Ifeanyi IbeHis mood was calculated, calm, sober and gentler than ever as he addressed his audience on Nigeria’s interest rate at the just-concluded 2023 second MPC meeting after the one in January. Central Bank Governor, Mr. Godwin Emefiele was returning to a more serious professional responsibility as CBN Governor at the end of the general elections where he was deeply embroiled in politics, using his currency redesign policy to throw himself into the political fray.
Indeed, it is not gainsaying that he got his fingers burnt as an array of equally bitter politicians buffeted him in the most negative outburst, culminating in a lawsuit at the Supreme Court which saw a gathering of his “enemies” using the opportunity to “finish” him.
Matters got to a very difficult head when after one week of the Supreme Court’s ruling against his policy he failed to comply. The worst arrow was to hit him when President Mohammed Buhari threw him and the Minister of Justice under the bus, washing his hands off the failure to comply with the ruling. In a few hours after the President’s scapegoating, Emefiele, in the character of a rainbeaten chick, announced compliance with the ruling.
The Monetary Policy Committee meeting held on Tuesday, March 21, 2023 would seem, indeed, to be Emefiele’s first public outing. His mien was that of a humbled fighter after a great loss as you watched him on television that afternoon. He addressed industry players and the press in a most gentle manner, putting on no airs. It wasn’t difficult to conclude that he had been bruised following his political-economic policy of currency redesign.
Not that in general terms the policy was unacceptable, but because he prepared a noose by himself and pulled it with all the illogical reasons he adduced for the policy. These were made worse by the timing of the implementation. I can’t forget in a hurry how one analyst had predicted(so accurately) that Nigerians would begin to buy and sell naira on the street; that POS operators would scavenge for naira from one market woman to another. How true it turned out. In my lifetime I saw a commentator’s prediction come to pass. He was not speaking from any hallowed pulpit. That was in October when Emefiele announced his currency redesign policy.
With the presentation of his Monetary Policy Committee (MPC) resolutions, Emefiele’s full image dotted the economic landscape again. He suddenly came to prominence again. It was a responsibility he must fulfill. In the buildup to the meeting one was skeptical what would be the result. Would there be anything good coming out of “Israel” this time? The meeting has come and result announced by Emefiele. Where did the result head? Hitherto it had been from one Monetary Policy Rate increase to another. This was no different. What goes up in this clime never comes down. If you expect otherwise you will die in your expectation.
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In his presentation, the CBN Governor noted that the increase resulted from the conscious effort to halt inflation. The meeting had agreed that there was an urgent need to deal with price and exchange rate disruptions even as there were convictions that fuel subsidy would become a thing of the past. And so the committee of wise men did their job as usual, hike Interest Rate.
A brief history of Interest Rate hike under Emefiele is interesting. Although he became CBN Governor in 2014, he inherited and retained an Interest Rate hike of 2007 which stood at 11.46%. But Nigeria had earlier seen a record low in July 2009 at 6.00%. After 2009 it has been a journey to the rooftop. And so in their eminent reasoning, the MPC members under Emefiele have been voting overwhelmingly for hikes, holding inflation responsible for what has become a cycle of Interest Rate hike. This is unmistakably true to the committee’s stance in its handling of this macroeconomic regulation. Recall that beginning in April 2022 it had jacked up Interest Rate to 11.50%, again to 15.5%. And in November of same year it rose to 16.5%. And in 2023 it witnessed another huge leap of 17.50% in January before making 18.5% in March, just in Q1 alone.
As is expected, if subsidy removal fails to sail through in Q2 and price equilibrium refuses to berth, what macroeconomic hope will there be for industries, banks and of course SMEs and Nigerian families? What magic wand would CBN come up with to stay the rise of inflation which is expectedly going to rise?
As is usually the case in Nigerian economics and economy, whatever goes up never comes down; the same for Nigeria’s interest rate. It is difficult to get an Interest Rate that an MPC would peg at 10.00% for instance. There would certainly be more serious reasons for a jack up.
Moderating inflationary trend in our economy will have to take cognisance of multiple factors which will include the reintroduction of coins as part of the currency regime.
READ ALSO: Time To Reintroduce Coins
The role of small denominations in stemming inflation cannot be overestimated. And it is the larger population made up of the poor that will be better off. Except the CBN is only interested in moderating the economy for only the rich. It is in circumstance of this nature that habitual hike of Nigeria’s interest rate may not be too harsh on the poor who hardly borrow money from banks.
Ifeanyi Ibe wrote in from Lagos
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