NAN-HE-20
MPR
By Olawunmi Ashafa
Lagos, Jan. 25, 2018 (NAN) The Chief Executive of Afrinvest Securities Ltd., Mr Ayodeji Ebo, on Thursday predicted that the Monetary Policy Rate (MPR) might remain uncut due to business-related risks.
Ebo spoke at the Economic Outlook organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
Its theme was: “Nigeria Economy and Financial Market Outlook: 2017 Review and 2018 Outlook,”
According to him, operational cost is among the risks affecting the companies’ profit negatively.
The News Agency of Nigeria (NAN) reports that the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on Jan. 24 said that the MPC would begin a gradual cut in rates mid this year.
Emefiele said that the apex bank plans to begin a gradual rate cut by the end of the first half of the year as inflation continues to subside.
Inflation, which had risen to almost 19 per cent in January 2017, had maintained a steady decline standing at 15.37 in cut.
Ebo said that a cut in rate would impact at the money market as investors might have to consider putting their funds in countries where risks were not high for good returns on investment.
“This will affect the current stability at the foreign exchange market and that is what the government would not want at a time the country is approaching an election period,” he said.
The Afrinvest chief also said that while the argument for a cut in rates was for increased lending to the real sector, a lower benchmark interest rate would not result in increased lending by banks.
He said that bringing down the MPR would not translate to improve lending by the banks.
“There is nothing like patriotic lending because we have to grow the economy.
“The banks will not use private money to grow the economy when they still see there are evident risks within the space. It is about the risk environment.
“Most of the companies that would have borrowed are struggling in terms of returns on their investment as they have factor in the cost of power as well as infrastructure.
“By the time you factor in those things, your business is not profitable and you cannot service your loan, the bank will not lend to you,” Ebo said.
He said that CBN had spent 15.9 billion dollars in nine months in its weekly intervention in the foreign exchange (forex) market.
Ebo said that the intervention funds, which were for nine months, started in April and ended December, 2017.
The Afrinvest chief also said that the figure was an improvement compared to the 9.6 billion dollars spent during same period of 2016.
He said that the Investors and Exporters’ Forex Window had recorded over 27.8 billion dollars in turnover and brought about transparency and stability in the market.
Ebo said that the current account stabilised in surplus position, expanding to 9.6 billion dollars in nine months from 2.7 billion dollars in fiscal year, 2016.
He said that foreign investors would be happy to see the interest rate remaining at 14 per cent, even as stability in the market had helped foreign investors to know that the economy was stable.
“Foreign portfolio investments provide liquidity and confidence to the market; keeping the interest rate at 14 per cent will help keep them coming,” he said. (NAN)
AWA/AOM/GOK
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Edited by Abdullahi Mohammed/Olagoke Olatoye