The recently released personal statements of the members of the CBN’s Monetary Policy Committee reveals that members voted 4 persons “for” and another 4 members “against” in their decision to raise interest rates at the meeting held on July 25th and 26th 2016.

This was in contrast to the communique released back in July, where the CBN Governor reported that “five (5) members voted to raise the Monetary Policy Rate while three (3) voted to hold.”

In the released personal statements, it was obvious that while 4 members (including the CBN Governor) voted to increase MPR, 4 other members voted to leave the rates at 12%. One of the members who voted to hold rates was Adelabu Adebayo a deputy Governor at the CBN. This is uncommon and quite remarkable as the CBN Governor, directors and deputy governors typically vote in the same direction.

The break in ranks by Adelabu Adebayo is probably the first sign that there is a clear division in the direction of monetary policy at the CBN.  The CBN Governor, Godwin Emefiele has been under fire for leading a Central Bank at a time when the Nigerian economy has deteriorated so much that it is not in a recession.

The four other members of the committee stood firm against a rate hike all alluding to the fact that the current inflation rate was not demand driven and will not in any way attract foreign investors let alone stabilize the exchange rate. They have already been proven right considering the massive depreciation witnessed in August 2016. The CBN eventually increased monetary policy rate (MPR) from 12% to 14% which translated to an increase in borrowing cost across board.

The recent revelation puts into spotlight, the next MPC meeting slated for Monday and Tuesday, 19th and  20th September 2016. Inflation rate has since the last meeting risen from 16.5% to about 17.6% in August further moving away from the monetary policy rate of 14%. Analysts are now pondering if the CBN will once again increase MPR in line with their policy of attracting FPI’s or decrease rates (or maintain status quo) and pursue a policy that can help stimulate growth.

The personal statements of members suggest we could well be in line for another feisty meeting. Another member of the committee, Garba Abdul Ganiyu who has often been the lone voice in the wilderness of dissent against the CBN’s policies did not vote at the last meeting and could make a comeback and a major difference when they meet again on Monday.

This was how they voted including excerpts of the reasoning behind their votes.

For or Against Rate Hike

ADELABU, ADEBAYO (CBN)

Verdict: Against

In the light of these concerns, I vote for the retention of the MPR at 12 per cent and the symmetry corridor of 200 basis points with a view to addressing the likely inflation pressure from fiscal slippage. With respect to the CRR, however, I vote for a CRR of 50 per cent on public sector deposit while the current rate of 12 per cent be maintained on private sector deposit. This is with a view to altering the conduct of the market and curtailing pressure on the foreign exchange market.

ALADE, SARAH O (CBN)

For

I therefore support an increase in Monetary Policy Rate by 200 basis points, to 14 percent, the retention of Private Sector Cash Reserve Requirement (CRR) at 22.5 percent, retention of the Liquidity Ratio at 30.00 per cent; and retention of the Asymmetric Window at +200 and -500 basis points around the MPR to help attract capital inflow and resuscitate the economy.

BALAMI, DAHIRU HASSAN (FG Nominee)

For

Again, we cannot leave the control of current level of liquidity to the banks because the DMB’s are not using it appropriately. On the basis of the above analysis, l vote to: (I) Retaining the CRR at 22.5%. (II) Raising MPR by 200 basis points from 12% to 14%. (III) Retaining the liquidity ratio at 30%. (IV) Retaining the asymmetric corridor at +200/-500 point basis.

BARAU, SULEIMAN (CBN)

For

In view of the need to restore stability in the macroeconomic environment and most especially to stem the rising inflation and equally make the domestic economy competitive for foreign capital, I propose that the MPR be increased by 200 basis points, while retaining other measures.

SALAMI, ADEDOYIN (FG Nominee)

Against

At the end of deliberations, I voted with a minority of colleagues in favour of the proposal to leave policy rates unchanged. Raising rates at this point is unlikely to achieve anything other than to worsen the economic and business circumstances of Nigeria.

UCHE, CHIBUIKE U (FG Nominee)

Against

In conclusion therefore, I believe that monetary policy tightening at the present time will be an error. Although maintaining status quo, when there is no clear path towards diversifying the nation’s economy and making the country less dependent on foreign goods, may not provide the optimal solution to our complex economic problems, it is by far the lesser of the two evils. At the very least, this position will give the fiscal authorities the necessary space for it to adopt policies that will encourage the diversification of our economy. Based on the above arguments, I am inclined to vote that status quo be maintained at the present time.

YAHAYA, SHEHU

Against

Under the circumstances, it may be necessary to tolerate, for a short time, the current negative MPR rate. Raising the CRR will also not help for similar reasons.

There is much greater scope to address inflationary pressures and contribute to growth through the foreign exchange market. As the forex market is being liberalized, it is necessary to ensure that its outcomes are guided to yield the necessary benefits to society. Efforts therefore need to be stepped up to find ways of augmenting the capacity of the CBN to intervene in the market, through additional forex resources. For an economy such as Nigeria, at the current level of development, and given the uncertainties regarding oil earnings, the time lag between policy and results in the effort to diversify the economy and add local value, the high level of import dependence, it is also necessary to manage the import regime through fiscal and other measures. This must be done to avoid market outcomes that destabilize the foreign exchange market and to ensure that the market can stabilize, help check inflationary pressures and help drive growth.

I therefore vote to hold, with respect to MPR, CRR and liquidity ratios. This does not exclude some tinkering with the corridor around the MPR.
EMEFIELE, I. GODWIN,

For

I acknowledge that a rate hike may inhibit real sector activities. However, the CBN is perceptive to the health of the critical sectors of the economy. Accordingly, the Bank will continue to support growth by broadening its development finance initiatives. We have seen the success ofthe anchor borrowers’ programme in rice: lowering prices and increasing supply. This will be extended to other agricultural products including tomato and palm oil for which we have domestic capacity. We will strategically extend the intervention to manufacturing and industrial sector ventures, while continuing activities with SMEs, power, etc. It is my utmost belief that this development finance activities in consonance with an ardent inflation combating will speed-up the rebound of the Nigerian economy.