The statement made Wednesday by the National Bureau of Statistics (NBS) saying that the country is now in a state of recession has put the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) under pressure, says the Financial Derivatives Company (FDC).
The FDC made stated this in its monthly report for August ahead of the MPC fifth meeting between September 19 and 20, 2016.
The report said that with the NBS revelation that the rate of inflation has reached an 11-year high the CBN would be pressured to adjust interest rates.
“This comes just after it increased policy rates to 14% per annum in July, in spite of negative growth and increasing unemployment,” it said.
“An important fact is that with the average Treasury bill stop rate for 182-day and 364-day at 17.8% and 18.5%, respectively, in August, the MPR may be redundant as the anchor rate.”
It said that the GDP report for second quarter 2016 showed a negative growth of (-2.06%), saying it was weaker than expected.
“With inflation slowing, and Nigeria in recession, the CBN is more likely to pursue an accommodative stance at its next MPC meeting.”
But Renaissance Capital (Rencap) said that the negative GDP growth could linger for long time on account of agriculture output likely to be affected by floods and production cuts in the oil industry due to vandalism and militancy in the Niger Delta.
Rencap specifically predicted that economic growth would further decline 1.4 percent in the second half of 2016.
The Rencap, in its September update, released Thursday, said: “We revise down our 2016 growth projection to-.4%.”
In making its forecast, the Rencap said that the negative growth would be mainly due to hiccups in agriculture, the biggest contributor to GDP, and a continued setback in oil output.
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