Standard Chartered Bank Nigeria (SCBN) anticipates an upward adjustment in the Central Bank of Nigeria’s (CBN) benchmark interest rate, the Monetary Policy Rate (MPR), by 300 basis points. This projection precedes the first meeting of the CBN’s Monetary Policy Committee (MPC) for the year. Speaking at the bank’s Global Market Outlook 2024 under the theme “Sailing with the Wind,” Ayodeji Adelagun, Head of Financial Markets at Standard Chartered Bank Nigeria (SCBN) Ltd, expressed his forecast, stating, “I foresee the CBN increasing the MPR by 300 basis points during the MPC meeting in February this year due to the high rate of inflation. While major analysts predict a 500 basis points increase, I believe it will be around 300 basis points, considering the ongoing inflationary pressures.”
Adelagun highlighted the dynamic market reforms, policies, and initiatives implemented in Nigeria last year to accelerate economic recovery. Despite these efforts, he acknowledged the challenges in returning to normalcy, emphasizing the uphill task associated with achieving sustained growth.
Addressing the stability of foreign exchange, Adelagun mentioned the likelihood of foreign investors injecting funds through Eurobond to bolster the market. He acknowledged the challenge foreign portfolio investors face in entering and exiting the market. He cited the CBN’s commitment to maintaining stability in the general price level and exchange rate.
Manpreet Gill, Standard Chartered Bank’s Chief Investment Officer for the Africa, Middle East, and Europe (AMEE) region, shared insights on the global outlook for 2024. Gill emphasized the common practice of planning investments at the start of a new calendar year. In their Outlook 2024 report, the bank preferred equities and bonds over cash. Gill questioned the potential additional return’s worth in light of cash yields hovering around 5%, stating, “With cash yields still in the region of 5%, is the potential additional return worth the risk?”
Gill argued in favor of taking the risk, emphasizing the current outlook for interest rates. Despite the prevailing 5% cash yield, he contended that beating this threshold is less challenging today. Gill asserted, “We strongly believe it is, and particularly so today given our outlook for interest rates.” He pointed out that most bond yields or income-generating assets already offer higher yields than available on cash, making the potential additional return compelling over longer time horizons.
In summary, Standard Chartered Bank Nigeria foresees a 300 basis points increase in the CBN’s MPR during the first MPC meeting of the year, driven by concerns over rising inflation. The bank acknowledges the challenges in returning to normalcy after dynamic market reforms in the previous year. Additionally, the bank anticipates foreign investors leveraging Eurobond to enhance market stability. On a global scale, it advocates a preference for equities and bonds over cash due to the promising outlook for interest rates.