Nigerian central bank acts without MPC after quorum failure

Nigeria’s central bank has been unable to hold its scheduled monetary policy committee meeting because it lacked enough members to form a quorum, it announced today (January 22).  

The Central Bank of Nigeria instead held its policy rate, and all other monetary policy instruments, at their previous levels, says governor Godwin Emefiele in an official statement.

The monetary policy committee (MPC) lacks sufficient members, as Nigeria’s parliament has failed to approve candidates nominated by the country’s president. Five of the 12 members of the MPC are awaiting replacements. Emefiele says a “revised schedule of meetings for the MPC will be communicated as soon as the bank is able to meet the statutory requirements of membership and quorum”.

A locally based reporter for Reuters wrote that Nigeria’s parliament was refusing to confirm president Muhammadu Buhari’s nominations to senior positions. This followed a dispute when president Buhari appointed a senior civil servant to an important role despite the objections of the senate, the upper house of Nigeria’s parliament, Reuters reported.

Emefiele says the central bank will keep the monetary policy rate at 14%, while the “asymmetric corridor” around the rate will also stay unchanged, at plus 200 basis points and minus 500bp. In addition, the cash reserve requirement and the liquidity ratio for Nigerian banks will remain at 22.5% and 30.0% respectively.

The central bank has now kept policy essentially unchanged for 18 months. The MPC last altered a policy instrument in July 2016, when it raised the monetary policy rate by 200 basis points to 14%.

Despite the MPC’s inability to meet, the central bank was “pleased that key economic indicators continue to move in the right direction”, Emefiele says in his statement. Nigeria’s recession ended in 2017, while inflation continued to fall. This was due to a “modest recovery in oil prices and boost in domestic production”.

Nigeria’s official year-on-year inflation rate was 15.37% in December 2017, the lowest rate in the preceding 12 months. It was a slight fall on the previous month’s rate of 15.9%, but came at the end of a year in which inflation had fallen every month from its January 2017 rate of 18.72%. Nigerian inflation rose sharply in 2016, following a collapse in world oil prices.

Nigeria had also recorded capital inflows of “almost $13 billion” since the central bank had introduced the “investors’ and exporters’ window” in April 2017, says Emefiele. This reflects “strong investor confidence” in Nigeria. The central bank’s foreign exchange reserves had grown to $40.78 billion on January 18, 2018, from a figure of $23 billion in October 2016, the governor says.

Governor Emefiele has repeatedly criticised what he has called Nigeria’s excessive reliance on oil for both tax revenues and export earnings. He has called for the government and business community to increase investment in alternative sources of income.

He has provided large amounts of financing to sectors and infrastructure projects seen as “strategic”. The central bank’s assistance has included loans to the agriculture sector and finance for oil processing and sugar refining plants.