Nigeria, March 23
Policy rate: 11.5%Inflation rate: 17.3% (February)Inflation target: 6% – 9%
Nigeria’s MPC will probably leave its key rate unchanged even with inflation at a four-year high, as it tries to prop up an economy that emerged from a recession in the fourth quarter and where a third of the labor force is unemployed. While the central bank will keep monitoring inflation, accommodative policy is key to accelerate the recovery, Governor Godwin Emefiele said in speech last month.
The government’s U-turn on planned hikes in fuel prices could give the MPC room to keep focusing on stimulating economic growth. Unless President Muhammadu Buhari’s administration decides to liberalize gasoline and power tariffs, rate hikes may be unlikely this year, said Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes Holdings.
Monetary policy committees in Ghana, South Africa, Kenya and Angola are unlikely to follow those in Brazil, Turkey, Mozambique, Zambia and Zimbabwe just yet when they announce their decisions on interest rates in the next eight days.
Inflation in the continent’s two biggest oil producers, Nigeria and Angola, is in double digits and rising, and the currencies remain under pressure. However, the risks to the recovery of most economies in the region after the worst slump in half a century last year, remain elevated.
After some African central banks cut to record lows in 2020, most have reached the limit on monetary policy easing and an extended pause in key rates seems likely in countries where there is less severe pressure on exchange rates, according to Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank.
The region’s policy makers may also take comfort from an accommodative global monetary policy environment, with the Federal Reserve signaling that U.S. interest rates will remain near zero through 2023. Lower-for-longer global interest rates mean African central banks won’t be forced to tighten policy in a bid to keep local assets attractive to offshore investors.
What Bloomberg Economics Says…
“We expect Africa’s major central banks to stay on hold in the coming weeks to support a continued recovery in output. However, the accommodative stance is unlikely to last much longer due to rising inflation pressures.”
–Boingotlo Gasealahwe, Africa economist