The global concerns of MPC members

The release by the CBN of members’ latest personal statements helps to explain the abrupt change in the thinking of the monetary policy committee (MPC). In November it voted unanimously for no change in the 14.00% policy rate and other parameters whereas in September three of the ten members had voted for a 25bps rate hike and another three for an increase of 150bps in the cash reserve requirement (CRR) ratio. Members felt that global prospects, notably China’s, had deteriorated, as well as the oil price.


  • They have turned bearish on the oil market. One member noted that US output had risen from 10.9mbpd to 11.5mbpd between July and September this year, and another feared a further fall in the price in early 2019. The decline weakens reserves accumulation, exchange-rate stability, FGN revenue generation and therefore its core infrastructure agenda.
  • In contrast, they were a little more confident about the domestic economy than two months previously, while noting that growth rates were inadequate. They saw demand growth stemming from the FGN’s 2018 capital budget, election-related spending, the mooted rise in the national minimum wage, the CBN’s own lending and what one member termed the imminent settlement of the FGN’s contractual obligations to the private sector.
  • Members again highlighted the very low growth in private-sector credit extension (PSCE), which amounted to 2.33% annualized in October and far short of the benchmark of 12.40%.
  • This combination of low GDP growth and credit expansion brought demands for an increase in the CBN”s “heterodox” development financing role. There were calls for more support for SMEs, given their employment-generation capacity, and for agriculture, given its faltering growth, as well as a strong endorsement of the CBN’s anchor borrowers’ programme. One member welcomed the recently announced programme for the release of portions of banks’ CRR for lending to the real economy as a good first step.
  • On inflation, members were generally not worried about an uptick, and there was consensus that a rise in the minimum wage would have a muted impact in light of the output gap, which one estimated at 1.5%.
  • On the soundness of the financial system, it was observed that oil and gas received 30% of aggregate credit and accounted for 45% of NPLs.
  • In short, the statements are in line with the governor’s recent speech indicating that the CBN would make few policy changes next year (Good Morning Nigeria, 14 December 2018).

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