Central Bank of Nigeria's (CBN) governor Godwin Emefiele. / AFP PHOTO / PHILIP OJISUA

• NSE All-Share Index drops further

As the Central Bank of Nigeria (CBN) yesterday retained the Monetary Policy Rate (MPR), the rate at which the CBN lends money to commercial banks, at 14 per cent against industry watchers expectations, some economists are forecasting a continuous contraction in the real sector of the Nigerian Economy.

The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, said the MPC members unanimously voted to retain the existing MPR and other monetary indices.This means that the Cash Reserve Ratio still remains 22.5 per cent, Liquidity Ratio, 30 per cent, the Asymmetric corridor is at +200 and -500 basis points around the MPR.

“The Committee was of the view that further tightening would strengthen the impact of monetary policy on inflation with complimentary effects on capital flows and exchange rate stability.“Nevertheless, it could potentially dampen the positive outlook for growth and financial stability.

“The committee was also of the view that loosening would strengthen the outlook for growth by stimulating aggregate demand through reduced cost of borrowing.’’Emefiele said the committee observed with satisfaction, the continued rise in the external reserves but urged the CBN not to relent in building buffers against future price downturns.

Emefiele said that the economic outlook for 2018 remained positive but hinged on the early passage and execution of the 2018 budget.He also said that the country’s economic growth was based on improved security, foreign exchange market stability as well as favourable crude oil prices.

However, two reputable and global economist who reacted to The Guardian yesterday on the outcome of the MPC decision though said we’re not surprised at the outcome but in unison declared that the retention of this tight measures will continue to stifle the real sector and create more unemployment in the country.

The Chief Economist at NEPAD, and Consultant to ECOWAS, Prof. Ken Ife said: “ I’m not surprised that the rate is unchanged. The newly constituted CBN Board would still need to see things, because they are still reading through their briefs and it’s still too early for them to pick strong views. There are certain things the bank looks out for: the inflation is about 14.3 per cent, still above the MPR, they would  want to do a reduction when inflation is actually below the MPR, that’s number one.

“ The second point is that different investors category are affected differently by today’s decision.’’ Prof Siyan Peter, an infrastructure economist  at the University  of Abuja declared that growth  will be stifled  by the inability of entrepreneurs to access loans from the banks and with it would generate unemployment of large scale proportion and ultimately increase the level of employment.
 
“ The implication of the retention of the high MPR is that the private sector in Nigeria will continue to be affected in its growth . It’s ability to continue to borrow. For the Economy to grow, you need to invest money in the productive activities and for you to invest, you must borrow . But if the cost of borrowing is high, there is a disincentive to borrow. If you invest, you create employment and you grow disposable income.’’

Meanwhile, the Nigerian Stock Exchange (NSE) All-Share Index yesterday maintained downward slide, dropping further by 0.26 per cent.The News Agency of Nigeria (NAN) reports that the index shed 105.78 points or 0.26 per cent to close at 40,749.86 against 40,855.64 achieved on Tuesday.

Similarly, the market capitalisation, which opened at N14.758 trillion, lost N18 billion to close at N14.740 trillion.Market watchers attributed the downward trend to investors’ concern about trade dispute between U.S. and China, which could create uncertainty for frontier market.

A breakdown of the price movement table indicated that Mobil Oil recorded the highest loss for the day, shedding N2 to close at N183 per share.Dangote Flour trailed with a loss of N1.45 to close at N13.75, while Ecobank Transnational Incorporated declined by 65k to close at N16.35 per share.Flour Mills depreciated by 50k to close at N38.80, while NASCON decreased by 50k to close at N21 per share.

On the other hand, Forte Oil led the gainers’ table during the day, gaining N1.10 to close at N41.90 per share.Stanbic IBTC followed with a gain of N1 to close at N49, while Guaranty Trust Bank gained 90k to close at N44.30 per share.Lafarge Africa increased by 55k to close at N44, while Access Bank also added 55k to close at N11.80 per share.In all, 401.41 million shares, valued at N6.77 billion, were transacted by investors in 5, 370 deals.This was in contrast with a turnover of 365.72 million shares worth N6.27 billion traded in 4,173 deals on Tuesday.

Source: Naija Hope Team

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