Experts speak on CBN’s failure to convene MPC meeting

On Monday, the Central Bank of Nigeria (CBN) postponed the crucial Monetary Policy Committee (MPC) meeting scheduled for this month, raising concerns and uncertainties among investors.

The postponement implied that the apex bank has failed to convene for the monetary rates-lending meeting in almost four months, amid naira depreciation against the dollar and soaring inflation.

The newly appointed CBN Governor, Olayemi Cardoso, has yet to hold the MPC meeting since he took over from his predecessor in September.

According to the MPC schedule published on the apex bank’s website, the last time the bank held its MPC meeting was on 25 July, almost four months ago.

Analysts said that investors looked forward to the MPC meeting for signals on how the lender intends to address the nation’s inflationary trend.

Nevertheless, the government, at several fora abroad, continues to woo potential investors to come to invest in the country.

While the CBN’s reluctance to hold its MPC meeting has triggered concerns and uncertainties among investors, the bank has yet to officially address the issue as of press time Tuesday afternoon.

Possible reasons & implications

Reacting to the CBN’s action, Praise Ihansekhien, Head of Research at Meristem Security, said the CBN’s postponement of the Monetary Policy Committee convening for almost five months has far-reaching implications.

“While the MPC has deferred its meetings, inflation rates, the central bank’s foremost concern, continue to surge, reaching 27.33 per cent YoY as of October from 24.08 per cent at the last meeting in July,” she said.

The researcher explained that the CBN has made use of alternative monetary policy tools (2 cumulative OMO auctions) to mop up liquidity in the system.

This, Ms Ihansekhien said, signals a reluctance to raise the Monetary Policy Rate (MPR) higher than it already is at 18.75 per cent.

“However, the decision to hike rates is very unavoidable when the MPC eventually meets,” she noted.

Ms Ihansekhien stated further that investors, particularly foreign investors, like to know what to expect from a country’s policies.

“The absence of MPC meetings and a clear plan makes things uncertain, which is a worry during these tough economic times,” she told PREMIUM TIMES in an interview, adding that when a country elevates its interest rates, creating a favourable interest rate differential, it tends to draw foreign investors, resulting in increased demand for the naira and subsequent capital inflows that strengthen the currency.

“However, the consistent stagnation of interest rates for five months acts as a deterrent for investors considering re-entry into the country, exerting pressure on the existing external sector position,” she said.

She said the postponement of MPC meetings not only raises questions about the CBN’s ability to effectively address macroeconomic challenges but also amplifies uncertainties that impact investors’ sentiment.

On his part, Razaq Fatai, Research and Advisory lead at Vestance, a data-driven intelligence and advisory firm, explained that the CBN’s reluctance to hold the MPC meeting could be that the bank feels its current monetary policy tools are limited in addressing the economic challenges.

This, he said, could lead to hesitation in convening the MPC until more effective measures or strategies are identified.

He reiterated that the absence of clear monetary policy direction can create uncertainty in the business and investment ecosystem in the country.

“A prolonged absence of MPC meetings, coupled with a weakening currency, may reduce the attractiveness of the Nigerian market for foreign investors. Foreign investors typically seek stability and clear policy frameworks before committing capital,” he said.

Similarly, Dairy Hills Limited Chief Executive Officer, Kelvin Emmanuel, noted that the CBN decision to postpone the 293 MPC meeting a second time, which is statutory to provide forward guidance on monetary and credit policy, creates uncertainty in the markets, considering that since the CBN governor took over, inflation has risen for three consecutive months.

He said the legal excuse the apex governor has for the MPC not being formed yet is because of an absence of the board of the CBN and the two members of the board that statutorily constitute the MPC.

He explained that this does not provide a sufficient excuse for the effect of a gap in communication between the MPC and the markets.

“Boards of Companies and Institutional Investors lack forward guidance for inflation, interest and exchange rates and are unable to plan for the 2024 financial year as a result of uncertainty,” Mr Emmanuel said.