On Friday, September 20, 2019, the CBN governor- Godwin Emefiele addressed the press at the end of the quarterly meeting of the Monetary Policy Committee- MPC- in Abuja and announced some key decisions that would regulate the monetary and credit policies in the Nigerian economy for the next three months at the very minimum.
The Monetary Policy Committee as constituted is made up 11 members including the CBN governor who is the chairman of the body, the four deputy governors of the bank, two members of the CBN Board, three members appointed by the president and another two brought in by the CBN governor himself. 9 of the 11 members were present at the last MPC meeting.
The CBN governor told the press that the Committee did a careful appraisal of the performance of the Nigerian economy in the last three months and noted the contraction of output in the second quarter of 2019 as reported by the National Bureau of Statistics- NBS. The statistical agency had in its most recent report announced that that the country’s total national output (GPD) grew by 1.94% in the second quarter- a decline from what obtained in the first quarter when a GDP growth of 2.1% was recorded. Performances of the oil and non oil sectors, manufacturing and other facets of the economy were also considered and evaluated by the Committee.
Activities in the banking sector, lending rates and advances to the private sector were also x-rayed as they happened in the period under review by members of the Committee. The Committee appraised the inflation rate in the country and expressed their disappointment that at 11. 02%, the going inflation figures- though not alarming – still fell short of the body’s target of 6-9% (single digit inflation).
High unemployment rates, rising public debts and heightening national insecurity were matters of significant concern for the members of the MPC who highlighted that these issues constitute serious threats to economic growth and development.
They enjoined relevant agencies of government including security establishments to take concrete steps to tackle the menace of insecurity. Investments in public works by all agencies of government were recommended as a means of tackling unemployment, economic expansion, and raising domestic consumption levels which would go on to spur the economy into more significant growth.
The proposal to increase VAT to 7.5% as made at the last FEC meeting also received the commendation of the MPC as a means of raising the much needed liquidity to fund public expenditure and reduce burgeoning national debt.
The Committee however did not see the increase in VAT as the silver bullet Nigeria needs to kick-start its wobbly and floundering economy.
The MPC is convinced that selling off redundant national assets in a “competitive and transparent” privatization process would shore up the national treasury and make it possible for private investors to pump in the much needed funds into the economy. This measure identified by the Committee as the BIG BANG will create more job opportunities for Nigeria’s teeming army of unemployed/underemployed youths.
There were also calls for the FG to be mindful of the instability in the international oil markets with the happenings in the Middle East, the chaos in Britain over Brexit and the wider implications of a trade war between China and US. The MPC called on Aso Rock and other concerned agencies to be proactive and build fiscal buffers to insulate the country from what promises to days of belt-tightening.
At the end of their deliberations, the Committee retained MPR (Monetary Policy Rate) at 13.5%, Cash Reserve Ratio- CRR- at 22.5% and Liquidity Ratio at 30%. These rates will remain in place until the next meeting of the body due for December this year.
No one can sincerely fault the observations of the MPC. The report presented by Governor Emefiele was very detailed and did portray the body which he leads as a team of serious-minded men and women committed to growing the economy.
A few observations are however succinct at this point. Let’s share four of those:
- Very limited Press Coverage: When INEC calls for a press event, one is likely to find a bevy of pressmen and media houses struggling to find space to fit in their microphones. At their respective offices, members of staff of the social media department are always on top of things- updating their followers on everything and anything. Yesterday as the CBN governor shared the outcome of the Committee’s meeting with members of the Nigerian public and other interested parties, there was scant media presence and on the social media front, things were a lot more quiet. No major media house was giving live update and whatever Emefiele was saying seemed to matter very little to the millions of Nigerians on Twitter, Facebook and other social media channels. Even the CBN never deemed it fit to give live update to those following its social media handles. Why was this the case? Does it mean Nigerians have very little regard on the events and news that shape the economy?
- Ignorance of economic matters and how they affect our lives: Another matter that draws the attention of Nigerians after the activities of INEC is court proceedings on election matters. A few days ago when the Presidential Elections Petitions Tribunal delivered its verdict on the petition filed by Alhaji Atiku Abubakar and the PDP challenging the declaration of Muhammadu Buhari as the duly elected president of the country in February this year, several media houses sent their staff to monitor proceedings and report the news as they break. Millions of Nigerians stayed glued to the screens- waiting for the latest updates from the pressmen at the Appeal Court in Abuja. Every new update was treated as a goldmine with hundreds of shares in a few minutes. With the MPC’s press briefing on Friday, the reverse was the case and this can be explained by the fact that there has been no attempt by either the CBN or any of the organs under the federal ministry of finance to explain to Nigerians- the importance of economic policies and how they affect our everyday existence including how much we pay for food, fuel, electricity, the amount we have in our pockets, the decision to save or invest, to buy or sell, to borrow or to lend. One would advise the publicity or rather public affairs department of the CBN to up its game, learn how the press works in the new age and keep members of the public updated on all policy matters across platforms.
- Platitudes over pragmatism: The MPC report as presented by Emefiele did a whole lot to x-ray the reality of unemployment which probably could explain why there is so much insecurity and despair in the land. Commendations are also due to the MPC for urging banks to increase lending across board- especially to the SMEs. It is however disturbing to note that seems not to be much in terms of deliverables and concretes in the presentation made by Emefiele. All over the world, in response to growing uncertainties- Central Banks- including the US Federal Reserves- working through the Federal Open Market Committee- are slashing interest rates to encourage wider investments and assure businesses that the public sector is committed to growth, employment and wealth generation. At 13.5% with an asymmetric corridor of +200/-500 basis points, it is hard to argue that the MPC is seriously encouraging borrowing for investments by the real sector. In the US where infrastructure is world class and consumer spending and employment statistics – according to President Donald Trump- is at an all-time high, the interest rate was on Thursday cut by 25 basis points to 1.75%. Why should a Nigerian businessman pay an interest rate of 13.5% to invest in an atmosphere of huge uncertainties?
- Ostensible Disconnect with Reality: Nigeria is about the toughest place for anyone to think of pouring his investment funds right now with poor infrastructural outlay, epileptic electricity, widening insecurity and corrosive brain drain. Purchasing power is at a very low point and unemployment is the opposite of what obtains in Donald Trump’s America. The naira according to reports has lost about 69% of its value in the last four years while the exchange rate of the naira to the dollar is at a level we have never seen before. What policy measures is the MPC recommending for tackling these issues beyond the tokenism we have seen in the last four years? Could this be why Nigerians have effectively tuned out from whatever the monetary policy authorities are saying?
Perhaps the time has come for public officials and technocrats to realise that the task of saving Nigeria lies in their hands and not necessarily in the bosom of politicians whose focus are always geared towards doing what is popular- aimed at winning elections and retaining their grip on power.
Nigerians did not abandon the MPC meeting and its outcome for nothing. It does appear that since these regular meetings and interventions are yielding nothing because the decisions are not far-reaching enough, Big Brother Naija, Premier and Champions League football matches will continue to amass more audience than the proceedings at the CBN headquarters.