Signals of tightening to come

The CBN last week released the personal statements arising from the last meeting of the monetary policy committee (MPC) in late September. This has provided some insights ahead of the next gathering on 19 and 20 November. Seven of the ten members voted for an unchanged policy rate of 14.00% while three called for a hike and a further three supported tightening through the banks’ cash reserves requirement (CRR). It would appear that next week may well bring the first rate hike since 2016.


  • The statements always set out the global backdrop and prospects, and generally quote from the IMF’s latest World Economic Outlook. One member singled out growth trends for China and India (Nigeria’s leading trade partners), indicating a likely modest slowdown this year for the first and pick-up for the second.

  • He also joined the topical debate about the cases of Chinese seizure of national assets from defaulting governments in Africa and beyond.

  • Relative to two months previously, members fretted less about inflationary pressures and some suggested that concerns over an expansionary fiscal stance ahead of the forthcoming elections may have been overdone. Nonetheless, CBN staff forecasts apparently point to an unspecified modest rise in the headline rate, driven by the core measure.

  • Those members of a tightening persuasion all cited inflation trends although we suspect that their primary reason was to underpin capital inflows by FPIs, and therefore the naira exchange-rate and official reserves. One observed that the central banks of Turkey, Indonesia and Russia had all raised rates to protect their currencies. Another argued that a modest hike at this stage would be preferable to subsequent, more aggressive tightening.

  • On capital inflows, two members pointed out that the normalisation of US monetary policy would not damage all frontier and emerging markets equally, and that Nigeria enjoys a certain amount of insulation by virtue of its reasonably healthy external balance sheet. We have often made this point.

  • As in the previous personal statements, members noted that the fuller definition of money supply M3, which includes liquidity outside the banking system, reflected annualized growth of 11.8% in August.  There is no benchmark for this newish measure: that for M2 is 10.5% for 2018.

  • We learnt that the staff forecast for GDP growth this year is 1.8%.

  • Members were confident that the differentiated CRR, outlined in a CBN circular in August, would prove a notable success in boosting credit extension.

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