Key questions this article answers:

  1. The monetary policy voted to hike interest rates by 50 basis points (bps) in May 2023. What are the possible outcomes of their meeting next Tuesday? 

  2. A lot has changed since May that could influence the MPC’s decision. What has changed? 

Come next week; all eyes will be fixed on the outcome of Nigeria’s fourth monetary policy committee (MPC) meeting of 2023. This will be the first meeting in about nine years to be chaired by someone other than the recently-suspended Central Bank Governor, Godwin Emefiele. 

Also, following his suspension by President Tinubu in June and a partial undoing of some of Emefiele’s unorthodox monetary policies by the Folashodun Shonubi-led Central Bank of Nigeria (CBN), the financial system has been awash with liquidity (more on this later). This boost in system liquidity has dictated market activity and would only bode negatively for inflationary pressures, which contradicts the CBN’s mandate to ensure low inflation.

Furthermore, given the CBN’s and DMO’s (Debt Management Office) posture at treasury bills and bond auctions—issuing securities at lower interest rates (more on this later) despite three MPR hikes this year—investors will be keen to see the outlook for interest rates to make investment decisions.

As such, we (Stears) thought it necessary to review some of the committee's critical considerations before its two-day meeting next week and explore the possible outcomes. But before we go into all of that, as I love to say, “the past informs the future”, so let us review the outcome of the previous MPC meeting.

What happened at the last MPC meeting?

The last time he presided over the meeting in May, Emefiele announced the committee’s decision to raise the monetary policy rate for a seventh consecutive time by 0.5% to 18.5%—the highest it's ever been since the rate was established in 2006.