“Inflation is under control because of one core thing and that is the baseline effects of last year on core inflation. For the Central Bank of Nigeria to act on things like CRO, they look at the level of core inflation. With low premier and core inflation, the topic will come out to increase CRO,” Essien told CNBC Africa on Monday.
“I think there’s still more time to observe. They will definitely consider it but I don’t think they will vote for it. I think it’s another meeting where you will have the rates kept intact,” he added.
The Monetary Policy Committee (MPC) have kept key rates unchanged since October 2011 and while the case for monetary tightening is stronger today than it was two months ago, recent pressure on the naira suggests that Nigeria's monetary authorities will not ease policy just yet.
"The pressures are more based on forecasts. So it’s something that I think they still have room to wait, see what happens in the US. You don’t want to mismatch the timing of tapering in the US and what’s happening now,” said Essien.
The outlook for the fixed income market in Nigeria looked positive in recent weeks and Essien believes that investors will already be speculating on the outcome of the meeting and its effects on inflation and interest rates.
“You have to look at the foundational causes for a rise in interest rates. What happens is when your outlook on the naira is not that good, they will advise them to keep more of their funds on the US dollar. So their supply to the Inter-bank market reduces,” he said.
The MPC meeting is scheduled for July 22 this year.