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•As stock market defies inflation, hits 3.93%
By Chinwendu Obienyi and Chukwuma Umeorah
With Nigeria’s headline inflation getting closer to 30 per cent, there are expectations that members of the Monetary Policy Committee (MPC) might decide to hike the Monetary Policy Rate (MPR).
Although, there are concerns as to when the meeting would to hold especially as the Central Bank of Nigeria (CBN)’s Governor, Olayemi Cardoso, is yet to preside over the meeting which has not been held since July.
According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation rose for the 12th straight month to a 20-year high of 28.92 per cent in December 2023 from 28.20 per cent recorded in November 2023.
Furthermore, NBS blamed food prices as the major cause of the increase, noting that food inflation rate in December 2023 was 33.93 per cent on a year-on-year basis, which was 10.18 per cent points higher compared to the rate recorded in December 2022 (23.75 per cent).
Reacting to the development, analysts at Coronation Research, said that inflation continues to be driven by structural issues such as high logistics costs, poor infrastructure, storage issues, exchabge rate pressure, elevated cost of Premium Motor Spirit (PMS) as well as insecurity (especially in food-producing areas).
They further noted that although the CBN’s core mandate remains price stability, they expect the apex bank to raise interest rates to combat the rising inflation.
“In recent years, the transmission effect of MPR hikes has been weak in relation to combating rising inflation. Looking ahead, we anticipate a former handshake with the fiscal authorities, emphasizing a nuanced approach to address inflationary pressures. The CBN’s halt in usage of quasi-fiscal tools signals a commitment to a more cohesive policy stance”, they said.
For their part, analysts at Cordros Research, noted that they expect inflationary pressures to persist in the half year of 2024 before the disinflationary process takes its course in the second quarter, albeit slowly.
They noted that besides, the risks for the local currency to remain pressured
remains intact amid the current low-interest rate environment.
“Consequently, we think that the MPC’s dilemma at subsequent meetings will remain to either increase the key policy rate further or keep the rates unchanged. Therefore, on a balance of factors, we expect the MPC to increase the MPR by an additional 300 basis points (bps) in the first half of before contemplating a Hold decision over the rest of the year.
That said, we believe that when the MPC eventually meets, they will increase the MPR further as inflationary and currency pressures have aggravated since the last policy meeting in July 2023”, they said.
Meanwhile, investors at the trading floor of the Nigerian Exchange Limited (NGX) on Tuesday continued to increase their interest in bellwether stocks, pushing the All-Share Index (ASI) up by 3.93 per cent to close at 87,971.09 points.
Similarly, market capitalisation rose by N1.82 trillion to close at N48.139 trillion from an opening value of N46.316 trillion. The gain was attributed to price appreciation in the shares of Dangote Sugar, Wapco, Nigerian Breweries and 70 other equities.
