As the Central Bank of Nigeria (CBN) prepares for its first Monetary Policy Committee (MPC) meeting on February 26 and 27 under the leadership of its new Governor Yemi Cardoso, he shed light on the reasons behind the postponements, citing the need for thorough groundwork to ensure the MPC’s effectiveness.
Cardoso revealed in an interview about the MPC with Arise News on Monday that “transmission was questionable”, referring to the impact of previous rate hikes on inflation figures.
The CBN’s rate hike spree since May 2022, moving from 13.0% to 18.75% during the last MPC meeting in July, has reportedly stirred debates on its efficacy, especially in light of the persistent rise in inflation rates, moving from 17.71% to 28.92% in December, the highest in 27 years.
He explained: “I didn’t want a situation where we start back on that same trajectory. It is for that same reason that we took our time to ensure that we put ourselves in a position where the MPC will be impactful and where it will complement the activities of the fiscal side.”
The MPC has twice postponed its 293rd meeting, initially set for September 25 and 26, since the nomination of Cardoso in the same month. The meeting, intended to address various issues, including the decision on interest rates, was rescheduled for the second time on November 20. While acting as CBN governor from June to September, Folashodun Shonubi oversaw two interest rate increases at the bank.
With the enactment of the new CBN Act (2007) by the National Assembly, the reconstituted MPC “meets bi-monthly, except in the event of an emergency”. The two-day meeting only occurred in January, March, May, and July 24 and 25 last year.
A tentative calendar of MPC meetings for this year posted on the CBN’s X (formerly Twitter) account indicates that the meetings have been scheduled for February, March, May, July, September, and November.
Emphasizing the importance of aligning monetary policy with fiscal measures, Cardoso underscored the goal of stabilizing prices and controlling inflation. He affirmed that the focus of the CBN under him was to stabilize prices and control inflation.
Cardoso pointed to International Monetary Fund (IMF) forecasts indicating a significant decrease in inflation in the coming year. “That is as a result of the tightening that we are doing,” he explained, hinting at a shift in strategy to tackle the nation’s economic challenges.
Amidst the anticipation surrounding the upcoming meeting, investors like Moses Adeolubodun are closely monitoring developments.
Speaking with FORBES AFRICA, Adeolubodun considers these delays as “a reflection of the CBN’s commitment to meticulous preparation”.
He adds: “The postponements, while unexpected, highlight the importance of thorough groundwork. In an increasingly complex economic landscape, it’s crucial for the MPC to be armed with comprehensive insights and strategies.”
He explains the need for the MPC to be fully equipped to navigate evolving economic challenges, ensuring its decisions resonate effectively in the market. “I think that Cardoso is prioritizing the MPC’s efficacy. This approach instills confidence among investors and reinforces the CBN’s commitment to prudent monetary policies.”
Nigeria, like many emerging economies, faces a myriad of economic variables, from inflationary pressures to currency fluctuations. Adeolubodun acknowledges the delicate balancing act required of the MPC in such circumstances. “The MPC’s decisions have far-reaching implications. They influence investor sentiment, shape monetary conditions, and ultimately impact economic growth.”
As the revised MPC meeting approaches, Adeolubodun remains cautiously optimistic. “While delays may raise eyebrows, they also signify a dedication to ensuring informed decision-making. Investors will be eagerly awaiting the outcomes, eager for insights into the CBN’s stance on key monetary issues.”