As the much-delayed meeting of the Monetary Policy Committee (MPC) is about to hold, stockbrokers have assessed the negative impacts of the delay on the activities in the Nigerian capital market.
The MPC meeting was held last in November last year, due to protracted disagreements in the confirmation of the new members by the National Assembly.
The President, Chartered Institute of Stockbrokers (CIS), Oluwaseyi Abe, lamented that delay in the MPC’s meeting has prevented announcement of policy direction of the Central Bank of Nigeria (CBN) on some critical monetary tools, which should have enhanced investment decisions on both the money and capital markets.
By this delay, investors in the money and capital markets have been denied the current policy direction on the Monetary Policy Rate, cash reserve ratio, liquidity ratio, among others, even as they affect investment decisions.
“What it means is that there are no policies that the market can react to. Policy announcements by the MPC drive the economy. There are certain things that have been happening that we know, even if they are not yet announced officially.
“For instance, we know that the Federal Government is refinancing its local debt- the Treasury Bills (TBs). It is also floating foreign bonds, Euro Bonds which costs are cheaper compared with domestic debt.
“At domestic level, the interest rate or coupon on Treasury Bills and local bonds are becoming unattractive because they are going down. The government is refinancing those exposures by taking foreign loans and using them to payout what they have taken here without rebooking new facilities or new takings from the people. This is a policy issue from the CBN”, Abe said.
He said that the delay in holding the meeting has led investors, especially those in the international space to be doing a lot of guess work, adding that the whole world is awaiting this meeting.
Corroborating him, the Managing Director and Chief Executive Officer, Network Capital Limited, Oluropo Dada, explained that lack of policy direction can bring about distortions and uncertainties.
“The monetary policy guidelines are tools for managing the economy and non meeting of the committee 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.
Analysts explained that the hardest hit by the protracted delay in the meeting of MPC is foreign investors whose risk analysis takes into cognisance the policy direction on the interest rate.
Also, speculators take advantage of MPR to determine when to switch over from the money market to capital market.
By Helen Oji
The Guardian Newspaper April 3rd, 2018