- Stockbrokers Decry Impacts of Delayed MPC Meeting
As the meeting of the Monetary Policy Committee of the Central Bank of Nigeria is set to hold this week, for the first time this year, stockbrokers in the country have assessed the negative impacts of its delay on activities in the Nigerian capital market.
The President, Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, while commenting on the development, lamented that the delay in the MPC’s meeting had prevented the announcement of CBN’s policy direction on some critical monetary tools.
The MPC held its last meeting in November last year and had been unable meet since then due to the delay in the confirmation of new members by the National Assembly.
Abe said, “The MPC is supposed to drive activities both in the money and capital markets as the two markets are inversely related. The inability of the MPC to meet since the beginning of the year has a major drawback on our market.
“What it means is that there are no policies that the market can react to. Policy announcements by the MPC drive the economy. There are certain things that have been happening that we know, even if they are not yet announced officially.
“For instance, we know that the Federal Government is refinancing its local debt – the Treasury bills. It is also floating foreign bonds, Euro Bonds, whose costs are cheaper compared with domestic debt.
“At domestic level, the interest rate or coupon on Treasury bills and local bonds are becoming unattractive because they are going down. The government is refinancing those exposures by taking foreign loans and using them to pay down what they have taken here without rebooking new facilities or new takings from the people. This is a policy issue from the central bank.”
Abe explained that the impact of this policy decision should stimulate activities in the capital market, adding that when the rates on the one-year Treasury bills was 18.5 per cent for long term, the effective yield was about 20.5 per cent and most banks were even playing in that market.
He said, “An investor can avert risk in the capital market and keep money in Treasury bill. The MPC ought to have announced this as a policy. It is what comes from the MPC that people will work on. The MPC should not leave the investing public to guesswork in terms of strategies.
“Delay in holding the meeting has led investors, especially, our friends in the international space, to be doing a lot of guesswork. The whole world is awaiting this meeting to hold so that everyone will be on the same page in terms of the direction in which we are going.”
Corroborating him, the Managing Director and Chief Executive Officer, Network Capital Limited, Mr. Oluropo Dada, explained that lack of policy direction could bring about distortions and uncertainties.
He said, “Stockbrokers and other investment analysts are interested in what happens to the interest rate now that inflation rate is declining. It is likely that the Monetary Policy Rate will go down by some basis points when the MPC eventually meets. But uncertainties, ambiguities and distortions will persist.”