Despite rising inflation, Nigeria’s Central Bank (CBN)’s policy decision on rates when the monetary policy Committee (MPC) meets in September may be determined by the Gross Domestic Products (GDP) numbers expected to be published on August 26.
According to Bismarck Rewane in the current Economic Bulletin, “If the numbers are positive, the MPC may be reluctant to increase the interest rates in its next meeting scheduled to hold in September 2022. “
In its bid to tame Soaring inflation CBN had in May hiked the monetary policy Rate by 150 basis points to 13 percent and by 100 basis points to 14 percent in July.
But, the Central Bank of Egypt (CBE) will hike its overnight deposit rate by 50 basis points (bps) on Thursday as it works to keep Soaring prices of products in check, according to Reuters poll forecast.
The median forecast in a poll of 15 analysts is for the CBE to raise deposit rates to 11.75% and its lending rate to 12.75 at its regular monetary policy committee meeting.
However, tight liquidity in the Nigerian economy has brought about interbank money market rates already surging and may likely reach between 18 to 20 percent per annum.
Rewane believes that “Total outstanding at the CBN discount widow will reach N1.5trn“ by the end of this month.
However, CBE has kept its rates on hold at its last meeting on June 23 but raised them by 200 bps in May, saying it was seeking to contain inflation expectations after prices surged by their fastest in three years.
John Swanston of Capital Economics said continued depreciation of the Egyptian pound and the expectation of fuel price increases would likely increase inflation.
“This will prompt policymakers to hike interest rates by 50 bps at next Thursday’s meeting,” he said.
Egypt’s annual urban consumer inflation accelerated to a higher-than expected 13.6% year-on-year in July from 13.2% in June, Core inflation jumped to 13.3% in May from 11.9% in April.
The central bank has an inflation target range of 5-9 percent , but in June said it would tolerate a higher level until after the fourth quarter.
Nigeria’s Central Bank, on the other hand, has its target range of 6-9 percent, but has not been able to achieve it for over many years.
Godwin Emefiele, CBN Governor had said in the July MPC communique that
“broad money supply (M3) rose significantly to 11.52 per cent in June 2022, compared with 10.86 per cent in May 2022.
This was largely driven by the
growth in Net Domestic Assets (NDA) of 18.02 per cent in June 2022, compared with 17.37 per cent in the previous month.
The sustained growth in Net Domestic Assets (NDA) was attributed to the increase in claims on the Federal Government and other sectors (public nonfinancial corporations, private sector, and state and local governments).
Money market rates oscillated within the asymmetric corridor, reflecting prevailing liquidity conditions in the banking system.
Consequently, the monthly weighted average Open Buy Back (OBB) and Inter-bank Call rates increased in June 2022 to 10.89 and 11.10 per cent, from 9.39 and 8.38 per cent in May, respectively.
The increase in both the Open Buy Back (OBB) and Inter-bank Call rates reflected the tight liquidity conditions in the banking system.“
