Today we turn our attention to the latest personal statements of the members of the monetary policy committee (MPC), which were released recently. Broadly speaking, members' views were aligned as the verdict of the committee was unanimous. The decision to retain all parameters was mainly hinged upon attaining the long-run objectives of price stability and output stabilisation without complicating recovery. One member noted that the stance to retain all parameters is complementary to MPC/CBN interventions geared towards strengthening economic recovery, while containing inflationary pressures, fuelled mainly by food and structural factors.
Since the outbreak of coronavirus, most countries, notably advanced economies, have not relented in deploying expansionary fiscal and monetary policy packages to stimulate their economies and achieve recovery.
A survey of 14 central banks, conducted by the CBN, showed that apart from Nigeria and Ghana, they have maintained low monetary policy rates, and that none has increased rates since September 2020. This is in an attempt to ensure monetary accommodation to aid economic recovery.
A committee member observed that domestic monetary and financial conditions remained stable in November and December 2020 with robust systemic liquidity.
We see from one of the personal statements that the financial system continued to persevere in its resilience and its supporting credit to the domestic economy, despite the economic disruption caused by the pandemic. CBN staff data indicated that domestic sector credit remained on an upward trajectory with significant increases recorded in manufacturing, agriculture, construction and general commerce.
The loans-to-deposits ratio policy has broadly been termed a success. Our expectation, based upon the statements, is that it will be sustained with a renewed focus on effective utilisation to lock in the benefits from supporting businesses, manufacturing capacity and domestic output.
Fx was highlighted in one member's statement. As part of efforts to improve fx supply and stabilize the exchange rate, the CBN sustained its demand management strategies. Examples cited were moderating the overinvoicing of imports as well as the elimination of third parties in import processes, complementing supply-side initiatives such as amended procedures for the receipt of diaspora remittances and a renewed focus on boosting non-oil export earnings. These initiatives are expected by the member to enhance fx supply.
A common thread across all statements was a pro-growth sentiment. These statements predated the release of the latest national accounts and anticipated a pickup in growth. GDP duly grew by 0.1% y/y in Q4 2020, surprising many analysts (including ourselves) if not the committee members.
Based on the tone of the statements, we doubt that the committee will be in any rush to change its stance at its next meeting scheduled to hold later this month.