What will inform Nigeria’s MPC decision for May?

The Monetary Policy Committee (MPC) of Nigeria is set to announce its third policy decision for the year as economic indicators continue to show signs of a fragile recovery. In a recent interview on CNBC Africa, Kenneth Igbomor engaged with Darstilewa Deba, the CEO of CFG Advisory, to discuss the factors that could influence the MPC's decision. The conversation centered around key economic data such as GDP growth, inflation figures, and the challenges facing the economy. Deba highlighted the delicate balance between sustaining growth and managing inflation in a challenging economic environment. The latest GDP numbers, which showed a modest growth rate of 1.5%, reflect the fragile nature of Nigeria's economic recovery. High inflation, stagnant employment rates, and weak performance in key sectors like manufacturing and ICT present significant challenges for policymakers. Deba emphasized the need for the central bank to focus on sustaining growth while also addressing inflationary pressures. When considering possible scenarios for the MPC decision, Deba cautioned against tightening monetary policy due to the economy's fragility. He argued that tightening measures could stifle growth and exacerbate unemployment, especially among the youth. Instead, he suggested that a more accommodative stance might be necessary to stimulate economic activity and support key sectors. On the issue of loosening monetary policy, Deba acknowledged the importance of creating stimulus measures but also warned about the potential inflationary consequences. The government's significant debt burden and the need to manage inflationary pressures were highlighted as key factors influencing the policy debate. Deba stressed the importance of aligning fiscal and monetary policies to address structural challenges and promote sustainable economic growth. One pressing issue discussed during the interview was the removal of subsidies on petroleum products, particularly in light of the potential impact on fuel prices. Deba emphasized the need for structural adjustments in the energy sector to reduce distortions and improve government finances. He noted that the removal of subsidies could help alleviate the government's debt burden and create space for more sustainable spending. In the face of these complex economic challenges, the interviewer pressed Deba on his expectations for the MPC's decision. Deba's succinct response was 'hold,' indicating a preference for maintaining the current policy stance. As Nigeria grapples with the dual challenges of sustaining growth and managing inflation, the decisions made by the MPC will have far-reaching implications for the economy. Overall, the interview shed light on the intricate policy considerations facing Nigeria's policymakers and the need for a concerted effort to address the structural issues hindering economic progress. As the MPC deliberates on its decision, the delicate balance between supporting growth and controlling inflation will be paramount in guiding Nigeria's economic recovery.