As the much-delayed meeting of the Monetary Policy Committee (MPC) is about to hold, stockbrokers have assessed the impacts of the delay on the activities in the Nigerian Capital Market.
President, Chartered Institute of Stockbrokers (CIS), Mr Oluwaseyi Abe who responded to media enquiries lamented that delay in the MPC’s meeting has prevented announcement of policy direction of the Central Bank of Nigeria (CBN) on some critical monetary tools which enhance investment decision on both the money and capital markets.
The MPC held its last meeting in November last year due to protracted delay in the confirmation of the new members by the National Assembly.By this delay, Abe said investors in the money and capital markets have been denied the current policy direction on the Monetary Policy Rate (MPR), cash reserve ratio, liquidity ratio and asymmetrical corridor as they affect investment decision on the activities in the money and capital markets.
“The MPC is supposed to drive activities both in the money market and capital markets as 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,” Abe explained.
He further explained that policy announcements by the MPC drives the economy, saying that the impact of policy decision should ginger activities in the capital market.
Corroborating him, the managing director and chief executive officer, Network Capital Limited, Mr. Oluropo Dada explained that lack of policy direction can bring about distortions and uncertainties. “The monetary policy guidelines are tools for managing the economy and non-meeting of the committee is a pointer that all is not well with the economy.
“Stockbrokers and other investment analysts are interested in what happens to the interest rate now that inflation rate is declining. It is likely that MPR will go down by some basis points when the MPC eventually meets. But uncertainties, ambiguities and distortions will persist,” Dada said.
Market watchers explained that the hardest hit by the protracted delay in the meeting of MPC are the foreign investors whose risk analysis takes into cognisance the policy direction on the interest rate.
Also, speculators take advantage of MPR to determine when to switch over from the money market to capital market. Transactions last week on the Nigerian Stock Exchange (NSE) have been moderated by profit taking, limiting price gains and other performance indicators.