Investors ‘expecting rate cut… they’ll continue to observe CBN’

Lukman Otunuga, research analyst at FXTM, says foreign investors were expecting an interest rate cut in Nigeria, and will continue to observe until the Central Bank of Nigeria (CBN) acts in 2018.

Reacting to the CBN’s decision to hold interest rate at over a decade high all through 2017, Otunuga said “Nigeria’s central bank has yet again left benchmark interest rates unchanged at 14% in November amid a ‘fragile’ economic recovery”.

“However, the nation’s economic landscape continues to recover. With GDP growth in the third quarter rising by 1.40%, it seems that the central bank is hesitant to take action anytime soon.

“I believe that Nigeria’s improving economic landscape, and signs of inflationary pressures easing, are likely to support investor expectations of a rate cut.”

He said investors suspect that CBN may be waiting for better inflationary figures before cutting key rates.

“With inflation in Nigeria at 15.91%, there is a suspicion that the CBN may be waiting for a more sustained decline before moving ahead with rate cuts to support economic growth.

“As the year slowly comes to an end, investors will continue to observe Nigeria’s hard economic data and inflation figures for hints as to when the CBN might act in 2018.”