POST MPC REVIEW REPORT

Our Overview…

The MPC’s contraction of the key bench-mark rate from 13% to 11% as well as the reduction of the CRR to 20% from 25% was largely unexpected at this time. Our expectation was that the committee would maintain status quo and allow the impact of the previous policy decision to permeate more into the system, especially with the moderation in October’s inflation figure to 9.3% from 9.4% in September    (after 10 consistent month on month uptick).

The CBN highlighted that the impetus to ease the key bench mark rate and unlock liquidity into the system in order to jump start the economy and channel liquidity into the real sector was gotten from the positive October inflation figure as well as the upswing in GDP growth rate after a long progressive decline as a result of the steep crash in oil prices.

In our analysis of the MPC decision, we have decided to evaluate the positive implication of the MPC’s decision on Macroeconomic indicators and the equities market as well the pressure points of the policy on the economy.

MPC Decision, the pro’s…

The proposed expansionary budget of the Federal Government of N8triillion (over 80% rise from the 2015 budget)  and  about 40% proposed for capital expenditure, is a clear indication that the new government is focused on economic growth (which in any case is an imperative considering that our bread and butter income head has experienced + 50% price tank).

   

click on link for full report

https://drive.google.com/file/d/0B7bfqve2E3QrWmlqdUZDY0J2Zzg/view?usp=sharing