Post MPC – January 2020

Dear Subscriber,

Interest rates jump in response to CRR hike

In furtherance of its heterodox monetary policy and determination to insulate the naira from speculative pressures. The MPC decided to jack up the CRR from 22.5% to 27.5% at its meeting on Friday.

The effect of this in the money markets was an immediate hike in interbank interest rates by over 400 basis points. The problem is that the maturing OMO bills held by the PFA’s in January/February is in excess of N10trn, whilst the increased CRR debits is approx. N2trn. Thus there will still be a lot of naira floating around in the already saturated money markets.

However, with T/bills yielding a mere 2.95%pa and inflation at approx. 12% any increase in bank deposit rates will be a welcome relief to jittery, nervous and confused investors.

In the slides, Bismarck Rewane discussed the impact of the MPC’s decision to indirectly resume a tightening cycle, on the markets and investor sentiment. This programme aired on Channels TV News at 10 pm on Friday.

Do enjoy your read…