Unegbu, told our correspondent that he doesn’t think there will be any changes in the monetary tools, stressing that the rates are just going to be stable.

Mazi Unegbu, who was a former Chairman of Council/President, Chartered Institute of Bankers of Nigeria (CIBN), noted that the 2017 budget has not been largely implemented, even some part of the 2016 budget has not fully implemented.

“So, the likely expectation from the MPC meeting is that the rates are going to be stable and I will be surprise if they touch any of the indices that are currently on”, he said.

The Maxifund boss noted that the rate is going to be stable and flat for now, until the first quarter (Q1) of next year (2018), stressing that all indicators are going to remain unchanged because anything they do now, may affect the foreign exchange market.

His words: “The forex market has been stable for over six months now, meaning that market has not been distorted in the recent time and the inflation has marginally come down during the same period.

“So, looking at these two indicators, and the benchmark interest rate which has remains at 14 per cent, I don’t think any good economist will want to change any of these indicators.

Because inflation rate is coming down, foreign exchange has been stable; interest rate has also been stable,” he said.

By Motolani Oseni