Saturday, 2nd December 2023

Govt considers new MPC members as uncertainty rocks economy

By Geoff Iyatse (Lagos), Kingsley Jeremiah, Collins Olayinka and Joseph Chibueze (Abuja)
21 November 2023   |   4:40 am
For the second time in a row, the Central Bank of Nigeria (CBN) has missed the rate-fixing Monetary Policy Committee (MPC) meeting, leaving room for speculations on Olayemi Cardoso’s strategic policy direction, approach to inflation control and even the current composition of the arm.

Olayemi Cardoso

• Membership may be disbanded, recomposed
• Cardoso readjusting CBN calendar, says CBN source
• To unveil policy direction at Banker’s Dinner this week 
• Market uncertainty increases, naira faces fresh crisis 
• Expert worried about governor’s silence on significant issues

For the second time in a row, the Central Bank of Nigeria (CBN) has missed the rate-fixing Monetary Policy Committee (MPC) meeting, leaving room for speculations on Olayemi Cardoso’s strategic policy direction, approach to inflation control and even the current composition of the arm.

This comes as the Central Bank is said to have severed communication with external members of the committee, which is expected to generate research-based market trends for monetary policy decisions. 
A member, who spoke with The Guardian yesterday, said there has been no official or unofficial communication with his colleagues since the new administration came on board.

“There is so much uncertainty and no one knows what is happening,” he said. The source said that the body language of the new administration suggests that the new leadership wants some changes but that it remains unclear how the apex bank would progress with that because the law has stipulated a removal process.   
Apart from independent members, the Ministry of Finance, the Securities and Exchange Commission and the Presidency are represented. The current independent members, whose fate hangs in the balance, are Adeola Adenikinju, a professor of economics at the University of Ibadan; Mike Obadan, another professor of economics; Aliyu Sanusi of the Department of Economics, Ahmadu Bello University and Robert Asogwa, a macroeconomist at the African Development Bank (AfDB). 
Others are Mohammed Adaya Salisu, Mo’Omamegbe. Five appointee members were re-nominated while two were newly nominated and confirmed by the Senate last year in line with Section 12(4) of the CBN Act, which guarantees tenure of offices of the appointees. They were previously subjected to scrutiny by the Senate Committee on Banking, Insurance and Other Financial Institutions. 
Recall that the CBN faced leadership challenges in the past few months with Emefiele and his four deputies resigning ahead of the end of their tenures. The Guardian had reported leaders of the institution faced an uncertain future as the President was determined to follow through with his promised “housecleaning”. 
Considered the apex body responsible for monetary policy and chaired statutorily by the CBN governor, the MPC is an arm of the CBN that draws membership from the apex bank and other experts outside the fold of the regulatory. 
Decisions of MPC arrived through voting, but the governor is believed to hold overwhelming influence over the voting pattern of the members, hence the market coming is considered a key factor that could alter the restrictive monetary phase that started May last year, raising the interest rate from 11.5 per cent to 18.75 per cent, feeding on the cost of commercial borrowing.
Months into the monetary tightening campaign, a hitherto dovish ex-CBN governor, Godwin Emefiele, said he would not promise a pause unless there was a reasonable breakthrough in the anti-inflation war. At a July meeting presided over by Foloshodun Shonubi, who acted briefly as head of the leadership team of the bank, the benchmark interest rate was raised by 25 basis points to 18.75 per cent, a level not seen in recent history.

The last meeting was considered a major test of the CBN’s autonomy after President Bola Tinubu, during his inauguration speech, told the country that he was committed to affordable interest rates as part of his plan to reboot the economy and grow a credit-led economy.
The circumstances surrounding Cardoso’s appointment raised questions about his courage to defend his own man as well. Hence, the market has looked forward to how he manages particularly issues around interest rates (which Tinubu considers too high) and CBN overdraft.
The September meeting came at a time during the infamous leadership vacuum while Cardoso was hurriedly sworn in at the behest of the urgent need to fill the space. Some market analysts expected the MPC to hold a week or two after he took the reins but that did not happen. Yesterday through today was another opportunity to convey the meeting, which is the last for the year. It was reportedly postponed but not through an official communication.
A source at the apex bank told The Guardian yesterday that it was not a postponement but a mere adjustment of events at the CBN. The source hinted that the new helmsman, who has kept his plan for a new CBN to his chest, would seize the moment at the forthcoming Bankers’ Night, a yearly event organised by the Chartered Institute of Bankers of Nigeria (CIBN), this weekend to make a bold statement and unveil key policy directions.
Every year, the source told our correspondent, the CBN draws a calendar of major events and activities, the source explained. But nothing is sacrosanct about the dates, the source explained, promising that MPC would be re-conveyed at a later date. 
Cardoso is expected to examine the macroeconomic direction and outlook for the Nigerian economy at the event where private sector operators look forward to a clue of the CBN’s thinking about the economy.
Cardoso will be addressing bankers and other public and private sector stakeholders at the Annual Bankers’ Dinner-themed ‘The Governor’s Day’ holding in Lagos. It will provide the governor the opportunity to address stakeholders on the economic and financial markets development during the year as well as the economic outlook for the coming year.
The dinner and 60th-anniversary celebration is expected to draw an assembly of over 500 leaders from the banking industry, influential business leaders and senior government officials. Vice President Senator Kashim Shettima and Governor of Lagos State, Babatunde Sanwo-Olu, are expected to join Cardoso at the event – a social event that has emerged as an opportunity to get the CBN boss to speak expensively on policy issues and economic projections in the last few years. 
There is yet nothing to show whether Cardoso intends to continue the 18-month interest rate hike campaign or pause. Since the start of the campaign, inflation has spiked from 16.8 to 27.3 per cent, though the month-on-month growth slowed in October reading – a signal that the current strength of inflation growth is ebbing out. 
With bank loans only accessible to a tiny portion of the population and businesses, experts have argued that using a money base to control inflation is largely inefficient and called on the Central Bank to rethink its approach to fighting inflation. Last year, the Monetary Policy Department members held a retreat in Lagos where they assessed the possibility of switching to inflation targeting as a new approach to checking prices. 
Commenting on the stalled MPC meeting, Tolulope Alayande, an investment banker, noted that the instability in the current administration is well beyond the financial space but includes the fiscal policies as well.  He expressed frustration with the tight-lipped posture of the governor of the apex bank regarding what his plans are in specific areas.
“What aspects of Emefiele’s policies will this administration retain? Which ones will go? Nigerians and investors need to know the directions. There are many initiatives that Emefiele brought forward during COVID-19 to stabilise the economy. We need to know the details. Where is this CBN governor going? How does he plan to get there? These are the worries,” he stated. On his part, a retired banker, Ande Mohammed believes that the MPC composition as presently constituted may not be what Tinubu wants.
“I will say that there may be plans by the government to reconstitute the MPC. That is the only way one can describe what is going on. If the government has confidence in the one in place now, why not allow it to meet? This is not good for the economy. There are many functions of the MPC; its pronouncements are germane to the stability or otherwise of the economy,” he said.
Prof. Godwin Oyedokun of Lead City University, said: “I know the CBN Governor will give the economic outlook at the Bankers’ Night. But the programme is at night; he has three clear days to prepare for the night. For me, it is clear irresponsibility to abandon a national assignment for a professional body.”