22 January 2018

Nigeria: Central Bank Holds Rates, Considers Emergency MPC Meeting in February

abuja and Lagos — In the absence of a meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), the Bank announced yesterday that it shall continue to retain the key monetary policy variables as decided by the MPC at its last meeting in November.

The two-day MPC meeting which was slated to commence today will not hold due to the inability of the committee to form a quorum.

However, in order to meet with the statutory number of meetings required from the committee in a year, the central bank is considering convening an emergency MPC meeting in February.

A senior central bank official disclosed this to THISDAY yesterday.

Section 13 (1) of the CBN Act 2007, stipulates that: "Meetings of the Board shall take place as often as may be required, but not less than six times in every financial year of the Bank."

But the CBN official expressed optimism that after the proposed emergency meeting next month, the lawmakers would most likely have confirmed the MPC nominees for a proper meeting to hold in March and will reaffirm the decisions of the emergency meeting in February.

The source explained: "Right now, the plan is to hold an emergency MPC meeting in February because the CBN Act states that the MPC meeting must hold six times in a year.

"So, they (MPC members) would most likely hold an emergency meeting in February and still hold a proper MPC meeting in March where the decision of the emergency meeting will be reaffirmed.

"Hopefully, before the March meeting, the Senate would have confirmed the nominees and there would be a proper meeting then."

THISDAY last November had exclusively reported that eight positions on the 12-member committee were vacant, making it impossible for the committee to form a quorum.

THISDAY had also reported about a fortnight ago that the Senate was not budging on its resolve not to consider the MPC nominees.

The lawmakers had maintained they would not confirm any nominee by the executive until the impasse regarding the nomination and non-confirmation of the acting chairman of the Economic and Financial Crimes Commission Crimes Commission (EFCC), Mr. Ibrahim Magu, was resolved.

The lawmaker also said the Senate had resolved to seek legal interpretation of a comment made by Vice-President Yemi Osinbajo that the position of the EFCC chairman does not require the confirmation of the Senate, as it was not specified in the constitution.

As a result of Osinbajo's remark, the Senate had resolved to suspend the confirmation process for all nominees of the president not specifically mentioned in the 1999 Constitution, but are provided for in the establishment Acts of several agencies of the federal government such as the CBN, FIRS, NCC, and others.

However, commenting on his assessment of the likely outcome of the January MPC meeting, if it had taken place, the CBN official explained that the committee would probable have left the interest rate and other monetary policy instruments unchanged.

He cited the delayed passage of the 2018 Appropriation Bill as well as the marginal drop in inflation as factors that would have compelled the committee to hold the interest rate.

He also pointed out that typically in January the MPC prefers to adopt a "wait and see" approach.

For the 11th consecutive month, the Consumer Price Index (CPI), which measures inflation, ended 2017 at 15.37 per cent (year-on-year) in the month of December. This was 0.53 percentage points lower than the 15.90 per cent recorded in November - the 11th consecutive slowdown in the inflation rate since January 2017.

"The situation has not really changed. Inflation only moved down marginally by a few percentage points. So, nothing has changed significantly.

"So, even if they held the meeting, the rates would have been retained," the CBN source added.

Confirming the postponement of the MPC meeting, the CBN governor, Mr. Godwin Emefiele, in a statement yesterday, said that the postponement was due to the inability of the MPC to form a quorum.

He however said that the benchmark monetary policy rate (MPR) will be retained at 14 per cent, the cash reserve requirement at 22.5 per cent, liquidity ratio will remain at 30 per cent, while the asymmetric corridor will be retained at +200 and -500 basis point around the MPR, as decided at the November meeting of the MPC.

He stressed that the central bank would remain proactive and vigilant in ensuring that macroeconomic stability was maintained.

Emefiele pointed out that despite the postponement of the MPC, key economic indicators have continued to move in the right direction.

He noted that with the modest recovery in oil prices and boost in domestic production, the country exited recession in 2017, while inflation has continued its decline, down to 15.37 per cent as of December 2017.

Emefiele added: "Our foreign exchange reserves have grown from about $23 billion in October 2016 to $40.78 billion at the close of business on January 18, 2018.

"Reflecting strong investor confidence in Nigeria, we have recorded $13 billion since our introduction of the Investors' and Exporters' window about nine months ago. These inflows have boosted foreign exchange supply and helped stabilise the exchange rate.

"We have also seen market capitalisation of our stock exchange improve by 22.3 per cent, from N13.21 trillion on November 30, 2017, to about N16.15 trillion as of January 19, 2018, while the All-Share Index rose by 18.8 per cent from 37,944.60 to 45,092.83 over the same period.

"The management of the CBN is determined to sustain these gains and will continue our vigilance and proactivity to ensure macroeconomic stability through 2018."

Emefiele added that a revised schedule of the meetings for the MPC would be communicated as soon as the Bank is able to meet the statutory requirement of membership and quorum.

Reacting to the postponement of the MPC meeting, financial market analysts, however, warned the executive and legislature not to impede the CBN from carrying out its mandate of ensuring price stability, saying that the Bank should not be obstructed by a political tussle between both arms of government.

In an e-mail response to enquiries by THISDAY at the weekend, a senior economist at London-based Exotix Capital, Christopher Dielmann, expressed disappointment over the delayed confirmation of the MPC nominees.

Dielmann said: "It is never good to see the process of appointment of MPC members to be overly-politicised. Given the independent nature of the CBN, we would hope to see them focusing on their mandate of monetary and price stability as well as reserve and foreign exchange management."

Also, the Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, expressed concern over the development.

According to Ekpo, it would create uncertainty among investors.

He said: "If the MPC does not meet it would send the wrong signal to international investors because it means that there is still uncertainty in the system.

"The way it is now, we are in limbo and if MPC does not meet, it means that there won't be decisive actions on monetary policies. The MPC is the engine room for monetary policies and so if they cannot meet to deliberate on the economy and relevant issues, you increase uncertainty in the system.

"The central bank's mandate is price stability and it is very crucial in any economy. We have always argued that such delays would always cause problems for us.

"So, my advice is that they should stop this delay because it has adverse effects on the economy."

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