The expectation of a July 2018 rate cut by Nigeria’s Central Bank Monetary Policy Committee (MPC) is looking less certain, as recent events in the domestic and global space are moderating such expectations, according to analysts.
The analysts are in consensus that while inflation has continued to moderate in the last 5-months in 2018, the recent May 2018 inflation number showed renewed pressure especially on a month-on-month basis, suggesting that the high base effect, which had largely supported successive moderation in headline inflation rate is fizzling out.
In addition, they see the disruption to food production amid clashes between farmers & herders, and the likelihood of an increased political spending in H2-18, putting pressure year-end inflation figures.
Rising yields in the developed markets like United States are also seen as mounting a considerable amount of pressure on emerging and frontier market assets amid massive capital flow reversal, highlighting the need for caution on the part of the MPC.
The central bank and the MPC have been focused on curtailing pressure on inflation and retaining foreign capital in the local economy, hence the dramatic improvements recorded across key macro variables earlier in the year. Their efforts have stirred a financial market expectation of a growth stimulating rate cut by the MPC, which was only a matter of “when and by how much.”