Bated breath for Emefiele’s second term monetary policy

By Moses Obajemu

As CBN Monetary Policy Committee meets

All eyes will shift to Abuja this week and even more attention will focus on Godwin Emefiele, the governor of the Central Bank of Nigeria (CBN) as the Monetary Policy Committee (MPC) of the apex bank meets to deliberate and provide guidance on monetary policy direction in the short to medium term.

But fresh from his confirmation for a new term of five years by the senate as governor of the Central Bank of Nigeria, there are already high octane expectations to hear what the ‘development activist’ central bank governor would unfold to Nigerians as his broad monetary policy direction in the next five years when he is expected to call the country’s monetary policy shots.

Emefiele was upfront and bullish upon his appointment five years ago when he took a detour from his predecessors on the chair by choosing to pursue an agenda that has seen him crisscross the length and breadth of the economy in his interventionist pursuit that bothered not a few watchers of this CBN governor.

Although he has given hint that he would likely continue on this road less travelled by those who had been on that chair before him, there are still a pocket of analysts out there who look to him rolling back a little and keeping a good watch on his core remit as a central bank governor.

So, when the MPC begins its meeting tomorrow (Tuesday) many will be waiting with bated breath to hear Emefiele outline his monetary policy thrust (MPC) at the close of full session.

His reappointment for a second term by President Mohammadu Buhari is believed to have been propelled by the development agenda championed by the apex bank under his watch during this first term. In that period, he led the CBN to introduce various intervention funds for the development of agriculture, SMEs, industry, infrastructure, and pushed for the diversification of the nation’s economic base.

Among such programmes he has championed are the N40 billion Anchor Borrowers Programme; the N220 billion MSMEs development fund; the N300 billion Real Sector Support Fund (RSSF); and the N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF), among others.

However, both Emefiele and the CBN have come under knocks and praises for its active and direct involvement in the economy. While Uche Uwaleke, a professor of banking and finance and chairman of Abuja chapter of the Chartered Institute of Bankers of Nigeria, applauded Emefiele for his giant contributions towards growing the economy, some others have decried his pursuit of development activism at the expense of monetary policy.

Sherrifdeen Tella, a professor of economics and the IMF were critical of Emefiele’s direct funding and intervention in the economy.

Tella said: “I think the president re-appointed him because he is happy with what he has done in the monetary sector. He has stabilised the foreign exchange rate and managed the inflation rate. These must have fallen in line with the President’s policy, but I don’t believe the CBN should be directly involved in giving loans to farmers and those in the real sector of the economy.”

In defending these interventions, however, the CBN said Emefiele chose to go into agricultural, industrial and infrastructural financing to ensure the real growth of the economy, in reaction to the IMF criticism of the CBN for its direct involvement in the economy.

“There is nothing unusual about what the CBN is doing. We agree with the IMF that one of the core functions of the central bank in any country is to maintain price stability.

“They said we should focus on inflation targeting, but that is just one bit of it, IMF will expect us to import food and not make arrangements to produce our own foods. The CBN is funding farmers who will grow food, supply to our people and by doing so reduce the price of food in the market,’’ the CBN said.

According to the apex bank, food was responsible for about 50 per cent of the causes of price increases in Nigeria, saying, “so what we are doing is delivering on our core function which is ensuring that there is price stability’’.

Emefiele’s central bank also said it was intervening in infrastructure because the present high cost of doing business drove up interest rate as well as other costs. The CBN said that the bank’s strategy was already yielding positive results and millions of jobs had already been created through the provision of credit to farmers and small scale enterprises.

Analysts believe that the MPC would not change the monetary policy rate which is presently at 13.50 percent after it was reduced by 50 basis points from the 14 percent earlier in the year. This is because inflation is still within the range that the monetary authorities consider not too high to warrant a rate review.

Emefiele has also used the open market operation (OMO) as an effective monetary policy tool in regulating money in circulation, mopping up excess liquidity through it to ensure price stability and the absence of inflationary pressure.