Puzzles About Monetary Policy in Nigeria
4 Pages Posted: 29 May 2014
Date Written: September 1, 2013
Two puzzles are becoming striking from recent communiqués of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN). First, growth, employment, household and business expenditure issues have completely crept out of policy deliberations, as concerns about fiscal and banking operations have become the primary preoccupations of the committee. Second, the number of economists on the 12-member MPC has dropped to just about four. One must wonder how Nigeria can sustain monetary policy that marginalizes growth or employment concerns and excludes economists. To resolve these puzzles, we reason that since fiscal and banking optimization concerns are also legitimate, creating parallel independent committees for dealing with each of them, as is currently the case in the UK, is the best way to ensure that growth and employment issues are not crowded out of monetary policy deliberations. Each of these committees will need to be populated by people with the right expertise, as the expertise of most of the present members of the MPC indicates that they will do better in the parallel committees. The MPC needs to be wholly made up of economists with the technical capacity to contemplate and incorporate growth and employment issues into the policy process.
Keywords: Nigeria, Monetary Policy, Monetary Policy Committee, Inflation, Employment, Real Activity, Spending
JEL Classification: E52
Suggested Citation: Suggested Citation