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Nigerian analysts divided on rate cut
Nigeria's Monetary Policy committee will end a 2-day meeting today and decide on monetary policy. Economists are divided on whether or not the MPC will lower the benchmark interest rate currently at 14 per cent. Razia Khan, MD/Chief Economist, Africa Global Research, Standard Bank joins CNBC Africa for more.
Tue, 20 Sep 2016 11:08:38 GMT
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AI Generated Summary
- The need for a 200 basis point hike in the policy rate to address rising inflation and restore faith in the Nigerian Naira
- The importance of policy consistency and credibility to attract foreign investments and improve confidence in the Nigerian economy
- The challenges faced by the Nigerian banking sector and the strategic approach required to address economic issues effectively
Nigeria's monetary policy committee has concluded a two-day meeting to decide on monetary policy, specifically the benchmark interest rate currently set at 14 percent. Analysts are divided on whether the committee will lower the rate. Razia Khan, MD and Chief Economist at Africa Global Research, Standard Chartered Bank, shared her perspective on the matter. Khan believes there is a need for a 200 basis point hike in the policy rate to address the consistent rise in Nigerian inflation. She emphasizes the importance of maintaining policy consistency and credibility to restore faith in the Nigerian Naira and tackle inflation effectively. Khan argues that despite the market interest rates moving higher, policy remains accommodative, even with a proposed rate hike. She refutes the notion of a trade-off between growth and inflation at the current stage, indicating that gradual policy tightening could restore confidence in Nigeria, leading to improved foreign exchange inflows over time. Khan also addresses the challenges faced by the Nigerian banking sector, emphasizing the importance of policy consistency and credible decision-making to attract foreign investments and improve confidence in the Nigerian Naira. The current economic challenges in Nigeria, including the dependence on oil exports and the impact of lower oil prices on FX revenue, require a strategic approach to address issues effectively. Khan suggests that focusing on improving confidence in policy-making and the Nigerian Naira will attract long-term foreign direct investments. She also highlights the need for a phased approach to economic recovery, with a focus on sustaining growth over time.
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