After having last met on September 19, 2011, why is the Central Bank of Nigeria calling an emergency meeting of its rate-setting committee?
Just about everyone I’ve spoken to (who both know, and agreed to talk) all finger increased volatility in the markets as teh likely cuprits: inter-bank exchange rates for the naira briefly touched US1/N168, before softening a bit; interest rates at the retail end have trended up; and the markets are generally in a tizzy.
The 50 basis points increase in the policy rate three weeks ago (bringing it to 9.25%) did manage to bring retail rates into positive territory after a pretty long while when each naira sitting in the banks’ vaults was a major loss of value to depositors. And one pre-supposes that in pushing for positive interest rates (with inflation at 9.3%) the apex bank was aware that retail rates had to reach for double digits.
Question then is what is there in today’s market mix that was not there three weeks ago? And that was not knowable three weeks ago? But justifies the CBN calling a special meeting?
Most commentators would rather wait and see.
But whether this meeting has been called to raise interest rates further; or to put down the naira (mercy killing, really), it is increasingly clear that the main handle for managing the economy in today’s straitened times, is not a monetary policy one.
The CBN labours in vain!
This would have been sad at the best of times, but proceeding thus, it may even kill off its capacity to signal to the markets, its preferred policy direction.