Will Nigeria’s MPC review be impacted by JP Morgan decision? - CNBC Africa

Will Nigeria’s MPC review be impacted by JP Morgan decision?

Western Africa

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Omosebi predicts a devaluation of the naira as well as policy tightening by the MPC. PHOTO: naijaloaded

“Initially I would’ve thought that the MPC would keep all money all policies at current stance and then post-election take a decision. But with the new news about the JP Morgan putting Nigeria on the watch list I expect a policy by the MPC in the next meeting,” said Kayode Omosebi, an analyst at United Capital told CNBC Africa.

JP Morgan is set to assess the sustainability of the naira too on a bond index, due to the lack of liquidity in Nigeria’s foreign exchange and bond markets.

(READ MORE: UPDATE: JP Morgan says it could remove Nigeria from key bond index)

Omosebi predicts a devaluation of the naira as well as policy tightening by the MPC to increase the CRR.

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“The reason is because the CBN wouldn’t be able to do much of administration measures in terms of control of the FX and that’s because of issues with capital flight and a lot of crunch in liquidity in the FX markets.”

(READ MORE: Nigeria Central Bank limits interbank dollar holdings to 72 hours)

Omosebi adds that another factor to consider is the oil price.

“Oil price is said to fall, I’m looking at 40 dollars per barrel because what you see in the months ahead is that refineries and HCR under the US would actually start their turnaround maintenance so you’ll see low demand and then  in a year they’re expected to increase production to around 300,000 barrels per day more,” he said.

Omosebi says that when looking at foreign investment he sees investors coming back to the market at a slow pace. He predicts more inflows post-election. 

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