THE Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) sat last week to review developments in the global and domestic economic environments since its last meeting of 18th and 19th May, 2015 to address emerging challenges in the economic landscape.
Amongst these was the battering pressure on the Naira exchange rate against the world’s major currencies which had forced the local currency to depreciate to an all-time low of N243/ USD1.0 as at the time of the MPC meeting.
Also key was the GDP growth rate which slowed to 3.8 per cent in the first quarter of 2015 as against 6.2 per cent in the corresponding period of last year. This was a fall-out of weaker consumer spending power, tighter monetary policy of the CBN/MPC, and the political uncertainty that slowed down consumption spending in the first quarter of this year.
Inflation also accelerated for the seventh consecutive month to 9.2 per cent in June 2015. This was as a result of the pressure from petroleum products scarcity and weaker Naira/Dollar exchange rate.
The MPC is the highest public/private sector policy making body in Nigeria’s economy, more so now that the country is without a functional federal economy ministry/team at cabinet level. Hence the MPC decisions on these matters which are crucial to the stability of the economy and well-being of the citizens of this country cannot be over-emphasised.
The decision of the MPC to maintain status quo in spite of growing inflationary pressures and increasing volatility in the parallel segment of the foreign exchange market underscores the fact that the apex bank may have gotten to the limits of monetary policy options it can deploy. It means they are now forced to wait on President Muhammadu Buhari to settle down and unfold his economic vision and direction.
The implication is that the CBN may remain incapacitated in this way until there are clear policy directions from the fiscal policy side (the federal government) particularly on issues bordering on fuel subsidy and general economic administration.
It is not likely there will be any significant change in the course of the financial markets and the economy in general as all indices in the economic challenges highlighted above will continue to head in the negative direction.
We therefore advise that CBN should use its independent policy window to address these urgent challenges and not to wait for the next MPC which will come belatedly in the fourth quarter. The Federal Government must hasten to appoint its economic managers in order to give direction and a sense of mission to the economy. The delay and uncertainty are hurting the economy, and this must be arrested immediately.