Analysts predict hold in lending rate as Shonubi presides over MPC meeting next week


  • FAAC shares N1.03trn February 2023 revenue to FG, States, LGs
Uba Group


Ahead of the fourth meeting, this year, of the Monetary Policy Committee of the Central Bank of Nigeria, expected to hold next week, financial analysts have predicted that the prevailing base lending rate will be retained.

They hinged their position on the fact that over-tightening had become a concern as the economy was already battling with the negative impact of elevated interest rates. 

The financial experts at Cordros Capital argued that aside from global central banks approaching the end of the interest rate hiking cycle, the MPC had reached a point where it could hardly increase the Monetary Policy Rate.

However, they are leaving the door open for an additional smaller rate hike in the near term, noting that headline inflation maintained its upward trajectory, currency pressures remained intact, and there are signs that real GDP growth settled higher in Q2-23 after the cash crunch-induced moderation in Q1-23.

“Overall, while our baseline view is for the MPC to adopt a HOLD stance at this meeting, we do not rule out a 25bps – 50bps hike in the MPR while retaining other policy parameters,” the analysts disclosed.

Nonetheless, like previous meetings, the experts expect the Committee to consider developments in the global and domestic economy since the last policy meeting.

As such, Cordros noted that the dilemma for the Committee at the meeting would remain whether to (1) continue its rate hike to further dampen the rising inflation trajectory or (2) adopt a HOLD stance to observe emerging developments and allow for the impact of the last rate hikes to permeate the economy.

“However, at this stage, continuous increases in the MPR at a time when non-monetary factors are the dominant upside risk to near-term price pressures will undermine economic growth. On a balance of factors, while our baseline view is for the MPC to adopt a HOLD stance at this meeting, we do not rule out a 25bps – 50bps hike in the MPR while retaining other policy parameters,” the experts noted.

The MPC meeting is scheduled to be held on July 24 and 25.

Following the suspension of Godwin Emefiele, Governor of the CBN by President Bola Tinubu, the meeting will be chaired by the CBN’s acting Governor, Folashodun Shonubi.

“Thus, we think the focus at this meeting will be setting a new tone for monetary policy direction over the next few months, in line with the monetary policy and FX reforms since 29 May,” the analysts said.

Meanwhile, the Federation Account Allocation Committee disbursed the sum of N1.03 trillion to the three tiers of government in February 2023 from the total revenue generated in January 2023.

The amount disbursed comprised N653.70 billion from the Statutory Account, N115.00 billion from Non-Oil Excess Account for the month, N13.80 billion from Electronic Money Transfer Levy (EMTL) and N250.01billion from Valued Added Tax (VAT).

The Federal Government received a total of N285.24 billion from the N1.03 trillion, States and Local Governments received a total of N248.98 billion and N183.23 billion respectively.

The sum of N32.73 billion was shared among the oil producing states from the 13 percent derivation fund.

The Revenue generating agencies comprising Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), and Department of Petroleum Resources (DPR) received N10.54 billion, N18.14 billion, and N5.37 billion respectively as cost of revenue collections.


Further breakdown of revenue allocation distribution to the Federal Government of Nigeria revealed that a total net amount of N175.67 billion was disbursed to the FGN consolidated revenue account; N4.71 billion was received as a share of derivation and ecology; N2.36 billion as stabilization fund; N7.92 billion for the development of natural resources; and N6.61billion to the Federal Capital Territory (FCT) Abuja.