Chinwendu Obienyi
As the much awaited meeting of the Monetary Policy Committee (MPC) opens today in Abuja, stockbrokers have been assessing the negative consequencies of the four months delay on activities in the Nigerian capital market.
The MPC held its last meeting in November last year due to protracted delay in confirmation of its new members by the National Assembly, a development that denied investors in the money and capital markets the opportunity to leverage policy decision on cash reserve ratio, liquidity ratio and asymmetrical corridor to formulate their investment decisions.
The President, Chartered Institute of Stockbrokers (CIS), Oluwaseyi Abe, while responding to media enquiries, lamented that the 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 decisions in both the money and capital markets.
“What it means is that there are no policies that the market can react to. Policy announcements by the MPC drives 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 debts, with treasury bills and it is also floating foreign bonds, euro bonds that costs 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 what it had taken here without rebooking new facilities or new takings from the people. This is a policy issue from the central bank,” he said.
According to him, the impact of this policy decision should ginger activities in the capital market. He noted that when the rate on the one year treasury bills was 18.5 per cent for long term, the effective yield was about 20.5 per cent, saying most banks were even playing in that market.