MPC attendance, decisions, voting pattern and expectations for 2015 (2)

The two external members appointed by the CBN governor, Doyin Salami and John Oshilaja, voted in similar pattern with the internal members. Conversely, however, the remaining three external members appointed by the president voted differently on some occasions. Abdul-Ganiyu Garba voted for interest rate increase four times and to maintain it three times. Shehu Yahaya voted for rate increase five times and to maintain it two times, while Chibuike Uche was more dovish, voting to increase rate only three times and to maintain it four times.

In 2012, the committee was more unanimous when compared to the previous year. With the exception of Abdul-Ganiyu Garba who voted for rate cut on one occasion, and to maintain it five times, all other members voted six times to maintain the rate at 12 percent. As was the case in 2012, all the members were unanimous in the six meetings held in 2013, voting not to increase the MPR. However, there was a strong minority voice with respect to the need for interest rate slash. From the five detailed communiqués released for the year (the minutes for the month of November 2013 did not contain members’ statements), Abdul-Ganiyu Garba voted three times for rate cut while Chibuike Uche voted five times for rate cut. Also, Shehu Yahaya voted two times for rate cut while one of the internal members, Danladi Kifasi, voted one time for rate cut. The case for interest rate cut was less compelling in 2014 as none of the members voted for a slash. The arguments were, however, centred on whether to maintain or increase the policy rate. The meeting in March 2014 was very close as five of the nine members present voted to maintain the MPR while four voted for increase. In particular, while four out of the five internal members voted for rate increase, one of them (a board member) aligned his vote with the external members, voting to maintain the policy rate. Overall, two external members, Abdul-Ganiyu Garba and Uche Chibuike, voted all six times to maintain the rate in 2014.

In general, the observed voting pattern by the internal and external members is not surprising. While the internal members and one of the external members appointed by the CBN governor have similar voting pattern, the external members appointed by the president voted differently in some cases. This observed pattern is similar to the findings of Niklas Potrafke (2012), who showed that the best predictor of minority voting is through the mode of appointment to the committee.

What then is the implication of the voting pattern of the MPC between 2011 and 2014 as well as the expectation for 2015? The implication is that the CBN attaches more weight to price and exchange rate stability and the voting pattern will continue to favour this trend given the numerical strength of the internal members as well as having at least one of the external members voting alike. Price and exchange rate stability are necessary ingredients for both public and private sector planning because of reduced volatilities. In addition, poorer people are protected more from higher inflation because of their cash holdings and dependence on labour income. Therefore, as long as there are threats to price stability, the voting pattern of the MPC will not be favourable to expansionary mode.

Threats to price and exchange rate stability can be minimized if constraints impeding productive economic activities are tackled. While we do not have control over exogenous factors like oil price decline and effects of some policies by developed economies (for example, the not-too-long tapering policy in the US), it is important that domestic challenges are addressed. Thus, irrespective of the outcome of the general elections, the government in power must continue to improve on provision of critical infrastructure while supportive fiscal policies are targeted at growth-enhancing sectors in order to boost inclusive economic growth, generate jobs and reduce unemployment. This implies that the real winners of the 2015 elections should be the Nigerian people through the dividends of democracy.

But what happens if oil pipelines vandalism and oil theft persist? What is the implication of continued sabotage of PHCN facilities? What happens if banks keep round-tripping in the foreign exchange market? What about the employer who does not remit deductions made from employees’ salaries to the pensions account? Why should a lackadaisical employee be expected to be paid at the end of the month? Why should the trader and market woman crave abnormal profit by creating artificial scarcity? The implication of all of these is inefficiency, high cost of doing business and economic slack.

For Nigeria to achieve sustainable growth and development, adherence to law must be our watchword. According to Governor Babatunde Fashola of Lagos State, if citizens and companies are law-abiding, government will spend less trying to enforce the law and the saved monies will be put into productive use. For citizens and companies to be law-abiding, governments at all levels must take the lead through transparency and accountability. As for the apex bank, its decisions over time reflect provision of section 2(a) of the CBN Act 2007 which stipulate that the principal objective shall be to ensure monetary and price stability.

MAXWELL EKOR