Monetary Policy: Expert Says Interest Rate Reduction Won’t Happen Until Third Quarter Of 2019

Ahead of the first 2019 monetary policy meeting, a financial expert predicts that the Central Bank of Nigeria (CBN) will not reduce the Monetary Policy Rate (MPR) until after the second quarter.

Naija News learnt that Prof. Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University Keffi, made this known  in Lagos that the interest rate would not be reduced for now.

Uwaleke said the apex bank would maintain tight monetary policy in the first and second quarters of the year due to a lot of factors to ensure stability in the system.

“My prediction is that the first and second quarters of 2019 will be bearish generally and you will also notice in monetary policy too in Nigeria, first and second quarters will be tight.”I don’t see the Central Bank of Nigeria reducing the monetary policy rate yet too until after the elections,” he said.

Uwaleke said the CBN would likely reduce interest rate later in the year if inflation dropped to a single digit.On the equities market, he anticipated a rebound in the third quarter on the assumptions that elections would be free and fair.

“So, I see a rebound in the third quarter of 2019. “And that again is on the assumption that elections are free, fair and credible, oil price will not drop below dangerous level 50 dollars per barrel or below what they used in the budget,” Uwaleke said.

He noted that a lot of people would want to wait and see the outcome of the elections before they started investing and that would happen sometime in June.

“Another thing that is also affecting the equities market and will also affect it going forward until sometime in May will be the 2019 budget.”The 2019 budget is not likely to receive the attention of the National Assembly until after the elections,” uwaleke stated.

He said the hanging appropriation bill, political risk caused by the forthcoming elections and the rates in the USA were combining and conspiring to push down the tempo in the equities market, thereby causing uncertainties in the system.

“This trend will continue till half year, if elections are over and the 2019 budget eventually gets attention and implementation kicks in and the elections are free and fair and credible, investors will come back.”If we have all these happening by the third quarter, I see this economy picking up, I see MTN coming back to the market and I see the market closing 2019 much higher than it did in 2018.

“In 2018, we lost about 18 per cent, and in 2019 I see the market closing on a positive note but the first two quarters are likely to be challenging for the market.

“So, investors should just be patient and I advise there shouldn’t be panic selling.

“You don’t have to panic and sell, this is the time to buy because some of the companies are selling below their intrinsic value compared with their fundamentals,” uwaleke said.