UNSTABLE NAIRA: MPC MEETS FOR WAY OUT OF THE WOODS

January 22, 2016 – Following rapid fall of the Naira and pressure from the International Monetary Fund(IMF) and financial experts to devalue the Nigerian currency, the Central Bank of Nigeria(CBN) has scheduled a meeting of the Monetary Policy Committee(MPC) for Monday and Tuesday, 24ts h and 25th, 2016.

CBN currently sells the Naira at N197 to one US Dollar, whereas, the Naira sells between N296 and N300 to one US Dollar in the open market in Lagos.

Penultimate week, the Managing Director of IMF, Christian Lagarde met government and officials of the CBN during which she canvassed for devaluation of the Naira as the stark reality facing Nigeria. Besides, the IMF, financial experts like Bismark Rewane, MD, Financial Derivatives believes Nigeria cannot run away from devaluing the Naira.

But for President Muhammadu Buhari , devaluation for now remains a non-issue. These are the issues, MPC will debate and come out with a position to ease the current pressure on the Naira, worsened by free fall of the price of crude oil. Organisation of Petroleum Exporting Countries (OPEC) sold a basket of crude oil for $22.89 as at Thursday, January 21, 2016.

The MPC is composed of the following members, Mr. Godwin I. Emefiele (Governor,CBN) as Chairman, Dr. Sarah O. Alade (Deputy Governor, Economic Policy) – Member, Alhaji Suleiman Barau (Deputy Governor, Operations) – Member, Dr. Okwu J. Nnanna (Deputy Governor, Financial System Stability) – Member, Mr. Adebayo A. Adelabu (Deputy Governor, Corporate Services), Daniel-Nwaobia, Anatasia (Board Member) – Member, Mr. Stanley I. Lawson (Board Member) – Member, Dr. Adedoyin Salami – Member, Prof. Dahiru H. Balami – Member, Pro. Chibuike U. Uche – Member, Dr. Shehu Yahaya – Member and Prof. Abdul-Ganiyu Garba – Member.

However, following the passage of the new Central Bank of Nigeria Act (2007) into law by the National Assembly, the Monetary Policy Committee has been reconstituted. Section 12 of the CBN Act (2007) states that in order to facilitate the attainment of the objective of price stability and to support the economic policy of the Federal Government, there shall be a Committee of the Bank known as the Monetary Policy Committee.

“The MPC shall consist of: The Governor of the Bank who shall be the Chairman; the four Deputy Governors of the Bank; two members of the Board of Directors of the Bank; three members appointed by the President and two members appointed by the Governor”.
The MPC is charged with the responsibility of formulating monetary and credit policy.

“The Monetary Policy Committee is the highest policy making committee of the Bank with the following mandate: To review economic and financial conditions in the economy; determine appropriate stance of policy in the short to medium term, review regularly, the CBN monetary policy framework and adopt changes when necessary and also communicate monetary/financial policy decisions effectively to the public and ensure the credibility of the model of transmission mechanism of monetary policy.

The MPC is meeting after a review of the economic outlook and other presentations from its various departments after stopping sales of US Dollar to operators of Bureau De Change(BDC), for round tripping and other fraudulent acts as part of measures to firm up the Naira. Rather than help, the Naira crashed further in the open market, just a day after rolling out the policy.