Analysing Nigeria's MPC decision

Nigeria's Monetary Policy Committee (MPC) has maintained all key rates unchanged following the release of the country's first quarter GDP figures showing a contraction of 0.52 per cent. Ejikeme Okoli, Research and Market Intelligence Officer at Diamond Bank, shed light on Nigeria's macroeconomic landscape in a recent interview with CNBC Africa. Okoli emphasized that while the GDP figures were disappointing, there are reasons to be optimistic about the country's economic trajectory. He noted that improvements in macroeconomic conditions, particularly inflation, are likely to drive growth in the coming quarters. Okoli highlighted that increased spending power due to inflation deceleration, improved FX market liquidity, and rising manufacturing sector output are positive indicators for Nigeria's economy. The convergence of FX exchange rates and higher oil prices have bolstered the country's revenue streams and foreign reserves, providing the Central Bank of Nigeria (CBN) with more resources to intervene in the FX market and stabilize the naira. Okoli expressed confidence that Nigeria could potentially exit the recession by the end of the second quarter, depending on external shocks. He underscored the pivotal role of foreign exchange in supporting Nigeria's non-oil economy and emphasized the broader impact of global oil price movements on the country's economic health. Looking ahead, Okoli cautiously projected a GDP growth rate of between 0.5 and 1% for 2017, with expectations of stronger growth in 2018. While acknowledging the challenges facing corporate Nigeria, Okoli suggested that next year could see a more substantial economic expansion. Reflecting on the MPC decision, Okoli supported the committee's choice to maintain rates, citing concerns about income inequality and the potential impact of rate adjustments on inflation and credit accessibility. He commended the CBN for providing rationale for its decision, noting that a balance between addressing inflation and promoting economic growth was crucial at this juncture. Overall, Okoli's analysis painted a cautiously optimistic picture of Nigeria's economic outlook, pointing to positive trends and the potential for sustained recovery in the coming months.