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Nigeria: CBN Makes Last Policy Decisions Before Election

The Central Bank of Nigeria (CBN) being seen an unenviable position of having to deliver its monetary policy committee (MPC) announcement a few days before the presidential elections.

The announcement is expected later today, four days before the polls that is highly-likely to a closely-contested affair between the ruling People's Democratic Party and the All Progressives Congress candidates Goodluck Jonathan and Muhamadu Buhari respectively.
Ahead of the MPC announcement, analysts did not envisage any changes to the current monetary policy stance.

"We believe the CBN should use the March sitting to at least clarify its foreign exchange policy and shore up market confidence. However, the status quo is likely to remain unchanged," Rand Merchant Bank said Today on Tuesday.

The economic think-tank said the CBN will sell US dollars at a set rate to ensure that liquidity is readily available to meet legitimate demand.

However, the 6,7 percent decline in foreign exchange reserves between February and March proves that the monetary authority cannot service the interbank market indefinitely.

"We continue to favour a more adaptable exchange rate agreement. The adoption of the IFEM rate as the official rate would undoubtedly unsettle the market, resulting in abrupt weakness," RMB said.

An analyst said devaluation of the local currency could not be dismissed.

The Naira has been on a steady decline in recent months owing to a drop in global oil prices and moves to USD/NGN250.00 cannot be ruled out if this scenario were to play out. However, the local unit should stage a recovery and steady below 220, especially if the oil price settles above US$60/bbl and investors look to lock-in attractive yields," he said.

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