MPC may lower interest rate Tuesday

Analysts anticipate that the Central Bank’s Monetary Policy Committee will likely shift its hawkish stance on the benchmark interest rate as members begin a two-day meeting today.

In a separate chat with The PUNCH on Sunday , some financial analysts stated that with inflation trending down for two consecutive months, members of the MPC should be motivated to lower lending rates marginally.

The Managing Director/Chief Executive of Cowry Treasurers, Mr Charles Sanni, noted that the MPC should consider cutting the interest rate, which currently stands at 26.75 per cent.

“With inflation trending down in two consecutive months, the members of the MPC may likely lower rates. And the CBN has shown a sign of this with the reduction of Treasury Bills rates,” he asserted.

He stated that no company could access funds at the current 26.75 per cent interest rate, adding other economies like the United States had cut rates.

Also, a Professor of Forensic Accounting at Copperstone University, Zambia, Richard Mayungbe, told The PUNCH that the interest rate hike by the central bank had become an overkill.

He projected that the MPC might lower interest rates in response to the inflation rate, which decelerated in July and August.

“Interest rate hike is an overkill. The MPC needs to reduce interest rates to enable industries to expand and create jobs,” he stated.

The MPC has hiked the benchmark interest rate in its four consecutive meetings since February, reviewing up by 50 basis points to 26.75 per cent in July, from 26.25 per cent.

The Consumer Price Index, which measures the rate of change in prices of goods and commodities, decreased to 32.15 per cent in August from 33.40 per cent in July.

The country’s inflation rate hit a 28-year high of 34.19 per cent in June 2024, the highest since March 1996.

A former President and Chairman of the Institute of Chartered Bankers of Nigeria, Prof. Segun Ajibola, told our correspondent, “For now, I cannot make a forecast because I do not expect the interest rate to be higher than this.”

He noted that while banks were inclined to view lending as a more comfortable option, there were rising concerns about borrowers’ ability to repay.

High interest rates, he warned, could exacerbate the problem of non-performing loans, a significant risk for lenders.

Also, Chief Economist/Managing Editor of Proshare, Teslim Shitta-Bey, expected MPC to retain the interest rate to observe if the inflation would sustain its downward trend.

“The MPC has two choices. They may retain the rates or hike them by around 25 basis points to further tame inflation, which is still very high at 32.15 per cent,” Shitta-Bey explained.

A financial analyst, Olaid Baanu, stated that he anticipated that the interest rates would remain unchanged, explaining that the apex bank had been consistently increasing interest rates amid persistently high inflation and a relatively stable exchange rate, both of which are critical factors influencing the MPC’s decision.

Additionally, he pointed out that with the Purchasing Managers Index falling below 50 points, there might be pressure to lower rates.

Baanu mentioned, “The inflation affecting Nigerians’ livelihoods has not significantly impacted interest rates.”

He urged the MPC to also consider security issues in the agricultural sector when making their decisions, highlighting the interconnectedness of various economic factors.

The PUNCH reports that the CBN had announced that its 297th Monetary Policy Committee meeting would be held on September 23 and 24, 2024, in Abuja.

According to the apex bank, the meeting will focus on reviewing the country’s economic and financial conditions and determining the appropriate monetary policy direction for the short to medium term.