The report which corroborated the Central Bank of Nigeria’s (CBN’s) concern, also pointed out that pressure on the naira abated in recent weeks partly as a result of the sustained tight monetary conditions in the economy.
The report by the WSTC Financial Services Limited, a dealing member of the Nigerian Stock Exchange (NSE) stated this yesterday.
Based on Tuesday’s resolve by the CBN’s Monetary Policy Committee (MPC) to sustain its tight monetary stance, the report anticipated “the re-engineering of operations in the banking sector to continue.”
It added: “It is therefore expected that yields in the fixed income market will remain at current levels, as we do not anticipate an ebb in the current monetary policy stance.”
Commenting on its expectation in the equities market, it predicted the equities market would sustain the rally for the remaining part of 2013.
“It is however expected that the vulnerability of the stock market performance to the impending US Federal Reserve liquidity tapering and the potential rising rates in Europe will continue into 2014,” it stated.
Against the backdrop of a stable domestic economic condition and global economic uncertainties, the MPC retained the Monetary Policy Rate (MPR) at 12 per cent with an interest rate corridor of +/- 200 basis points. It also retained the Cash Reserve Ratio (CRR) at 12 per cent and 50.0 per cent for private and public sector deposits respectively.
Although, the committee considered the positive impact of improving conditions in the advanced countries on the global economy, it however recognised the impact of rising rates in Europe and the US quantitative easing tapering on the naira exchange rate and domestic stock prices. The committee also hinted that an end to the current liquidity squeeze may not be in sight as it expects increased fiscal spending alongside the foregoing concerns to be potential headwinds in 2014.