Highcap Securities Ltd. has said the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to retain key monetary policy parameters will keep the capital market on a steady course.

The Vice President of Highcap Securities Ltd, David Adonri, said this in an interview on Wednesday in Lagos while reacting to the outcome of the 306th MPC meeting of the CBN.

The committee retained the monetary policy rate (MPR) at 26.5 per cent at the end of its 306th meeting on Tuesday.

It also retained the standing facilities corridor at +500/-100 basis points around the MPR, while the cash reserve ratio (CRR) remained at 50 per cent for deposit money banks and 16 per cent for merchant banks.

Mr Adonri also said the policy stance would maintain stability in the financial markets, with investors expected to focus more on corporate earnings rather than changes in monetary policy.

According to him, inflation has remained virtually at a standstill, leaving no compelling reason for the CBN to alter its monetary policy stance.

“Since all monetary aggregates were retained, financial markets are not expected to change course. Normal market flow is expected to persist.

“The retention of the monetary policy parameters by the MPC is wise. Macroeconomic conditions have been stable for many quarters, with inflation virtually at a standstill,” he said.

According to him, there is no basis for investors to switch funds between equities and fixed-income securities because the monetary policy environment remains unchanged.

He described the decision as prudent, noting that the country’s macroeconomic environment had remained relatively stable for several quarters.

He said that although the economic environment remained volatile, the decision of the committee reflected confidence that macroeconomic stability would persist in the near term.

According to him, the policy stance will strengthen investor confidence and support output growth while giving the committee flexibility to respond to future economic developments, if necessary.

Mr Adonri, however, said monetary policy alone could not address the structural challenges limiting economic growth.

He said fiscal authorities must implement reforms capable of boosting productivity and improving the economy’s supply side.

He stated, “Monetary policy is a short-term demand management strategy to restore stability. Thereafter, fiscal policy is expected to intervene to address the structural issues constraining output growth.

“Unfortunately, public policy has yet to materially influence the supply side of the economy in a sustainable manner.”

(NAN)