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HomeExecutive BriefUncertainty of MPC meeting leaves economic agents in limbo

Uncertainty of MPC meeting leaves economic agents in limbo

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By Oludare Mayowa

The Central Bank of Nigeria has not held its regular Monetary Policy Committee (MPC) meeting since the inception of President Bola Tinubu’s administration on May 29, 2023.

This was part of the consequences of the immediate steps taken by President Tinubu to reform the economy and ensure a major departure from his predecessor’s policy and modus operandi in economic management.

One of the first key steps taken by the president was the suspension of the erstwhile governor of the CBN, Godwin Emefiele, who has since been locked up in the custody of both the Department of State Security (DSS) and later with the Economic and Financial Crime Commission (EFCC).

The removal of Emefiele was followed by a clean sweep of the top hierarchy of the regulatory bank and their replacement with an entirely new set of leadership.

With the appointment of Oluyemi Cardoso as the governor of the CBN a few weeks before the slated July 24 meeting of the MPC, it was obvious that the regulatory bank would have to cancel the date to enable the new leadership to settle down.

The last time the MPC met under the previous administration was in May, and since then, the regulatory bank has missed two meetings: in July and September, and it’s not clear if the November 10 meeting will be held.

While it’s understandable that the MPC meeting has taken a backseat in the top priority of the regulatory bank due to the change in leadership and the clear loads of responsibility trusted on the news leadership to clean up the aegis stable, the need for the meeting on the country monetarists remains important.

One of the key mandates of the regulatory body is to maintain price stability in the economy through the deployment of monetary tools, which include interest rates and clear-cut management of the country’s forex reserve and financial system.

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Since the establishment of the MPC by a former governor of the bank, Charles Soludo, the monetarists have continued to play significant roles in providing direction for economic planning and ensuring the sharpening of monetary tools to drive growth and stability in the economy.

Data plays a central role in economic planning by various agents, including businesses, investors, consumers, and government entities, and the meeting of the MPC has over the years acted as a veritable source of monetary data and clarity of policy direction.

This data serves as a critical tool for making informed financial and economic decisions, managing risks, and aligning strategies with the prevailing monetary policy environment.

It fosters transparency, consistency, and predictability in Nigeria’s economic landscape.

For instance, the key benchmark rate has consistently become the major anchor for all investments in the economy, such as the credit activities of banks, investments in government debt instruments, and equity markets by both local and foreign investors.

Also, the data released by the MPC provides crucial information on key monetary policy indicators.

These include interest rates, inflation forecasts, and other monetary policy decisions. Economic agents, such as businesses and investors, rely on this data to anticipate changes in the monetary policy environment, which can impact borrowing costs and overall economic conditions.

MPC data helps economic agents anticipate changes in interest rates, such as the Monetary Policy Rate (MPR).

This information is vital for financial institutions and businesses when making decisions about lending, borrowing, or investing. Knowing the direction of interest rates allows for informed financial planning.

When the nation’s monetarists meet, the robbing of minds and analysis of the key drivers of the economy, such as the inflation rate, exchange rate, and interest rate, helps businesses and other policy markets make decisions regarding pricing, savings, and investment choices.

There are so many opportunity losses in the absence of the intervention of the monetarists in policy directions and providing directions for businesses and other economic agents.

The consistency of MPC decisions has reflected the CBN’s commitment to maintaining a stable economic environment. Economic agents seek reliable and consistent monetary policy, which provides a foundation for long-term planning and investment.

It’s obvious that the new CBN Governor, Cardoso, is gradually restoring confidence in the operations of the regulatory bank since he was cleared by the National Assembly and settled down to perform his function.

However, it will take time for Nigerians to trust the regulatory bank again, considering the damage done to the bank’s image by the previous administrator of the regulatory bank led by its erstwhile governor, Emefiele.

One of the quick wins for Cardoso is to convene the meeting of the monetarists immediately to provide the country with relevant information on the state of the economy and give directions for other policy implementations.

The immediate implication of an MPC meeting at this period is that both local and foreign investors would have clarity on the policy direction of the CBN while also gaining insight into key drivers of such policy.

Often, the monetarists equally have their ways of inputting into the policy enunciation by the regulatory bank, which equally provides additional consideration for the CBN leadership in arriving at major monetary policy.

Lastly, a meeting of the monetarists would provide the new CBN with a platform to reassure investors and the entire economy of the determination of the regulatory bank to implement a more transparent monetary policy and a clear departure from the unorthodox regime that has created multiple challenges for the economy.

(Edited by Oludare Mayowa; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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