What to expect from Nigeria’s interest rate decision

Nigeria's Monetary Policy Committee is set to announce its last policy decision of the year, and market analysts are closely watching for signals on economic recovery and market sentiment. Victor Aluyi, Head of Portfolio Management at Commercio Partners, shared insights on what to expect from the announcement and the current state of Nigeria's financial market. The committee's focus on balancing inflation control with supporting economic growth has led to a series of interest rate cuts this year. With recent GDP and inflation data showing mixed signals, the committee faces the challenge of stabilizing prices while jumpstarting the economy. Victor highlighted the need for supportive measures to put the economy on a path to recovery. As Nigeria aims for a rebound in output growth, the timeline for a full recovery remains uncertain. The impact of the pandemic has resulted in a double-dip recession, requiring time for the economy to regain momentum. Victor suggests that a semblance of recovery could be visible by the second quarter of the coming year. Market performance, particularly in the equity space, has been influenced by investors reassessing risk amid fluctuating economic indicators. The shift from fixed income to equities has been driven by higher returns but is now facing scrutiny as pricing and risk factors come into play. Concerns over dividend yields and market sentiment have led to a cautious approach among investors. The local currency, the naira, has been under pressure against the greenback due to longstanding fundamental challenges. Uncertainty surrounding monetary policy guidance and macroeconomic headwinds have contributed to the currency's weakening. Victor notes that a sturdy recovery in oil prices and reserves accumulation could provide some support to the naira. As the week unfolds, market sentiment remains cautious, with investors eagerly awaiting the outcome of the monetary policy committee meeting. The committee's decision is expected to guide market direction in the near term, shaping sentiment for the rest of the week.