Analysts are anticipating a potential shift in the Central Bank’s hawkish stance on the benchmark interest rate as the Monetary Policy Committee convenes for a two-day meeting today.
Some financial analysts believe that, with inflation trending downward for two consecutive months, members of the MPC may be encouraged to consider marginal reductions in lending rates, according to The Punch.
This potential move could aim to stimulate economic activity while addressing the easing inflationary pressures.
The Managing Director/Chief Executive of Cowry Treasurers, Mr Charles Sanni, noted that the MPC should consider cutting the interest rate, which currently stands at 26.75 per cent.
Sanni said “With inflation trending down in two consecutive months, the members of the MPC may likely lower rates. And the CBN has shown a sign of this with the reduction of Treasury Bills rates.”
He noted that no company can access funds at the current interest rate of 26.75%, emphasizing that other economies, such as the United States, have already begun to cut rates.
A a Professor of Forensic Accounting at Copperstone University, Zambia, Richard Mayungbe, said that the interest rate hike by the central bank had become an overkill.
He projected that the MPC may lower interest rates in response to the inflation rate, which showed a deceleration in both July and August.
“Interest rate hike is an overkill. The MPC needs to reduce interest rates to enable industries to expand and create jobs,” he stated.
The MPC has raised the benchmark interest rate at its last four consecutive meetings, increasing it by 50 basis points to 26.75% in July from 26.25%.
Meanwhile, the Consumer Price Index, which tracks the rate of change in prices of goods and commodities, decreased to 32.15% in August, down from 33.40% in July.
The country’s inflation rate hit a 28-year high of 34.19 per cent in June 2024, the highest since March 1996.
A former President and Chairman of the Institute of Chartered Bankers of Nigeria, Prof. Segun Ajibola, said that “For now, I cannot make a forecast because I do not expect the interest rate to be higher than this.”
He noted that while banks are increasingly inclined to view lending as a more viable option, there are growing concerns about borrowers’ ability to repay.
He warned that high interest rates could exacerbate the issue of non-performing loans, posing a significant risk for lenders in the current economic climate.
On his part, the Chief Economist/Managing Editor of Proshare, Teslim Shitta-Bey, expected MPC to retain the interest rate to observe if the inflation would sustain its downward trend.
“The MPC has two choices. They may retain the rates or hike them by around 25 basis points to further tame inflation, which is still very high at 32.15 per cent,” Shitta-Bey expounded.
Recall the CBN had announced that its 297th Monetary Policy Committee meeting will take place on September 23 and 24, 2024, in Abuja.
