Nigeria postpones rate decision after overhaul of Central Bank
Nigeria’s central bank postponed a rate-setting meeting after the nation’s president overhauled its leadership and as the local currency plunged to record lows.
The MPC meeting scheduled to be held on Sept. 25-26 has been postponed until further notice, the central bank said in a statement on Thursday.
Shrinking dollar supply from the central bank is forcing buyers onto the streets for hard currency. Inflation in Africa’s biggest economy is also at the highest in more than 18 years, prompting economists to predict that the central bank would raise interest rates again at its next meeting, which has been deferred to a yet-to-be-determined date.
President Bola Tinubu last week nominated Olayemi Michael Cardoso, a Harvard graduate and former Citibank executive, to be the next governor of the nation’s central bank. Cordoso’s appointment to the five-year term will require confirmation by the Senate, which isn’t scheduled to meet until next week. Another four people were nominated as deputy governors.
Meanwhile, Folashodun Shonubi, a deputy governor in charge of operations at the bank, who was appointed as acting governor after the suspension of Godwin Emefiele, and four other deputies have resigned from their positions, according to government officials, leaving the central bank without clear leadership. Another top economic official, Wale Edun, the minister of finance and coordinating minister of the economy, was away attending the United Nations General Assembly in New York.
What Bloomberg Economics Says…
“It’s a sensible decision to wait until the nominated governor has been confirmed in the position.”
— Yvonne Mhango, Africa economist
Yields on Nigerian dollar debt across the maturity curve fell on Thursday, with the notes due in 2038 dropping 0.8 cent on the dollar to 72.92 cents. The currency was trading at near a record low of 1,000 nairas per dollar on the black market, according to traders in Abuja, the nation’s capital, with reports of panic buying of dollars.
The MPC has increased rates by 725 basis points since May 2022 to rein in inflation that’s been at more than double the top end of the central bank’s 6% to 9% target range for over a year.
Inflation is being stoked by the removal of costly fuel subsidies and currency pressure from reform of the exchange rate. As part of efforts to contain inflation the government said last month it would suspend raising gasoline prices and declared a state of emergency in July to allow the authorities to take exceptional steps to improve food security and supply.
It’s not the first time Nigeria’s central bank has postponed its MPC meeting because of a lack of decision makers on the panel. In 2018, the first gathering only took place in April as the MPC lacked a quorum when lawmakers initially refused to screen former President Muhammadu Buhari’s nominees because of political differences.
