Inflation has taken an unexpected upturn and third-quarter GDP expanded at the fastest rate in four quarters since the last monetary policy meeting but there are expectations for members to stick with their previous voting pattern of retaining key rates ahead of an official announcement later this afternoon.
At the last meeting in September, every member voted for a hold in benchmark interest rate at 13.5 percent; Cash Reserve Ratio (CRR) at 22.5 percent, liquidity ratio at 30.0 percent and the asymmetric corridor at +200/–500 basis points.
In their words, below are the reasons they gave for their decisions.
AHMAD, AISHAH N.
My decision to hold, like all other members, reflects the importance of balancing the price and monetary stability remit of the Committee with the pursuit of stronger growth. Rising global headwinds, policy uncertainty and persistent domestic vulnerabilities were other key considerations for my decision.
ASOGWA, ROBERT CHIKWENDU
There is strong argument that the two successive interest rate cuts in the US and the easing stance in other major economies provides a welcome breathing space for Nigeria and indeed other developing and emerging economies to reduce their own policy interest rates as well. The uncertainties about the future stance of monetary policy may however require a wait and see approach on MPC decisions about the key policy rates for now. This seems appropriate especially given that the current CBN easing stimulus to key sectors look somewhat effective. Besides, the emerging signs 20 of willingness to resolve the US-China trade conflict might lead a possible reversal of the yield curve sooner than anticipated. The 3rd quarter domestic output figures are not yet out but there are huge expectations of mild recovery as compared to the second quarter figures. As such, other supportive macro policies will be key to sustaining output growth in the near future. My opinion therefore, is that policy parameters should remain largely unchanged at this September 2019 MPC meeting.
BALAMI, DAHIRU HASSAN
Taking into consideration the Q2 growth rate at 1.9%, improvement in financial sector indicators and inflation at 11.02% in August 2019, I vote to hold because tightening will further slowdown growth, while loosening will be inflationary.
NNANNA, OKWU JOSEPH
Growth remains muted amidst the bumpy road to economic recovery while the longstanding problems of high unemployment and infrastructure deficit persist.
Inflation is decelerating but remained outside the target corridor of 6-9%.
Financial conditions have remained tepid, and credit to the private sector remains largely below target.
External buffers (reserves) are more than adequate to finance Nigeria’s import needs in the medium-to-long term but fiscal buffers remain inadequate to finance capital expenditure.
Overall, the macroeconomy is at a crossroad and the economy may witness a twin deficit.
Monetary policy has been overburdened and its limitations have become evident, as seen in the neutrality of the Monetary Policy rate. The critical pressure points that policy should address in the near term include; job creation through the implementation of a robust public works programme, encompassing infrastructure improvement and strengthening of key institutions.
In view of these developments, I vote to hold on all the policy metrics constant.
OBADAN, MIKE IDIAH
The observed downward trend in inflation would have provided headroom to loosen the monetary policy stance in view of the need to stimulate growth and generate employment. But the need to sustain a robust external reserves position, take advantage of the reversal of monetary policy normalisation by the major advanced countries, and hedge against weakening oil prices suggest caution in loosening monetary policy. At the same time, any tightening of monetary policy beyond the current stance will be at variance with the much-desired high inclusive economic growth that is employment-generating and poverty-reducing. Therefore, I will support the option of holding policy parameters at the extant levels.
SANUSI, ALIYU RAFINDADI
My decision to vote for a hold on all the policy parameters was informed by the increased uncertainties occasioned by domestic and global economic developments.
In considering the policy options, I was convinced that, while loosening the current monetary policy stance may complement the various heterodox policy interventions in raising credit, it could also raise inflationary pressure and jeopardize the downward trend in inflation. It may also raise pressure on the foreign exchange, the stability of which is important for the current disinflationary process. Further tightening would further depress aggregate demand and hurt the fragile output recovery, thereby exacerbating the high unemployment situation. As the data shows, I am convinced that the several heterodox policy actions taken by the Bank are still working themselves out. Therefore, I voted for a hold to appraise their effects.
SHONUBI, FOLASHODUN A.
Overall, while there is no clear and urgent need for a tight monetary policy stance at this time, especially as inflation remain on downward trend, it is pertinent that we must continue to promote growth and enhance employment generation. Moreover, the strengthening dovish wave across central banks and relatively competitive domestic yield provides some respite. I am therefore persuaded that we must allow the present policy environment to mature for the full benefit to be realised.
GODWIN EMEFIELE, CBN Governor and MPC chairman
In my consideration, I note that the prevailing macroeconomic stability and short-term prospects are threatened by global and domestic headwinds. Though the trajectory of the economy remained generally positive, it is fragile and requires cautiousness.
Regardless of the desire to spur growth, there remains the need to ensure that inflation and inflation expectations are not undermined. Though inflation rate is declining, it remains outside the tolerant range of the CBN.
Easing at this time may resolve one problem while aggravating a bigger one. Besides, given the tangential impact of interest rate on portfolio flow, this may inadvertently destabilise the FX market.
Given the need to avoid monetary policy actions that will worsen
FDI outflows, destabilise the fragile recovery, and infringe on disinflation, I am inclined towards a more practical and well-balanced decision with considerations for output, unemployment and poverty. Accordingly, altering the current levels of monetary policy instruments could stir indeterminate outcomes. Since the key mandate of the CBN remains price, monetary and exchange rate stability, I am committed to driving inflation to single-digit levels and building sufficient reserves buffers to defend the naira.
Today, my immediate predisposition is that the current level of real policy rate is appropriate to balance the objectives of exchange rate stability, price stability and output stabilisation without introducing disruptive policy shocks. Therefore, I vote to retain key policy rates.
