Saturday, May 18, 2024

Expectations of Monetary Policy Tightening: Prelude to First MPC Meeting Under Nigeria’s New CBN Governor


Experts Anticipate Tighter Monetary Policy as CBN Prepares for First MPC Meeting Under Governor Cardoso

The Central Bank of Nigeria (CBN) is gearing up for its Monetary Policy Committee (MPC) meeting set for Monday and Tuesday. This will mark the first session chaired by the new CBN Governor, Yemi Cardoso. Ahead of this significant meeting, several economic experts are speculating an adjustment in the Monetary Policy Rate (MPR) as a strategic move to curb inflation and stabilize the Naira. The last MPC meeting, which took place in July 2023 under acting governor Folashodun Shonubi’s watch, saw an increase in the MPR by 25 basis points from 18.50 percent to 18.75 percent.

Renowned economist Prof. Ken Ife shared his insights, suggesting a potential tightening in the monetary policy. “We are likely to see rates tightening for a while. The MPR could remain steady or even increase slightly. The CBN is focused on inflation targeting, yet there’s a need for more fiscal support as many economic challenges extend beyond monetary solutions,” he commented. Prof. Ife also highlighted the inefficacy of allocating N500 billion annually for social intervention without investing in the productive sector.

Okechukwu Unegbu, a past president of the Chattered Institute of Bankers of Nigeria (CIBN), predicts a rate hike. Despite anticipating tighter monetary conditions, Unegbu remains skeptical about the immediate impact of such decisions on the economy. He criticized early policy decisions taken by President Bola Tinubu, such as floating the Naira, which he considers a misstep. Unegbu also proposed a bold strategy for Nigeria to price its oil in Naira and consider exiting the Organisation of Petroleum Exporting Countries (OPEC) to establish more control over its economic affairs. Furthermore, he advised against adhering strictly to economic models recommended by the World Bank and the International Monetary Fund (IMF), questioning their benefit to Nigeria’s growth.

Bismarck Rewane, another economics expert and Managing Director of Financial Derivatives, concurred with the prospect of tightening the MPR. “Given the loose monetary conditions, tightening is not just necessary but crucial. I would recommend an adjustment of no less than 200 basis points. This approach counters loose monetary policy effectively, leading to higher interest rates, increased savings, reduced consumption, and eventual stabilisation of the currency,” Rewane explained.

In a key development, the Nigerian Senate has recently ratified the appointment of Cardoso as Chairman and 11 other members of the MPC, following their nomination by President Bola Tinubu. The newly confirmed deputies include Muhammad Abdullahi, Bala Bello, Emem Usoro, and Philip Ikeazor of CBN. Other members include Lamido Yuguda of the Securities and Exchange Commission, Jafiya Lydia Shehu of the Ministry of Finance, with Murtala Sagagi, Aloysius Ordu, Aku Odukemelu, Mustapha Akinwunmi, and Bamidele Amoo completing the list of appointees.

As the financial community anticipates the outcomes of the upcoming MPC meeting, the broader implications of potential policy shifts remain a focal point of discussion among economists and stakeholders alike. With inflation and currency stability at the forefront, the decisions made in the coming days could shape Nigeria’s economic landscape in the months to follow.

Alexandra Bennett
Alexandra Bennett
Alexandra Bennett is a seasoned business journalist with over a decade of experience covering the global economy, finance, and corporate strategies. With a Bachelor's degree in Economics and a Master's in Business Journalism from Columbia University, Alexandra has built a reputation for her insightful analysis and ability to break down complex economic trends into understandable narratives. Prior to joining our team, she worked for major financial publications in New York and London. Alexandra specializes in mergers and acquisitions, market trends, and economic

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