22 January 2018

Nigeria: Senate's Stance On Magu Leads to Cancellation of Nigeria's Monetary Policy Committee Meeting

The first meeting of the Monetary Policy Committee, MPC, for 2018 scheduled for Monday and Tuesday has been cancelled due to inability of members to form a statutory quorum.

The Senate has refused to confirm new presidential nominees to fill positions vacated by some former members who either retired or completed their tenures.

The lawmakers have stuck to their position not to confirm such nominees from the executive until the acting chairman of the Economic and Financial Crimes Commission, EFCC, Ibrahim Magu, is removed. The Senate twice refused to confirm Mr. Magu as the head of the EFCC while the executive has held on to him for his role in the anti-corruption efforts of the Muhammadu Buhari administration.

The MPC, whose meeting is being cancelled, is the Central Bank of Nigeria, CBN committee responsible for formulating monetary and credit policy for the economy.

In line with Section 12 (2d) and (e) of the CBN Act of 2007 (Amended), the MPC is composed of 12 members, including the CBN Governor as Chairman.

Other members include the four CBN deputy governors; two members of the board of directors; three appointees by the president, and two by the CBN governor.

To form a quorum, the law requires five members of the CBN board to be in attendance. Three of them must be CBN directors other than the governor or the deputy governors.

However, for most part of last year, the committee had been meeting with eight members, excluding the CBN governor, who is the chairman.

The exit of the deputy governors in charge of Economic Policy, Sarah Alade, who retired last March, and the retirement of her Corporate Services counterpart, Suleiman Barau, later in June 2017 left eight vacant positions to fill.

Last October, President Muhammadu Buhari had approved the nomination of five new members of the Committee to replace those who were either retired or were on the verge of completing their tenures at the end of the year.

Among the new appointees to the committee were Aisha Ahmad, a former executive director (Retail Banking) at Diamond Bank Plc., who was expected to resume immediately after her confirmation to replace Mrs. Alade.

Four others included Adeola Adenikinju, Robert Asogwa, Asheikh Maidugu, and Aliyu Sanusi.

Mr. Adenikinju, a Professor of Economics from the University of Ibadan, is a Research Professor at the Centre for Econometrics Petroleum, Energy Economics and Allied Research; and a Senior Research Fellow, Macroeconomic Study Group, University of Ibadan.

Mr. Asogwa, a development economist, was until his appointment the Team Leader of Inclusive Growth Unit at the UN Development Programme, UNDP. A micro-economist\policy analyst and research project expert, he holds a PhD in Economics from the University of Nigeria, Nsukka, with proficiency in Financial, Development and Monetary Economics.

Mr. Maidugu, a former director, Federal Inland Revenue Service, FIRS, and former Chief Operations Officer, Debt Management Office, DMO, 2007-2010, was a Senior Lecturer in the Economics department, University of Maiduguri (1994-2007), where he was also educated.

Mr. Sanusi, Associate Professor of Economics, Department of Economics, Ahmadu Bello University, ABU, Zaria, was a director, International Centre of Excellence, Rural Finance & Entrepreneurship (ICERFE), Lancaster University, since May 2016.

However, four months after their nominations, none of the appointees has been confirmed by the Senate, making it impossible for the MPC to form the mandatory quorum needed to hold the meeting.

Although some observers expressed fears about a possible negative impact of the development on monetary policy and the economy, CBN governor, Godwin Emefiele, said on Sunday there was no cause to worry.

"Economic fundamentals remain sound. Key indicators in the economy continue to move in the right direction, with modest recovery in oil prices and a boost in the domestic production activities," Mr. Emefiele said.

Other positive indicators he identified include continued decline in inflation rate from 15.87 to 15.37 per cent in January; accretion of foreign exchange reserves from about $23 billion in October 2016 to $40.78 billion as at January 18, 2018.

Besides, the CBN Governor said investors' confidence continues to soar with the recent introduction of Investors' and Exporters' (I&E) window, which generated over $13 billion within just nine months.

"The positive economic outlook and the foreign exchange inflows have also impacted positively on the capital market which boosted the market capitalization by 22.3 per cent from N13.21 trillion on November 30, 2017 to N16.15 trillion as at January 19, 2018," he said.

Regardless, some economic experts have expressed concern over the development, saying it would create uncertainty among investors.

"The MPC is the engine room for monetary policy in the economy. If they cannot meet to deliberate on the economy and relevant issues, it will increase uncertainty in the system, considering that CBN's key mandate is price stability," the Director General of the West African Institute for Financial & Economic Management, WAIFEM, Akpan Ekpo, a professor said.

But, others have said the inability of the committee to hold its meeting for the first time in several years would not have any significant impact on the economy going by the indices in previous years.

"There won't be much impact on the economy," associate professor and head of Department, Banking & Finance, Nasarawa State University, Keffi, said.

"Following the trend in previous years, the financial markets are not expecting any change in the policy parameters in January, even if MPC meets."

At the end of the meeting of the committee on November 21, 2017, members resolved to retain all the policy fundamentals unchanged.

The monetary policy rate, MPR, which is the ruling lending rate in the economy was left at 14 per cent; cash reserve ration, CRR, at 22.5 per cent and liquidity ratio at 30 per cent.

The Asymmetric corridor was kept at +200 and -500 basis points around the MPR.

The CBN has already indicated that it would keep "key monetary variables as decided by the last MPC meeting in the absence of the meeting holding."

Besides, Mr. Uwaleke said, the CBN Act 2007 did not say the MPC cannot meet in February, if the January meeting fails to hold. However, it is not clear if the Senate would consider the MPC nominees if the presidency continues to retain Mr. Magu as EFCC chairman.

Although the law requires the committee to meet for six times every financial year, it also gives allowance for unforeseen circumstances beyond the control of the CBN, which may not allow meeting to hold for a maximum of two of the schedules.

For Chief Executive Officer of Economic Associates, Ayo Teriba, any impact on the economy of not holding the meeting would depend on how long postponement would take.

"Given the fragility of the foreign exchange market, until the rates converge, easing will rock the boat. Further increase in reserves will bring convergence. It is only at that point they should ease," he said.

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