The nation’s economy may be exiting a six-month apathy and cautious mode imposed on it by the standoff between the federal legislature and the executive, as the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will be ready today.
President Muhammadu Buhari had in November 2017 sent a list of five nominees to the Senate for confirmation to fill the vacant positions in the MPC.
Two of them are also to serve as deputy governors of CBN. But the list was caught in the web of political standoff, which delayed the lawmakers’ action on it for about six months.
Within this period, which analysts have described as characterised by uncertainty, both local and foreign investors transacted in the nation’s financial market with caution.
Updates on policies appeared static, particularly the local debt refinancing and long-speculated interest rate cut.
But two weeks ago, the lawmakers sheathed their sword and confirmed the nominees, giving a leeway to the ongoing MPC meeting, the communiqué of which is due today.
The first quarter of 2018 was a period of mixed fortunes for the capital market, with a minimal net effect in capitalisation and the all-share index at the end of March, compared to the beginning of the year.
Market operators attributed the mixed fortunes to a lack of policy pronouncements.
At several trading sessions in the last three months, which also marked the height of concerns over policy meetings and direction, the capital market, where most portfolio investors play, lost billions.
Specifically, trading yesterday, the first in April and second quarter of the year, sustained the mixed fortunes in the first quarter as equity transactions declined, following price losses.
This made the all-share index to fall by 1.6 per cent, losing 648.87 points or 1.6 per cent to 40,855.64 from 41,504.51, while the market capitalisation consequently dipped by N234 billion from N14.992 trillion recorded a few days ago to N14.758 trillion.
On March 20, the market capitalisation depreciated by N52 billion from N14.964 trillion recorded on Monday to N14.912 trillion; lost N236 billion or 1.53 per cent from N15.666 trillion to N15.430 trillion on March 7; and lost N139 billion or 0.9 per cent on February 12, from N15.476 trillion to N15.337 trillion.
Analysts attributed these developments to the recurring feelings of insecurity by investors, as they seek a direction and speculate within the period of the absence of MPC meetings.
The Head of Investor Relations at the United Bank for Africa (UBA), Rasaq Abiola, said the market was happy for the return of the meeting, which is the most important thing, and now awaiting its outcome, in terms of decisions and pronouncements.
“The truth is that no one likes uncertainty, particularly the financial market. It creates speculations and panic. During this period, no investor was happy for the absence, but the monetary policy accommodation maintained by CBN helped to sustain transactions,” he said.
An honorary policy adviser, Dr. Uzochukwu Amakom, told The Guardian that the absence of the meetings in the last six months meant that the yearly monetary and credit policy guidelines that outline the broad objectives and specific instruments of monetary policy for the year were either approved unofficially or not packaged yet.
“As the MPC meets within the week, it needs to send out a strong message and review extant rates to tilt the economy on the path of growth and inclusive capture of the gains of economic growth,” he said.
The Managing Director and Chief Executive Officer of Network Capital Limited, Oluropo Dada, corroborated Amakom, saying the market understands the situation as a lack of policy direction which can bring about distortions and uncertainties.
“The monetary policy guidelines are tools for managing the economy and the failure of the committee to meet is a pointer that all is not well with the economy.
“Stockbrokers and other investment analysts are interested in what happens to the interest rate now that inflation rate is declining. It is likely that MPR will go down by some basis points when the MPC eventually meets. But uncertainties, ambiguities and distortions will persist”, Dada said.
The President of the Chartered Institute of Stockbrokers (CIS), Oluwaseyi Abe, lamented the delay in the MPC’s meeting, saying it prevented the announcement of a policy direction of the CBN on some critical monetary tools which should have enhanced investment decisions on both the money and capital markets.
“What it means is that there are no policies that the market can react to. Policy pronouncements by the MPC drive the economy.
There are certain things that have been happening that we know, yet they are not announced officially. Investors, especially those in the international space are now doing a lot of guesswork,” he said.
By Chijioke Nelson and Helen Oji
The Guardian Newspaper April 4th, 2018