CBN to Sustain Expansionary Monetary Policy Till Q1, 2021

Monday, January, 11, 2021 / 8:39PM /
Ottoabasi Abasiekong for WebTV / Header Image Credit: The Guardian NG

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The Central Bank of Nigeria will sustain
its expansionary monetary policy through the period of Q1, 2021 as it supports
the growth and recovery of Nigeria  from the current
recession.                    

 

Cordros Securities disclosed this in a
recent media briefing on its latest report titled “Positioning the New Normal”.

 

According to Jolomi Odonghanro, Head of
Research & Strategy, Cordros Securities in his presentation said the
accommodative policy of the CBN which is geared towards stabilizing the economy,
will switch to tightening from Q2,2021.

 

Based
on this projection he said market yields will remain in the low single-digit
through H1,2021 with a moderate uptrend to account for reduced market
participation as investors demand for higher yields.

 

In terms
of foreign exchange management he said the CBN will sustain FX demand
management strategy in order to support the naira amidst expected low oil
prices.

 

On the
concerns around devaluation of the naira currency, Odonghanro said it remained
high, particularly if external conditions do not show significant improvement.

 

With
the prospects of a widening  current account deficit in the country, he
said the ability of the CBN to defend the currency will be challenged in 2021.

 

Looking
at Capital importation the analyst noted that inflows will remain subdued, more
so with the capital control measures of the CBN.

 

From
the analysis he estimated that the current account deficit for 2021 will be
around $22.63bn, while the trade deficit is pegged at $3.93bn.

 

Giving
further insight on Nigeria’s economic recovery, he said the Non-Oil sector will
be the key driver with Services and Agriculture leading the growth which has
been projected at 1.98% FY.

 

Providing
insight on the headline inflation rate forecast for 2021, he highlighted the
fact that on the base case with the re-opening of the land border and moderate
depreciation of the currency it will hit 16.65% y/y (2021 FY average) and 15.43
y/y(by December 2021), while in the bull case with no electricity price hike
and FX range on N380-N385/$ it will hit 14.73%(FY 2021) and 14.11%(by December
2021).

 

The
bear case scenario for the headline inflation according to him is predicated on
a situation where the land border is closed and the naira depreciates faster by
N440/$ which  will lead to a likely Full year average of 17.25% y/y and
17.52% (by December 2021).

 

Mr
Christian Orajekwe, Managing Director, Cordros Securities Limited, called on
the Federal Government, to explore fiscal incentives that could attract more
investments into the economy and harped on effective partnership with the
private sector to achieve an industrialized and competitive economy.

 

He
believed it was time to implement far-reaching economic policies that will
unlock opportunities for the private sector and businesses to invest in the
economy.

 

The MD
of Cordros Securities also called for the speedy signing of the Petroleum
Industry Bill (PIB) into law and innovative strategies for the FG to diversify
its revenue earnings from crude oil.

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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.