Isn’t it strange that the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) meets today, and the economy’s outlook is the least important of the considerations on the talking head’s agenda?
Today’s meeting (it drags into tomorrow) will be the last such meeting for five (of the 12) members of the MPC. Appointed four years ago (three of them by the president and the remaining two by the governor), these members, as with directors of the CBN, are “eligible for reappointment for another term of four years”. With some hope, this may yet happen. Although concerns (expressed below) remain about this.
Otherwise, as an economy, we run the risk that the MPC may not meet (as expected) in January next year. No! Let me re-phrase this. Given the fact that the MPC is quorate with just six members (“two of which shall be the governor, and a deputy governor, or two deputy governors”), the real risk is that a meeting may hold in January without the “independent” members of the MPC. The governor, his four deputies, and any of the two members of the central bank’s board on the MPC would do just fine. The difficulty is that, given our experience of monetary policy formulation over the last 4 years, not many will take such a meeting of the rate-setting committee seriously.
The last time the departing quintet was appointed, CBN watchers thoroughly enjoyed the spectacle, not just of each of them having to undergo security clearance, but their appearances before the Senate, where each held brief on his (no female, then) sense of the economy and its needs. We do not expect anything less this time around. I.e. the new appointees, even if we are confirming the former ones, must have their day in the spotlight.
Confirmation hearings in the Senate will allow those for whom such things matter to gauge how well the appointees (in respect of re-appointed members) think they husbanded the monetary side of the economy over the last four years. Hopefully, even new appointees may then have a chance to explain away the sense that fissile material may be ticking away under the monetary foundations of the economy — disorderly exit of foreign portfolio investors’ and its feedback on the naira, for one; or the possible tightening of monetary conditions next year, as we struggle to rein in the deleterious effects of election year spend.
Yet, none of this may happen. The Senate will go on recess for year-end soon. It is unlikely that the nominations for the vacant MPC positions will reach the upper house of the legislature before this break. It is even less certain that the list of nominees will be ready as soon as the Senate resumes.
What does all these matter? Honestly, this depends on one’s expectations of the country. To cite but another such cause, one could just as well ask: What does it matter that the petroleum industry bill (PIB) has not been passed? Despite all the doomsday scenarios that the different groups backing the many versions of the bill have put out, the country has not missed a step. So, may be, as usual, once again, I fret too much.
Nonetheless, over the last four years, monetary policy has borne much of the pressure for keeping the economy running. Every commentator on the economy (bar those directly responsible) actually indicts the fiscal side for the surpluses that have put pressure on prices, and forced the MPC to tighten monetary conditions in response.
There is a sense in which the local monetary dominance resonates with global experience. Much of the recovery of the global economy since the Great Recession has come on the back of non-traditional monetary policy measures. Nonetheless, there is a second sense in which this dominance is a purely Nigerian thing. Too large a portion of government spend in the country is taken up by things as basic as paying salaries and buying office supplies (including motor vehicles, apparently).
While we may continue to worry that the structure of the expense side of the budget does not support price stability, and on this one account alone, the country might not be a low-interest environment, the revenue side is just as big a cause for concern. The economy’s addiction to revenue from crude oil exports has exercised the minds of successive governments since I can remember. Yet, the revenue base of the economy is no more diversified today than it was three decades ago.
It then matters that next year, in its bid for re-election in 2015, government will spend a lot more out of pocket than it has done any time since it was first elected. It will matter just as much that the revenue side might remain pressured by continuing development of unconventional fuel sources in our traditional export markets, and the shocking leakages (and associated shut-ins) from the upstream sector of the local oil industry.
In other words, much of the resulting slack in the economy next year can only be picked up (again) by the monetary authorities. To do this well, the CBN needs to have an MPC of some competence in place, and on time.