Uncertainty trails March 20 MPC meeting


…as Senate fails to confirm nominees

By Kayode Tokede

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) responsible for monetary policy direction of the country may not hold for the second time in 2018 as Senate is yet to confirm the nominees presented by President Muhammadu Buhari last year.

The second MPC on the CBN’s website is scheduled for March 19 -20 and before now members on January 20 do not form a quorum, forcing the CBN’s Governor, Mr. Godwin Emefiele to issue a statement on the nation’s economic direction.

Statutorily, the MPC comprises 12 members, the CBN governor (chairman), the four deputy governors, two members of the CBN board of directors, three members appointed by the president and two members appointed by the governor.

Its quorum is of six members, “two of whom shall be the governor and a deputy governor, or two deputy governors”.

The MPC meeting usually held once in two months to set the Monetary Policy Rate (MPC), Cash Reserve Ratio (CRR), among others.

An Economic Expert, Prof. Uche Uwaleke, said the policy parameters would remain the same, stressing that it might have policy fallout on investment.

He maintained that status quo on rates continued to favour foreign investors.

The National Bureau of Statistics (NBS) had announced 15.13 per cent inflation rate in January and it is expected to announce February Inflation rate this week.

He said, “It is the local community that is calling for lower interest rate. Foreign Investors are always pushing for higher interest rate. When you lower interest rate, the returns become negative because inflation rate as at January 2018 was 15.13 per cent and MPR is at 14 per cent.

“Foreign investors prefer restrictive monetary policy.  Whether or not they meet this March, I do not see the members reducing the rates. The new members will want to understand the situations to make any changes.

“The CBN is looking at a situation where inflation rate slows down before they talk about reduction in MPR. I do see reduction happening in May during which time the new members might have settled down.”

The Head, Research Analyst at Pan Africa Capitals Plc, the Investment Banking arm of Pan African Capital Group, Mr. Moses Ojo, explained to Nigerian NewsDirect that the CBN governor might be forced to issue a statement like he did in January.

He said, “The CBN Act mandated that the MPC meets six times in a year which means they will have to form a quorum.

“The CBN in March or April will have to call for Extra ordinary meeting in order to position the nation’s economic direction.”

“The uncertainty that surrounds the MPC nominees’ confirmation before the Senate is affecting the confidence of foreign investors. Foreign Investors are watching the trend.

“With the nation’s inflation rate slowing down to 15.13 per cent in January, the MPC may likely move the interest rate down to 12 per cent or adopt a cautious approach.

”All the action of the monetary policy has been driven towards growth of the nation’s economy. The main reason CBN has decided to keep the interest rate at 14 per cent has been increase in inflation rate. Now the inflation rate has dropped gradually, I see the MPC moving the interest rate down to 12 per cent.

“The drop in interest rate will help foreign investors as returns will tend to increase,” he explained.

The CBN deputy governor (Operations), Mr. Suleiman Barau retired from active service. Another deputy governor, Adebayo Adelabu, corporate services, has also been served notice of disengagement from the CBN.

Recall too that Mrs. Sarah Alade, who was deputy governor for economic policy, had in March 2017 retired and her replacement – Aisha Ahmad – is yet to be confirmed by the Senate since her nomination in October 2017.

Also recall that in April, President Muhammadu Buhari announced the appointment of Ummu Ahmed Jalingo, Justia Odinakachukwu Nnabuko, Mike I. Obadan, Abdu Abubakar and Adeola Adetunji as non-executive directors of the CBN board. In October, he nominated Adeola Festus Adenikinju, Aliyu Rafindadi Sanusi, Robert Chikwendu Asogwa and Asheikh A. Maidugu as new members of the MPC but they are yet to be approved by the Senate.

The Senate had refused to screen Buhari’s nominees in line with its July 4 resolution to suspend all executive confirmation requests until Ibrahim Magu is removed as the acting chairman of the Economic and Financial Crimes Commission (EFCC).