POLL: Ghana to cut interest rates in September, Nigeria to hold

Vuyani Ndaba

 JOHANNESBURG (Reuters) - The Bank of Ghana will cut its prime lending rate on Monday to ease pressure on the hard pressed economy following a gruelling three-year International Monetary Fund credit programme, a Reuters poll found.

Out of 10 analysts polled in the past three days, half predicted a 100 basis points cut to 20.00 percent while two pencilled in a cut of 50 basis points. Two more suggested a 200 basis point cut and only one said rates would stay on hold.

“Ghana’s authorities are likely to continue with their easing stance in an effort to boost productivity and reduce public debt servicing costs, which remains a major source of economic stress,” said Gaimin Nonyane, head of economic research at Ecobank.

The Bank cut its benchmark interest rate by 150 basis points to 21.00 percent in July, citing a downward trend in consumer inflation and the potential for higher economic growth on increasing oil output.

Ghana’s inflation - last recorded at 12.3 percent in August - is expected to average 12.5 percent this year and slow to 10.0 percent next year and then to 8.50 percent in 2019.

However, Rafiq Raji, chief economist at Macroafricaintel in Lagos said “rates are already way too high relative to the inflation outlook. To keep pace, the Bank of Ghana has to cut rates aggressively.”

Last month the IMF approved an extension of an aid package for Ghana, initially worth $918 million, that will see the programme continue for an extra year beyond its original April 2018 end date. 

NIGERIA GETTING CLOSER TO CUTTING

Nigeria, hit badly by a price slump in crude oil, its main export, will wait for either January or March before kicking off its own easing cycle.

Fourteen of 15 analysts said interest rates will stay on hold at 14.00 percent on Tuesday while one predicted a 200 basis point cut.

The poll suggests its Monetary Policy Committee will wait until early next year before cutting rates by 25 basis points. After cumulative cuts of different amounts during the year, the benchmark rate will end 2018 at 12.25 percent.

Nonyane said Nigeria will maintain the policy rate at 14.00 percent in the near term despite improving liquidity conditions.

“Monetary authorities are likely to remain keen on mopping up naira liquidity in an effort to reduce dollar speculation and to achieve sustained real returns,” she said.

Nigerian central bank authorities have aggressively made scarce dollars available in the market this year and soaked up naira to discourage speculation that has often led to a gap between the black market and official exchange rates.