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

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

(Bloomberg) -- The Nigerian central bank has finally set a date for its much-awaited Monetary Policy Committee meeting after several months of delays and uncertainty. 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. The postponement to April 3 and 4 follows doubt on whether the MPC will convene at all after completely missing the January meeting. It has been paralyzed by a battle between the nation’s lawmakers and President Muhammadu Buhari.

1. 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 deputy governors. But the Senate refused to consider the nominations, leading to the cancellation of January’s meeting and the postponement of the March one to early April. The Senate is now set to screen the nominees.

2. 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.

3. 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.

4. 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. 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.

5. 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 nomination of Ibrahim Magu to head the government’s anti-graft body. The president has left Magu to continue acting as chairman of the Economic and Financial Crimes Commission since late 2015.

The Reference Shelf

  • A Bloomberg News article on the central bank committee not holding a meeting in January.
  • A Bloomberg News article on political deadlock threatening Nigeria’s economic recovery.
  • The Central Bank of Nigeria Act, 2007.
  • Interview with Central Bank of Nigeria Governor Godwin Emefiele.

--With assistance from Solape Renner

To contact the reporter on this story: David Malingha Doya in Abuja at dmalingha@bloomberg.net.

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Lisa Beyer

©2018 Bloomberg L.P.