What to expect in Nigeria Monetary Policy Committee

The Central Bank of Nigeria's Monetary Policy Committee (MPC) is gearing up for a decision, and there are a lot of moving parts to consider. Guy Czartoryski, Head of Research at Coronation Merchant Bank, joined CNBC Africa to provide insights on what to expect in the upcoming MPC meeting. Historically, the Monetary Policy Rate (MPR) in Nigeria has remained stable, with the last change occurring back in June 2016. While the MPR serves as a signaling rate, the real action often takes place in the open market operation bills of the CBN, where market prices are set. Recent developments have seen a decline in institutional money flow, which has raised concerns for the central bank. Additionally, fluctuations in external reserves and oil prices have added complexity to the monetary policy landscape. The CBN is closely monitoring foreign exchange reserves, which have been dwindling at a rate of $400 million per week. While the current reserves stand at $42.6 billion, the CBN aims to safeguard its foreign exchange position and attract foreign inflows to bolster the economy. This has led to an increase in market rates to entice foreign investors, signaling a proactive approach by the central bank to manage currency stability and economic growth. In line with this, Nigeria is in talks with the World Bank for a $2.4 billion loan, which could provide short-term relief. However, the CBN is taking a prudent long-term view on managing the country's debt levels and economic strategy beyond 2020. Shifting focus to macroeconomics, Nigeria's GDP growth projection hovers around 2%, falling short of desired levels for sustainable growth. The CBN's efforts to stimulate growth through rate adjustments have faced challenges, prompting a broader discussion on policy effectiveness. The Economic Advisory Council (EAC) is tasked with revamping strategies to promote structural changes and drive private sector-led growth. Inflation remains a key concern, hovering around 11% and straying from the CBN's target single-digit range. Factors such as rice inflation pose challenges to achieving price stability, necessitating a careful balance of monetary and fiscal policies. The fiscal landscape in Nigeria presents limitations on government spending to spur economic activity, underscoring the importance of external support like the World Bank loan. While the focus on power sector investment holds promise for economic revitalization, the need for comprehensive structural reforms remains paramount for sustained growth. As Nigeria navigates complex economic terrain, stakeholders await the MPC's decision and brace for potential policy adjustments in the coming months.