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Monetary Policy Decision - No MPC meeting in January, policy levers maintained

No MPC meeting in January, policy levers maintained                                                                 

The Central Bank of Nigeria (CBN) cancelled its January Monetary Policy Committee (MPC) meeting due to its inability to form a quorum for the scheduled meeting. The Central Bank of Nigeria Act (2007) specifies that the quorum is “six members two of whom shall be the Governor and a Deputy Governor or two Deputy Governors” (Second Schedule of 2007 CBN Act), a requirement unmet in the current composition of the MPC (only five members) following the retirement of five members of the committee at the end of 2017. President Buhari submitted five names to the Senate in October 2017, but these nominations remain unapproved as the Senate has effectively suspended the approval of any Executive nominations as long as Ibrahim Magu remains the Acting Chairman of the Economic and Financial Crimes Commission (EFCC).                                                                     

Without the MPC sitting, the CBN was unable to alter any monetary policy levers and thus retained them at the levels agreed at the meeting in November 2017. We highlight that the MPC was widely expected to retain all policy levers (had they sat), a view supported by guidance provided by the CBN Governor during his engagements with the international media.                                                                      

We do not see the cancellation of January’s MPC meeting materially affecting Nigeria’s economy or capital markets in the short-term. But should the issue be prolonged, we foresee a long-term impact on the perception of Nigeria’s central bank independence from political inference and consider this very negative for the development of monetary policy in the country. In addition, the continued absence of a sitting MPC could alter rate expectations for the year, particularly as we enter the H2’18 and draw closer to the 2019 elections.