"Nigeria set for big rate hike as currency stumbles"

" \r\n\r\n Nigeria set for big rate hike as currency stumbles \r\n\r\n \r\nA sharp slump in the Nigerian naira since mid-April and 28-year high inflation will likely leave the monetary policy committee with little choice but to hike rates again.\r\n\r\nOf the 12 economists in a Bloomberg survey nine predict a percentage-point hike, two 200 basis-point increase and one no change when Governor Olayemi Cardoso gives the MPC\u2019s decision on Tuesday in the capital, Abuja. The MPC raised rates by 6 percentage points in the first quarter to 24.75% to rein in inflation and stabilize the currency.\r\n\r\n\u201cThe committee will likely be watching recent currency volatility and may decide more action is needed,\u201d said Giulia Pellegrin, senior portfolio manager at Allianz Global Investors, which has more \u20ac530 billion ($576 billion) under management. \u201cInvestors would still like to see some tightening coming out of the next MPC meeting in Nigeria,\u201d she added.\r\n\r\nThe depreciation of the currency by 28% against the dollar in the past four weeks \u201cmeans additional and sizeable rate hikes are needed,\u201d said Yvonne Mhango, Bloomberg Africa economist.\r\n\r\nThe slide is the latest bout of volatility since President Bola Tinubu, who marks his first year in office next week, relaxed foreign-exchange controls in June. The unit has declined around 69% against the greenback since then, fanning inflation that quickened to 33.7% last month \u2014 more than triple the 9% ceiling of the central bank\u2019s target range.\r\n\r\n\u201cWe expect another 200-basis-point increase at the Central Bank of Nigeria\u2019s May 21 meeting, with the focus being on large price gains that are likely to come,\u201d said Mhango. \u201cThat follows a similar move in March and will help restore price stability and positive real rates,\u201d she said.\r\n\r\nInvestors also want Cardoso to announce more liquidity-tightening measures and introduce greater transparency in the currency market, said Ayodeji Dawodu, director of fixed income for Central and Eastern Europe, Middle East and Africa at BancTrust & Co. \u201cI would say transparency and increased intervention in the official market at market driven levels are what are missing from the CBN,\u201d he said.\r\n\r\n\u201cUnfortunately, there is still some concern on the quality of the reserves, particularly when we saw the sizeable decline in April and there were some vague explanations from the central bank,\u201d he said.\r\n\r\nLiquid reserves declined almost 5% last month to $31.38 billion and have recovered slightly to $31.78 billion as of May 16."

"Nigeria set for big rate hike as currency stumbles"

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