After nearly four months of delay due to a standoff between the Presidency and the National Assembly, the Central Bank of Nigeria (CBN) is to hold the first Monetary Policy Committee (MPC) meeting next week. The apex bank confirmed this in a notice posted on its website.
The MPC meeting had been billed to take place in January but was postponed due to an absence of a quorum. All rates were left unchanged. There had been a delay in clearing the nominees due to a standoff between the Presidency and the Senare over the continued stay of Economic and Financial Crimes Commission (EFCC)
What does the MPC do?
The MPC sets monetary policy for banks in the country through decisions on the Monetary Policy Rate (MPR), Cash Reserve Ratio (CRR) and Liquidity ratio. These variables in turn determine the quantum of funds that the banks have at their disposal to lend. The MPR is the rate at which the CBN lends to banks. This in turn determines the interest rate banks charge members of the public.
The MPC comprises 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.
Why this month’s MPC meeting is key?
Aside from being the first meeting of the year, investors are looking forward to next weeks meeting because of the possibilities of a rate cut. This is largely due to a drop in the inflation rate.
How does it affect you ?
For investors holding debt securities, this could lead to lower yields (returns) on treasury bills and bonds. For borrowers, a rate cut, in theory, should lead to lower borrowing costs.
