{"id":105486,"date":"2021-01-26T05:20:18","date_gmt":"2021-01-26T05:20:18","guid":{"rendered":"https:\/\/fin2me.com\/?p=105486"},"modified":"2021-01-26T05:20:18","modified_gmt":"2021-01-26T05:20:18","slug":"nigerian-central-bank-keeps-analysts-guessing-on-rates","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/nigerian-central-bank-keeps-analysts-guessing-on-rates\/","title":{"rendered":"Nigerian Central Bank Keeps Analysts Guessing on Rates"},"content":{"rendered":"

Nigeria\u2019s central bank has analysts guessing about its interest-rate path this year, underscoring the distortions that are stoking inflation while output is languishing in Africa\u2019s largest economy.<\/p>\n

All but two of the 18 economists and investors surveyed by Bloomberg forecast the central bank will keep its monetary policy rate steady at 11.5% on Tuesday. However, the outlook for the rest of the year is far less certain.<\/p>\n

Of the 18 respondents, 11 said the central bank will raise the key rate rate this year, with forecasts for tightening ranging from 100 basis points to 350 basis points. The rest project policy makers will hold or slash borrowing costs, with one predicting a 400 basis-point reduction.<\/p>\n

The central bank\u2019s efforts to manage the naira and stoke economic growth in recent years rather than just focus on keeping inflation in its target band of 6% to 9% has made it more unpredictable. A sharp drop in oil prices, the country\u2019s main export, and lockdowns at the start of the Covid-19 outbreak pushed the economy into recession.<\/p>\n

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What Bloomberg Economics Says:<\/h3>\n

\u201cWe expect policy makers to continue to overlook inflation and argue it is structural. This will allow the central bank to continue justifying the use of supply side and other policy interventions. It may also encourage the CBN to introduce new measures to narrow the disparity between the lending and deposit rates.\u201d<\/p>\n

— Boingotlo Gasealahwe, Africa economist<\/p>\n

For the full report, click here<\/p>\n<\/blockquote>\n

Authorities also had to devalue the naira twice last year as a shortage of dollars pushed up import prices and increased the gap between the official and black-market exchange rates. Import restrictions announced by the central bank to help local producers have added to fuel inflation, which hit a three-year high in December.<\/p>\n

\u201cThe disparity in views reflect the gulf between what people think the central bank should do and what they think it will actually do,\u201d said Patrick Curran, an economist with Tellimer Ltd., who expects the central bank to raise the benchmark rate to 12.5% this year. \u201cThe bank is trying to reconcile several priorities and trying to figure out how they can keep the naira stable without harming growth more than they need to.\u201d<\/p>\n

<\/blockquote>\n

High inflation coupled with a surge in local liquidity after the central bank restricted the purchase of short-term notes to bolster lending, turned the real yields of Nigerian financial assets negative. Monetary policy should work to reverse negative yields and the attract investment needed to turn the economy around, said Doyin Salami, a policy adviser to President Muhammadu Buhari.<\/p>\n

Tightening this year would make Nigeria an outlier among major economies expected to ease or hold rates at record lows to breathe new live into their economies.<\/p>\n

Here\u2019s a round-up of analysts\u2019 views:<\/p>\n

Mohamed Abu Basha, head of macroeconomic research at Cairo-based EFG Hermes:<\/p>\n