How We Keep Our Independence at MPC Meetings, Cardoso

The Central Bank of Nigeria (CBN) governor, Olayemi Cardoso, said the bank includes independent-minded external members in its monetary policy committee (MPC) to avoid groupthink and improve policy discussions.

Cardoso said this shows the bank’s commitment to having a credible, independent, and transparent MPC.

He made these comments on Thursday at the ongoing IMF/World Bank Group Annual Meetings in Bangkok, Thailand. He stressed that the committee’s decisions come from serious debates, different views, and integrity.

He noted that keeping external members independent and encouraging open discussions among committee members is key to boosting public and investor trust in the bank’s monetary policy decisions.

Cardoso explained that picking independent external members for the MPC is a deliberate move to cut down groupthink and enhance the quality of policy discussions. Groupthink happens when the need for harmony and agreement in a group leads to poor decisions.

He pointed out that external members bring different views compared to internal members, who are more involved in the bank’s daily work and have regular access to its data.

Cardoso said the variety of opinions has sparked lively discussions in the committee. He added that members are encouraged to question existing beliefs and make independent judgments before any decisions are made.

"I just want to emphasise something here once again. For us, we came in at a time of crisis, and I am not saying this as a cliché or anything like that. But the actions we took after that were essential to build the credibility of the Monetary Policy Committee and the central bank.

"So that’s really the background we have come from to ensure that we have another chance at building up a monetary policy committee that has credibility and to ensure that once they take decisions, there are decisions that are credible," Cardoso added.

When asked if his role as CBN governor affects internal committee members, Cardoso said he does not hold separate meetings with them to come to conclusions before formal MPC meetings.

"I don’t do that. All the data is given out to members in advance to allow them to examine the information, ask questions, and conduct their own analysis before deliberations begin," he stated.

The CBN chief added that the committee has a strong secretariat to answer members’ questions and help them review policy options. He also mentioned that the bank allows members to consult specialists from outside when needed.

He said the CBN organizes retreats and other meetings outside the regular MPC meeting schedule, sometimes involving experts from other central banks, to enhance members’ understanding of monetary policy challenges and global experiences.

Cardoso noted that external members are involved from the beginning of the bank’s shift to inflation targeting, rather than just being included when decisions are about to be made.

He said transparency is key to rebuilding the credibility of both the MPC and CBN. He added that external members sometimes question why certain information has not been shared with the public.

Cardoso explained that the CBN’s way of communicating monetary policy is to clarify the economic conditions and policy reasons behind its decisions, especially when those decisions surprise financial markets.

He mentioned improved coordination between fiscal and monetary authorities, an agreement to enhance cooperation between the two, and clearer overnight financing rates as actions that have boosted monetary policy effectiveness.

Cardoso also highlighted Nigeria’s improved external reserves, which he said had reached their highest level in 18 years at the time of the decision discussed. He also noted a steady decline in inflation and continued economic growth.

He stated that the CBN’s interaction with the media after MPC meetings helps explain the reasons behind policy decisions and helps market players understand the bigger economic picture.

Cardoso insisted that credibility is vital to managing market expectations. He argued that trust is built when investors see an institution making sound decisions and communicating them clearly.

He said the ultimate goal is to create a monetary policy committee whose decisions are trusted because they are based on independent judgment, transparency, and thorough discussions.