Financial expert Uche Uwaleke has suggested that the Central Bank of Nigeria’s Monetary Policy Committee may reduce the Monetary Policy Rate by 50 basis points at its September meeting. Uwaleke, Director of the Institute of Capital Market Studies and President of Capital Market Academics of Nigeria, made this statement in an interview in Abuja ahead of the 307th MPC meeting. The MPC had previously retained the MPR at 26.5 per cent at its 306th meeting in July.
The MPC had maintained the standing facilities corridor at +50/-450 basis points around the MPR, while the Cash Reserve Ratio remained at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public sector deposits. Uwaleke cited prevailing economic conditions that could support a modest reduction in the benchmark rate, including moderating inflation, exchange-rate stability, improved foreign exchange market liquidity and an increase in external reserves.
Uwaleke also highlighted the recent Memorandum of Understanding between the Minister of Finance and the CBN governor on fiscal and monetary policy collaboration. He described this development as significant for economic management, emphasizing that stronger coordination between fiscal and monetary authorities is necessary due to the interconnected nature of government expenditure, borrowing, liquidity, exchange rates, inflation and private-sector credit.
The expert stressed that the MoU provides a framework for cooperation that goes beyond personal relationships between the Minister of Finance and the Governor of the CBN. It establishes structured mechanisms for information-sharing, aligned macroeconomic assumptions and the resolution of areas where fiscal and monetary actions might otherwise work at cross-purposes. Uwaleke believes that this cooperation should eventually be supported by appropriate legislation to ensure a transparent framework for fiscal-monetary coordination.
Uwaleke suggested that Nigeria could consider reviewing and amending the relevant provisions of the CBN Act 2007 and other fiscal-governance legislation to establish a transparent framework for fiscal-monetary coordination. This framework should clarify the respective responsibilities of the fiscal and monetary authorities, establish procedures for setting broad inflation objectives, and protect the CBN’s instrument and operational autonomy.
The expert emphasized that fiscal and monetary authorities should retain their respective responsibilities while working together to ensure greater consistency in economic policy. Fiscal authorities should remain responsible for taxation, public expenditure, fiscal policy and debt management, while the CBN should maintain the autonomy required to conduct monetary policy. Both institutions should be required to exchange information and explain publicly how their policies interact.
The MPC’s September meeting is expected to consider developments in inflation, foreign exchange market conditions, liquidity, economic activity and financial stability before determining its monetary policy stance. Uwaleke’s comments come against the backdrop of ongoing efforts by monetary and fiscal authorities to balance inflation management, exchange-rate stability, economic growth and access to credit.
Key points
- Uche Uwaleke suggests 50bps MPR cut at September MPC meeting
- CBN may consider economic conditions for MPR reduction
- MoU between Minister of Finance and CBN governor aims to enhance fiscal-monetary coordination
