Sanusi sends Mixed Signals ahead MPC’s Rate Decision

Mallam Lamido Sanusi, the Governor of the Central Bank of Nigeria has sent mixed signals as regards the decision of the Monetary Policy Committee (MPC) set to meet on Monday. Analysts are uncertain as to whether the committee will raise or hold interest rates.

Initially the CBN governor had stated that the MPC will not raise the rates in response to inflationary pressures caused by the partial removal of subsidy. He stated that the inflationary effects were first round effects and not significant to warrant a rate hike.

Discussing with CNBC Africa, Sanusi said, “In January, because of the removal of subsidy there’s going to be inflationary pressure. Usually we will not respond to that directly because it’s a first round effect … so we will not raise interest rates in response to inflationary pressure from the rising oil prices.”

However at the World Economic Forum in Davos, Sanusi hinted that the MPC may toe a different path if the government’s budget is expanded.

Sanusi stated in Davos, “If we do have an expansionary budget plus the fuel subsidy removal, I think the likelihood is more for an increase than a cut.”

However it is uncertain if this potential increase is slated for Monday or further into the year when the government would have presented its amended budget.