When will MPC meeting hold again?

The intricacies surrounding the holding of the Monetary Policy Committee (MPC) by the central Bank of Nigeria (CBN) should be clearly spelt out before the Economic stakeholders considering the fact the meeting has been suspended for four consecutive times now.

The primary functions of the monetary policy committee are to maintain a balance in the business cycle, to surge the rate of GDP and economic growth, and to turn down the witnessed inflation rates especially in these hard times. The MPC meeting is usually held every two months to decide interest rates. It was initially scheduled for Monday and Tuesday, September 25 and 26, 2023.  

There was also expectations that since the dust at the Apex Bank bank is settling down the CBN Governor, Cardoso will definitely hold the last MPC meeting before the year ends but the CBN has postponed its monetary policy committee (MPC) meeting. This is the second time the financial regulator has postponed the MPC meeting since Yemi Cardoso became the governor of the apex bank.

According to the CBN calendar, the 294th MPC meeting is slated for between November 20 and November 21, 2023.

But speaking on Monday, Isa Abdulmumin, Director of Corporate Communications, said the crucial meeting will not hold this week. Abdulmumin linked the postponement to the forthcoming 60th anniversary of the Chartered Institute of Bankers (CIBN) scheduled for November 24, 2023.

“MPC is not holding this week. All roads lead to the 2023 CIBN annual dinner slated for Friday, 24th,” he said. In September, the bank had shelved the 293rd committee meeting indefinitely. Abdulimumin in a statement, had said a new date would be communicated in due time. He did not provide reasons for the postponement.

The CBN’s MPC is the highest policy-making committee of the bank set up to review economic and financial conditions in the economy, determine appropriate stance of policy in the short to medium term. The committee is also tasked with reviewing the CBN monetary policy framework, and adopting changes when necessary.

Its meeting is critical to the price stability functions of the central bank as it determines interest rates to curb the persistent rise in inflation.

At its last meeting held in July, the committee raised its interest rates by 25bps to 18.75 percent.

The latest postponement comes amid a burgeoning inflation rate reported at 27.33 percent.  The rate at which prices of goods and services rise in the country continued to spiral upwards amidst higher fuel costs and depreciating naira as the headline inflation increased to 27.33 percent year on year in October 2023.

Latest inflation data released by the National Bureau of Statistics (NBS) showed that the October inflation figure was 0.61 percent higher than 26.72 percent that was recorded in September 2023.

On a monthly basis, the headline index fell to 1.91 percent in October, down by 36 basis points relative to the 2.45 percent month on month ease recorded in September.

According to the NBS, food inflation increased by 31.52 percent YoY in October 2023 signalling a  0.88 percent increase over the 30.64 percent recorded in the previous month.

Commenting on the inflation data, Director, Corporate Communications of the Central Bank of Nigeria (CBN), Dr. Isa AbdulMumin expressed optimism that the low rate of increase in the average price level in October compared to September 2023, was a pointer to the fact that the Bank’s monetary policy stance to tighten rates and its money market reforms were yielding the desired effect. Aggressive monetary tightening using various liquidity mechanisms including removing the cap on the Standing Deposit Facility (SDF) and Open Market Operations had raised Open Buy Back (OBB) rates from less than one per cent in August to their expected levels around the monetary policy rate today.

In spite of 0.61 percent increase in the headline inflation rate from 26.72 percent in September 2023 to 27.33 percent in October 2023, Isa remains upbeat that the CBN is headed in the desired direction in terms of achieving price stability. According to him, available statistics show that the first indication of deceleration in prices was recorded in September and further reforms in the money market, which commenced in October, had accelerated easing in prices as indicated by the substantial drop in month-on-month changes recorded in October.

“Moderation in month-on-month changes in prices observed in the headline, food and core components of the consumer basket followed reforms in the money market and relative stability in the FX market,” he added.

A key driver of the headline inflation rate in October, food inflation remained on a steady rise, reaching 31.52 percent in October. This represents a 7.80 percent points increase compared to 23.72 percent recorded in October 2022.

According to the latest CPI report by the National Bureau of Statistics, the increase in food inflation on a year-on-year basis was caused by increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, fruit, meat, vegetables and milk, cheese and eggs.

This is as the Food and Agriculture Organisation said that Nigeria has plunged into an unacceptable threshold of food consumption resulting from a significant spike in staple food prices following increases in fuel prices, inflation and high cost of food production.

According to FAO, over 26.5 million including Internally Displaced Persons (IDPs) are expected to plunge into acute food insecurity between June and August 2024.

It stated that going into the lean season (June to August 2024) households may experience slight to moderate deterioration in food consumption which may plunge several states into the crisis phase.

In the month of October, Kogi, Kwara, and Lagos states had the highest food inflation while Borno, Kebbi and Jigawa recorded the slowest rise.

On a Month-on-Month basis, however, October 2023 food inflation was highest in Yobe (5.35 percent), Sokoto (3.68 percent) and Jigawa (3.45 percent), while Edo, Katsina and Rivers recorded the slowest rise in inflation on Month-on-Month basis.

The Apex Bank Governor needs to set a policy thrust to address Nigerians on the persistent inflationary pressures in the market circle. The situation is becoming unbearable for the masses so the MPC meeting that is supposed to address these occurrences is being suspended. While growth is important, it is not a sufficient condition for development, whereas as prices continue to go up, it hits the poor very hard. So, inflation is very important. The Apex Bank must consider the likelihood of the masses.

The inability of the central bank to convene the MPC meetings under its new leadership has continued to generate concerns among analysts and stakeholders amid the current galloping inflation partly fuelled by the removal of fuel subsidy,  FX liquidity challenges, and the increasing cost of funds in the economy among others. The lack of clear guidance on interest rates, inflation targets, and other monetary policies may result in market volatility and reduced investor confidence.