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Further MPR hike could be detrimental to Nigeria’s economic growth – Investment banker



Further MPR hike could be detrimental to Nigeria's economic growth - Investment banker

The Co Founder of Comercio Partners Limited, an investment bank, Steve Osho, has counselled against further hike in the Monetary Policy Rate (MPR), saying such move will undermine growth of the economy.

In a report by the company which reviewed the continued upward trend in the inflation rate to 33.95 per cent in May, Osho noted that the recent 750 basis point hike in the MPR has started to show positive effects, evidenced by the Month-on-Month, MoM reduction in inflation.

According to the National Bureau of Statistics (NBS), Month-on-Month inflation fell for the third consecutive month to 2.14% in May.
While food inflation rose to 40.53% in May, the rate of increase dropped for the third consecutive month to 0.52 percentage points.

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Noting that the inflation trend in May was in line with expectations, with continuous reforms by the Federal Government and the Central Bank of Nigeria’s (CBN) anticipated to have a dampening effect on the rate of increase, Osho, however, stressed that the persistent high food inflation indicates that structural issues, such as transport subsidies, insecurity, and supply chain disruptions, still need to be addressed.

“Effective measures targeting these areas could potentially lead to a more significant decline in overall inflation”, he said
Osho said though the upward inflationary trend is expected to continue, he said the CBN is, however, expected to retain the MPR at the current level of 24.75 per cent.

“At Comercio, we believe that the MPC is likely to maintain the current MPR in the upcoming meeting.

“Further tightening could be detrimental to economic growth, as businesses need access to funds to expand and operate efficiently.
“Despite some stability in the exchange rate, the market remains volatile and uncertain. The fixed income market has benefited from the recent rate hikes, but it is prudent to allow these measures more time to impact the economy before considering additional increases”.

On steps investors can adopt to navigate the high inflationary regime, Osho said, “In the face of persistent high inflation, investors should adopt a cautious yet strategic approach.

“Diversifying portfolios to include investing in sectors that traditionally perform well during inflationary periods, such as commodities and real estate.

“It’s also crucial to stay informed about policy changes and market conditions to make timely and informed investment decisions.
“Active management and focusing on long-term value will be key strategies in navigating this high-inflation environment”, Osho stated.

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