The Central Bank of Nigeria (CBN), on Monday said the 262nd meeting of its Monetary Policy Committee (MPC) holds between Monday, July 23 and Tuesday, 2018.
Ahead of the date, the apex bank, earlier published the personal statements of committee members detailing reasons for how they voted unanimous at the previous meeting to hold rates. Chief of this was their fear over the inflationary impact of the late passage and assent of the 2018 budget and campaign funding ahead of the 2019 general elections.
These fears, according to FBNQuest, in its daily economic review titled: Good Morning Nigeria, “are overstated because projected FGN spending in 2018 is no more than 8% of forecast GDP, and, based on precedent and the late passage of the budget, is most unlikely to be released in full.”
As a broader point, the analysts noted that an examination of the “data for the run-up to the 2011 and 2015 elections, and have not found macro turmoil in the series for money supply, inflation and the public finances.”
Continuing, FBNQuest, the investment bank group of FBN Holdings Plc, which includes FBN Merchant Bank Limited, said it “would have welcomed the start of easing but accept that the latest statements suggest otherwise.”
The main concerns of members, it continued, “are that the macroeconomy will be distorted by fiscal challenges and that the offshore portfolio community will rush for the door marked exit en masse.
“On inflation, one member acknowledged that the policy rate was finally positive in real terms. Another noted that staff forecasts pointed to single-digit core inflation y/y in June.
“Those same forecasts see upward trending pressures in H2 2018, which the committee explains in the context of fiscal developments: the late passage of the 2018 budget (signed off since the committee met), the expansionary nature of the N9.12trn budget, and the determination of the FGN to disburse undrawn capital releases from the 2017 budget before moving onto those projected for 2018. This is the single largest risk identified in the statements. Additionally, several members made the point that politicians generally inject cash into the economy ahead of Nigerian elections.”
The company’s analysts expressed belief that given these stated concerns, “the MPC will again make no change when it meets next week. Almost out of hope, however, we still see a rate cut by end-2018 and point to the statement in the communique that it would be prudent to analyze the national accounts for Q2 in detail and assess the FGN’s fiscal stance once the 2018 budget had been approved before revising its own stance.
“We would have welcomed the start of easing but accept that the latest statements suggest otherwise. Their main concerns are that the macroeconomy will be distorted by fiscal challenges and that the offshore portfolio community will rush for the door marked exit en masse,” the report added.