MENU

Monetary Policy Committee
Tag Archive

Time to cut? Nigeria central bank gathers for first 2018 meeting

4 April 2018 Comments (0) Actualites, Africa, Economy

LONDON (Reuters) – The Nigerian central bank’s monetary policy committee will finally meet on Wednesday to set interest rates for the first time this year.

Interest rates have been stuck at a record high of 14 percent since July 2016. However, the committee had to cancel its January meeting due to an inability to form a quorum following a number of departures that reduced it to just five out of 12 members.

A majority of analysts taking part in a Reuters poll said they expected rates to stay on hold for now, but that they would be cut later in the year.

Here are three graphics showing Nigeria’s changing economic dynamics.

 

1/ EASING PRESSURE

The pace of inflation has steadily slowed since the start of 2017, with the core reading hovering close to the 12 percent mark. And with exchange rates fairly stable and demand-related pressures absent, inflation rates could be sinking further, making Nigeria ripe for easier monetary policy.

“After a year of lethargic disinflation, the drop in headline inflation to 14.3 percent in February 2018 ignites hope that inflation is still on a steady course towards the target 9.0 percent ceiling and that conditions could continue improving to favour unwinding the present hawkish monetary stance,” StratLink wrote in a note to clients.

 

2/ WHERE’S THE GROWTH?

Nigeria returned to growth in 2017 with the economy expanding 0.83 percent after shrinking by 1.58 percent in 2016, which was its first annual contraction in 25 years. However, latest growth figures are still well below its potential, the recovery has been fragile, and private sector credit lending lacklustre.

Political stalemate has been a common occurrence in Nigeria and has hampered reforms, while lawmakers still have to pass the 2018 budget. But with elections coming up in 2019, the heat is on for policy makers to help stimulate growth.

“The main focus will be to try and do something positive to the economy, to try to kickstart bank lending to the economy against a very weak backdrop, where the budget has not been passed and money supply is weak,” said Razia Khan, chief economist for Africa at Standard Chartered.

 

3/ RISING BUFFERS

Meanwhile a recovery in oil prices, successful debt sales including rolling local into external debt, and a significant amount of portfolio investment have helped replenish the central bank’s coffers. In March, foreign exchange reserves stood at $46.2 billion – a near 9 percent jump month-on-month.

Nigeria’s foreign exchange buffer has climbed 53 percent since March 2017 when it stood at $30.30 billion – though reserves remain far from the peak of $64 billion in August 2008.

 

(Reporting and graphics by Karin Strohecker; Editing by Gareth Jones)

Read more

South Africa cuts main interest rate as inflation falls within range

28 March 2018 Comments (0) Actualites, Africa, Economy

PRETORIA (Reuters) – South Africa’s central bank cut its main interest rate to 6.5 percent on Wednesday, in another boost for the economy after ratings agency Moody’s left intact its last investment-grade credit rating.

Traders and economists had expected the 25 basis-point cut in the repo rate after a slowdown in consumer price inflation to 4.0 percent in February, which put price growth well within the central bank’s 3-6 percent target range.

It was the first easing step since July and comes as South Africa rides a wave of investor optimism in the wake of President Cyril Ramaphosa replacing scandal-plagued Jacob Zuma as head of state in February.

The rand fell, however, as the rate cut dents somewhat the appeal of local assets versus developed-market peers. Banking stocks also fell.

South African Reserve Bank Governor Lesetja Kganyago told a news conference that inflation risks had subsided somewhat since January and that the bank had raised its economic growth forecast for this year to 1.7 percent from 1.4 percent.

But he said that the bank had not started “a journey of cutting” and that the future path of the repo rate would depend on data.

Four members of the Monetary Policy Committee voted to cut the rate while three wanted to keep it on hold, Kganyago said. There was no discussion of a more aggressive 50 basis-point rate cut.

Despite the central bank’s broadly upbeat tone, Kganyago said that the growth outlook remained relatively constrained and that the policy-setting committee would prefer to see inflation expectations anchored closer to the midpoint of its target range.

Analysts said they were not expecting to see a flurry of further rate cuts.

Razia Khan, an Africa-focused economist at Standard Chartered, said: “We think that today’s 25 basis-point cut was probably it in terms of South Africa’s easing cycle”.

Moody’s said on Friday that it expected to see a strengthening of South Africa’s institutions under Ramaphosa which could translate into greater economic and fiscal strength.

S&P Global, another of the “big three” ratings agencies, said it wanted to see stronger per capita growth before it would consider raising its credit rating.

 

(Reporting by Olivia Kumwenda-Mtambo and Nomvelo Chalumbira; Writing by Alexander Winning; Editing by James Macharia and Hugh Lawson)

Read more