MPC: CBN Consolidating on Economy

The Central Bank of Nigeria (CBN) has been top best on using the Monetary policies to drive economic growth, especially driving down the inflationary trend.

The CBN is set to hold yet another Monetary Policy Meeting for September 2021 and topmost on its agenda would be inflation, forex crises, intervention programmes, and more.

The Monetary Policy Committee (MPC) last met on the 26th and 27th July, 2021, and took far-reaching decisions that are shaping the economy.

Some of the considerations would still be relevant at this month’s MPC meeting. Thus, we will attempt to bring to the fore key considerations and decisions of the July 2021 MPC.

The Committee’s Key Considerations

The Committee noted the gradual recovery in output growth following the positive growth in the first quarter and improving PMI in subsequent months, expressing confidence that the second-quarter output result would show further improvement. The MPC had assessed the options available to it in the short to medium terms, analysing the downside risks to growth and upside risks to inflation.

While the economy has been gradually reopening, Committee members at the meeting noted that the Pandemic was far from over and therefore continued to hinder the recovery. They thus urged the Presidential Task Force on COVID-19 to intensify efforts towards procurement of more vaccines to ensure that herd immunity is achieved in Nigeria.

The MPC was concerned about the broad level of insecurity across the country, noting its impact on business confidence and overall economic activities. It noted the persisting insecurity in key commodity-producing areas and urged the Federal Government to intensify security surveillance in farming communities to ensure uninterrupted farming activities. Committee members expressed optimism about the likely moderating impact of the forthcoming harvests on food prices, as this would contribute to the ongoing broad reduction in headline inflation.

The CBN said it will continue to release maize from its strategic maize reserve directly to feed-millers as part of its deliberate response to address rising food prices and moderate the price of maize across the country.

Members further noted the contribution of poor infrastructure to rising domestic price levels, re-iterating their call to the Federal Government to prioritise investment in public infrastructure such as improved transportation networks, power supply and telecommunication facilities. Funding for such projects, the Committee noted, could be sourced through Public-Private Partnerships, as well as the issuance of Diaspora bonds. It emphasised the complementary role these bonds would play to boost foreign exchange supply, improving accretion to reserves and easing the exchange rate pressure.

Notwithstanding the moderate decline in market indices, the Committee noted that the equities market remained in a good shape, indicating sustained investor confidence in the Nigerian economy.

The MPC applauded the continued resilience of the banking system in the face of severe shocks to both the domestic and global economies. Members noted Management’s effort in maintaining a reasonably low level of non-performing loans ratio, even though aggregate credit moderated slightly.

The Committee encouraged Nigerian banks to extend more credit to consumers and firms to enhance consumption and production activities necessary to strengthen the recovery.

Committee members noted the persistent reduction in remittance of oil revenue to the Consolidated Revenue Fund, stemming largely from rising levels of cost under-recovery and other obligations, particularly to Joint Venture Contracts. The Committee thus urged the Government to continue to explore additional sources of non-oil revenue, as this would reduce the over-dependence on a single revenue source.

The Committee also noted the increased contribution of the non-oil sector to the Government’s revenue in recent times which reflected the gradual diversification of the economy to reduce reliance on crude oil export proceeds, and called for increased support for the non-oil sector in the country.

Overall, Members were confident that the Bank was taking the right steps toward the restoration of macroeconomic stability, while noting the downside risks to growth and the upside risks to price developments.

At this meeting, the MPC was delighted that inflation had begun to trend downwards, while output growth had remained positive. Committee, however, was of the opinion that there was a need to continue to put in place policy measures that will further and faster drive down inflation, and at the same time accelerate output growth to levels above population growth rate. Whereas, the arsenal at its disposal had almost become fully exhausted, the MPC believes that there is the need to continue to use those tools that had been adopted so far, even in a more aggressive manner. MPC, therefore, encourage the Bank to continue using its existing administrative methods to rein-in inflation by the use of its discretionary CRR policy to mop-up liquidity from the banking system as the need arises.

The Committee also encouraged the Bank to continue the use of its intervention mechanism to deploy funds to output-stimulating and employment-generating sectors of the economy, such as the Targeted Credit Facility, AGSMEIS, Agriculture, and Manufacturing.

In the Committee’s view, the current situation, neither gives room for tightening, as this will hurt output growth, nor loosening, as this will exacerbate inflationary pressures.

On tightening, MPC feels that whereas this will limit excess liquidity available to attack the foreign exchange market, it nevertheless feels that tightening will reduce money supply and thus, inhibit the ability of Deposit Money Banks (DMBs) to create credit that is needed to stimulate manufacturing output which could also help to moderate prices.

On loosening, whereas MPC feels this should transmit into lower market interest rates which could improve the ability of obligors to repay their loans and reduce NPLs, it nevertheless feels that loosening would not only exacerbate inflationary pressure, but this would increase negative real rate of return and discourage investments in the domestic economy.

Based on the above considerations, the MPC made the decision to hold all policy parameters constant, believing that a hold stance will enable the continued permeation of current policy measures in supporting the recorded growth recovery and macro-economic stability.

Emefiele, Zulum, Adesina bag Leadership’s person of the year

The trio of the Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele; the President of the African Development bank (AfDB), Dr. Akinwunmi Adesina, and the Governor of Borno State, Professor Babagana Umara Zulum, have emerged joint Leadership Persons of the Year 2020.

The award was conferred on them at the 2020 Leadership Conference and Awards held in Abuja.

In a citation, the organisers of the Award said Emefiele was awarded the Leadership Person of Year 2020 “For a lifestyle of service that held the economy and the nation together in the face of a monumental global crisis; for his consequential interventions that turn crises into moments of economic opportunity, and for positively redefining the role of the Central Bank”.

The award was presented to Emefiele by the Vice President Yemi Osinbajo to Mr. Godwin Emefiele, who was represented at the event by his Deputy Governor in charge of Economic Policy, Dr. Kingsley Obiora.

Other recipients on the night were Governors Mai Mala Buni (Yobe) and Godwin Obaseki (Edo), who were awarded Politicians of the Year 2020; and the trio of Governors Ezenwo Nyesom Wike (Rivers), Babajide Sanwo-Olu (Lagos) and Abdulrahman AbdulRazaq (Kwara), who were named Governors of the Year 2020.

The Public Person of the Year 2020 was awarded to the Secretary to the Government of the Federation (SGF), Mr. Boss Mustapha, for discharging his duties meticulously as Chairman of the Presidential Task Force (PTF) on Covid-19; while the Mr. Herbert Wigwe, the Managing Director of Access Bank, was awarded the Banker of the Year 2020 and the co-founder of Waltersmith, Abdulrazak Kutepa, was named Business Person of the Year 2020.

Also awarded were the late Flag Officer Tolulope Sarah Arotile, who received a posthumous award as Outstanding Person of the Year 2020; Osita Izunaso and Badamasi Burji as Social Impact Persons of the Year; Shola Akinlade, the CEO and co-founder of Paystack, as CEO of the Year 2020; Ndubuisi Emmanuel Egbo, Sports Person of the Year 2020; and Folarin Falana, also known as Falz, as Artiste of the Year 2020.

Making up the list of awardees were Taj Bank (Bank of the Year 2020); Indomie (Brand of the Year 2020); the Independent National Electoral Commission (INEC), and the Presidential Task Force on COVID-19 (Government Agency of the Year (2020); Jiji Nigeria (E-Commerce Company of the Year 2020); HIS Towers (ICT/Telecom Company of the Year 2020); 54gene (Company of the Year 2020); and Zoom Video Communications (Product of the Year 2020).