Analysts Explain Why CBN Should Hold Rates on Thursday’s MPC, Others Expect a Hike
- As Nigerians await the first MPC meeting in 2025, Analysts have outlined reasons why CBN should hold rates.
- Some others, including Agusto & Co, think that another hike in interest rates is imminent from the committee.
- Meanwhile, the CBN Governor had earlier said that the Monetary Policy Committee would stick to orthodox methods of controlling inflation in 2025
Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.
Ahead of the first Monetary Policy Committee (MPC) meeting in 2025, analysts have outlined expectations regarding the Monetary Policy Rate (MPR), or Benchmark Interest Rate, as it is commonly called.
This would be the first MPC meeting for 2025, as the Central Bank of Nigeria (CBN) pushed the date forward due to the delay in releasing the first Consumer Price Index (CPI) report based on the newly rebased GDP.
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The National Bureau of Statistics (NBS) said the report would be out by 31 January 2025 but Nigerians still await the release of this report as of Monday 17 February 2025.
Source: UGC
Analysts expect the MPC to hold rates.
There appears to be a high expectation that the Monetary Policy Committee (MPC) will hold the Benchmark interest rates, after the last increase of 25 basis points to 27.5 percent in November 2024.
Speaking on the matter, Managing Director at Optimus by Afrinvest, Mr. Ayodeji Ebo, says that the tightening cycle has peaked. While the CBN may not immediately start cutting rates yet, it will need more time to evaluate the effects of past raises, based on FX stability and inflation, before deciding to cut rates.
Mr. Ebo, an investment professional, noted in a BusinessDay report, that after multiple raises in interest rates, with the most recent being in November 2024, the economy is yet to fully reflect the impact of those raises, hence a hold might seem more probably for now.
Any move, other than a hold, will be premature.
The Managing Director and Chief Economist for Africa and the Middle East at Standard Chartered Bank, Ms. Razia Khan noted in her comments that it is too early for the CBN to cut back rates.
Khan said;
“However, we expect the CBN to cite the inflation data as a justification for keeping interest rates on hold. With the CBN having raised the monetary policy rate by a modest 25bps to 27.5 percent only at its last meeting of 2024, we think any frontloaded easing might be considered premature by foreign portfolio investors and may put at risk recent hard-won stability in Nigeria’s FX market.”
She is optimistic that by or before H2 2025, the rates will be eased based on the improvement seen in inflation rates.
Analyst at Norrenberger, Samuel Oyekanmi, who spoke to Legit.ng, also said that a hold is very likely. He said;
"My take is a hold, although it will depend on what inflation figures we see from the NBS later today"
The last data from the NBS put Nigeria's inflation at 34.80% in December 2024, and Nigerians still await the numbers from the rebased inflation for January.
Oyekanmi noted that while it is possible for the MPC to consider raising rates if there is a further spike in inflation, he does not expect a spike.
In the latest economic report from Financial Derivatives Company, the CEO Bismarck Rewane also predicts that interest rates will hold this time, and the marginal cuts may only come in H2 2025.
He predicted;
“The primary focus of CBN is price stability but interest rates will remain above 20 percent this year.”
Some expect another rate hike
There are however others that expect further raises in interest rates. JP Morgan, predicted in its Emerging Market Frontier Local report, that there will be a 50 basis points raise to 28% in February 2025, after which the MPC would hold rates for the remainder of the year.
The Head of Financial Institutions at Agusto & Co. Ayokunle Olubumi also thinks that CBN will raise interest rates on Thursday, as part of tightening measures, while other metrics will remain the same.
CBN Governor says MPC would continue raising rates
In related news, the CBN governor, Olayemi Cardoso had said during the launch of the FX code that the MPC would stick to orthodox methods of controlling inflation in 2025.
The CBN Governor said this while speaking about the high incidences of unethical practices discovered during the FX verification exercise.
Cardoso explained that as the apex bank looks to rein in inflation in 2025, it would stick to orthodox methods, which mostly include raising interest rates.
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Source: Legit.ng
