Why Nigeria’s Central Bank Is Paralyzed by Politics: QuickTake

by Dramelin 9:30 AM 0 comments

The Nigerian central bank’s Monetary Policy Committee is supposed to meet March 19 and 20.
The panel has kept the main lending rate at a record high of 14 percent since July 2016, and easing could help to support the economy as it recovers after a contraction in 2016.
But the committee may fail to even convene, as has already happened once this year.
It has been paralyzed by a battle between the nation’s lawmakers and President Muhammadu Buhari.
Why is the committee stuck? It lacks the quorum necessary to convene a meeting.
Usually made up of 12 members, the committee was down to 10 last year, before five retired after serving out their tenures.
Six members are required for a quorum, and they must include the governor and a deputy governor, or two deputy governors.
Buhari has nominated six panel members, including two potential deputy governors.
But the Senate refused to consider the nominations, leading to the cancellationof January’s meeting.
The Senate is now set to screen the nominees, but it’s far from certain that it will complete the task in time for the March 20 rates announcement.
Why are the president and Senate at odds? Lawmakers say that Buhari is out to undermine their role.
They say he is selectively targeting some of them in his anti-corruption campaign and point to the case of Senate President Bukola Saraki.
Saraki contested the Senate presidency, the nation’s third-highest government position, against the wishes of Buhari.
Some say it was therefore suspicious that Saraki was prosecuted on charges that he hid assets.
Saraki denied wrongdoing and was acquitted on all but three of 18 charges.
Also, lawmakers want Buhari to fund more projects in their constituencies that can earn them political mileage, while the administration wants to use funds mostly on national infrastructure projects.
What happens next? The Senate on March 13 tasked its banking committee to start vetting Buhari’s nominees and report back to the full Senate within a week.
Lawmakers can then vote to approve or reject the candidates.
What if the committee fails to meet again? While the central bank schedules six meetings a year for the committee, it is only required by law to convene four times a year, so it could still remain within its mandate.
However, a second impasse could damage investor confidence in Nigeria.
Central Bank Governor Godwin Emefiele said in January that the committee could cut rates before July if inflation slowed to a rate nearer to single digits.
Price growth decelerated to a 22-month low of 14.
3 percent in February.
It still remained above the central bank’s target of 6 percent to 9 percent, but investors increasingly see a need to at least reassess monetary policy.
Is the fighting just about the central bank? No.
The Senate has delayed approval of many Buhari appointments.
Lawmakers haven’t approved the boards of several state-owned agencies and they have twice rejected Buhari’s nominee to head the government’s anti-graft body.
The Reference Shelf.