{"id":7066682,"date":"2026-09-25T13:48:15","date_gmt":"2026-09-25T13:48:15","guid":{"rendered":"https:\/\/peraltafinancing.com\/uncategorized\/more-on-the-monetary-policy-rate-nonso-obikilis-blog\/"},"modified":"2026-09-25T13:48:15","modified_gmt":"2026-09-25T13:48:15","slug":"more-on-the-monetary-policy-rate-nonso-obikilis-blog","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7066682","title":{"rendered":"More on the monetary policy rate \u2013 Nonso Obikili&#8217;s Blog"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p class=\"wp-block-paragraph\">My <a href=\"https:\/\/businessday.ng\/business-economy\/article\/should-we-still-care-about-the-monetary-policy-committee\/\" rel=\"noreferrer noopener\" target=\"_blank\">column in Business Day<\/a><br \/>\n yesterday basically questioned the usefulness of the Central Bank\u2019s<br \/>\nmonetary policy committee(MPC) and its monetary policy rate(MPR), which<br \/>\nhas remained fixed at 14 percent for almost two years now. I argue that<br \/>\nthe MPR doesn\u2019t mean much because the CBN doesn\u2019t really implement it<br \/>\nbut acts differently. My thinking is driven by the graph below.<\/p>\n<p class=\"wp-block-paragraph\">The<br \/>\n graph shows the MPR and the 91-day treasury bills rate, a benchmark<br \/>\nshort-term risk free security issued by the federal government.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/nonsoobikili.wordpress.com\/wp-content\/uploads\/2019\/01\/d66cc-1ttfvyozpvrx-2bmaqafbow.png\" alt=\"\"\/><figcaption>Nigeria<\/figcaption><\/figure>\n<p class=\"wp-block-paragraph\">If<br \/>\n the CBN really does implement its announcements for the MPR then the<br \/>\nrates should track each other. Of course, they will never be identical<br \/>\nbut the spread between the two would be minimal. What is interesting is<br \/>\nthat, at least for the last few years, the rates don\u2019t track each other.<br \/>\n In fact, if you zoom in to the last five years then you can see why I<br \/>\nworry about the usefulness of the MPC.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/nonsoobikili.wordpress.com\/wp-content\/uploads\/2019\/01\/10a45-1qsrkyraaftwfj_4c1rrw9w.png\" alt=\"\"\/><\/figure>\n<p class=\"wp-block-paragraph\">As<br \/>\n you can see, over the period where the MPC has officially stuck to its<br \/>\n14 percent holding plan, it has actually gone from tightening, to easing<br \/>\n to tightening again. Even the CBNs own OMO securities, similar to the<br \/>\n91-day treasury bills show the same pattern.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/nonsoobikili.wordpress.com\/wp-content\/uploads\/2019\/01\/02af7-1ugazawy1y2f8xj-aq-jp1g.png\" alt=\"\"\/><figcaption>90 to 95 day OMO securities\u200a\u2014\u200alower\u00a0bid<\/figcaption><\/figure>\n<p class=\"wp-block-paragraph\">Compare this to other \u201ccredible\u201d central banks like South Africa or the United States and you can see the point.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/nonsoobikili.wordpress.com\/wp-content\/uploads\/2019\/01\/cdcab-1hrozg4jjuklqppo47zfqgg.png\" alt=\"\"\/><figcaption>South Africa<\/figcaption><\/figure>\n<p class=\"wp-block-paragraph\">The<br \/>\n point of having a MPC and going through the motions of announcing a<br \/>\nrate that you actually implement is to show that you are focused on your<br \/>\n core mandate of fighting inflation and keep inflation expectation<br \/>\nlower, or within you target. Its one of those self-fulfilling prophecy<br \/>\nthings where if people believe that you are acting and will act to keep<br \/>\ninflation in check then it tends to be in check, even in the face of<br \/>\nother shocks like exchange rate fluctuations. A recent paper by <a href=\"https:\/\/www.google.com\/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=13&amp;ved=2ahUKEwizjv2FnpLgAhXzTxUIHYWJD-84ChAWMAJ6BAgEEAI&amp;url=https%3A%2F%2Fwww.imf.org%2F~%2Fmedia%2FFiles%2FPublications%2FWP%2F2018%2Fwp18173.ashx&amp;usg=AOvVaw2AVy2iViGmTZK7hqlg3N8c\" rel=\"noreferrer noopener\" target=\"_blank\">Kabundi and Mlachila<\/a><br \/>\n demonstrates this. How large is the inflation penalty for not being<br \/>\nfocused? I don\u2019t know but perhaps we shouldn\u2019t be trying to find out.<\/p>\n<hr class=\"wp-block-separator\"\/>\n<p class=\"wp-block-paragraph\"><em>I<br \/>\n have a monthly economic update which you can subscribe to get my<br \/>\npersonal thoughts and insights on issues regarding the Nigerian economy.<br \/>\n <\/em><a href=\"https:\/\/jarida.co\/list\/9c6c3698e6d44ec49d66cb30b111b2e7bc420668\" rel=\"noreferrer noopener\" target=\"_blank\"><em>Here<\/em><\/a><em>.<\/em><\/p>\n<p><span id=\"wordads-inline-marker\" style=\"display: none;\"\/>\t\t\t\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>My column in Business Day yesterday basically questioned the usefulness of the Central Bank\u2019s monetary policy committee(MPC) and its monetary policy rate(MPR), which has remained fixed at 14 percent for almost two years now. I argue that the MPR doesn\u2019t mean much because the CBN doesn\u2019t really implement it but acts differently. My thinking is [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7066683,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[227935,109679,122068],"tags":[3767,31794,76543,122069,11572,1485],"dealstore":[],"offerexpiration":[],"class_list":["post-7066682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-monetary-policy","category-nigeria","category-random-thoughts","tag-blog","tag-monetary","tag-nonso","tag-obikilis","tag-policy","tag-rate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>More on the monetary policy rate \u2013 Nonso Obikili&#039;s Blog - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=7066682\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"More on the monetary policy rate \u2013 Nonso Obikili&#039;s Blog - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"My column in Business Day yesterday basically questioned the usefulness of the Central Bank\u2019s monetary policy committee(MPC) and its monetary policy rate(MPR), which has remained fixed at 14 percent for almost two years now. I argue that the MPR doesn\u2019t mean much because the CBN doesn\u2019t really implement it but acts differently. 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