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Published On: Wed, Nov 15th, 2017

Time is ripe for rates cut, says Rewane as inflation slows further in Oct.


Prof. Yemi Kale, DG, National Bureau of Statistics

This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives.

The National Bureau of Statistics on Tuesday released Consumer Price Index (CPI), which measures inflation and it showed that inflation rate lower by 0.07 percent points to 15.91 percent (year-on-year) from 15.98 per cent recorded in September. But on a month-on-month basis, inflation accelerated marginally 0.76 percent in October 2017, 0.02 percent points lower from the rate of 0.78percent recorded in September.

The MPC is scheduled to meet for the last time for the year on Monday and Tuesday in Abuja. Pundits hope the latest decline in inflation rate would influence to lower interest rate, which has been pegged at 14 per cent since August 2016, despite outcry from the organized private sector for the reduction of benchmark rates during the 15 months the country wallowed in recession. But the apex bank argued that this would worsen the economy and discourage Foreign Direct Investments (FDIs). But the CBN governor, Godwin Emefiele recently hinted that interest rate would begin to drop in 2018.

“The good news is that inflation has been down to 15.91 per cent, which has been forecast and it was accurate. It has been consistent in the accelerating path. I hope it will influence the out of the MPC meeting on Monday and Tuesday,” noted Rewane. If the GDP numbers come out on Monday and there is further improvement, MPC will have no reason not to lower rates, he also argued while speaking on Channels TV’s Business Morning Show on Tuesday.

The data from NBS indicates that urban inflation was up 16.19 percent (year-on-year) in October2017,   0.01 percent point higher than 16.18 percent recorded in September. On the other hand, rural inflation slowed to 15.67 percent in October compared to 15.81 percent in September.

“Consumer Price Index Food Index High food price and food price pressure continued into September though generally at a slower pace. The Food Index increased by 20.31 percent (year-on-year) in October, down marginally by 0.01 percent points from the rate recorded in September (20.32 percent),” the report stated.

The Financial Derivatives boss explained that food inflation has been high because of increased rate of food smuggling out of the country, postulating that cost of food stuffs is bound to drop due to the current harvest season.

The Central Bank targets 6-9 per cent inflation rate, while the federal government is aiming for 12 per cent for 2018.

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