How we avoid ‘groupthink’, maintain independence at MPC meetings – Cardoso

The Central Bank of Nigeria (CBN) governor, Olayemi Cardoso, said the bank involves independent-minded external members in its monetary policy committee (MPC) to guard against groupthink and improve the quality of policy deliberations

The CBN chief said the decision reflects the bank’s commitment to building a credible, independent, and transparent MPC.

Mr Cardoso said this on Thursday at the ongoing IMF/World Bank Group Annual Meetings in Bangkok, Thailand, stressing that the committee’s decisions are informed by rigorous debates, diverse perspectives and integrity.

He stated that ensuring the independence of external members and encouraging open discussions among committee members are crucial to strengthening public and investor confidence in the bank’s monetary policy decisions.

According to him, appointing independent-minded external members to the MPC is a deliberate step to reduce groupthink and improve the quality of policy deliberations.

Groupthink refers to a situation in which the desire for harmony, conformity, and consensus within a group leads to poor or irrational decision-making.

He observed that external members bring perspectives different from those of internal members, who are more closely involved in the bank’s daily operations and have regular access to its data.

Mr Cardoso said the diversity of views has stimulated vibrant discussions within the committee, adding that members are encouraged to question existing assumptions and make autonomous assessments before decisions are reached.

“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,” Mr Cardoso added.

Addressing concerns that his position as CBN governor influences internal committee members, Mr Cardoso said he does not hold separate meetings with them to reach conclusions ahead of 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 boss added that the committee has a strong secretariat to respond to members’ inquiries and support their evaluation of policy options.

He added that the bank also allows members to engage specialists from outside the institution when necessary.

He said CBN organises retreats and other engagements outside the formal MPC meeting cycle, sometimes involving experts from other central banks, to strengthen members’ understanding of monetary policy challenges and international experiences.

Mr Cardoso explained that external members are involved from the early stages of the bank’s transition to inflation targeting, rather than being brought in only when decisions are ready to be made.

He said transparency remains central to rebuilding the credibility of both the MPC and CBN, adding that external members sometimes question why the public has not been given certain information.

Monetary policy communication

Mr Cardoso said the CBN’s approach to monetary policy communication is to explain the economic conditions and policy considerations underpinning its decisions, particularly when those decisions surprise financial markets.

He cited improved coordination between fiscal and monetary authorities, an agreement to strengthen cooperation between the two, and greater clarity on overnight financing rates as measures that have boosted monetary policy effectiveness.

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Mr Cardoso also pointed to Nigeria’s improved external reserves, which he said had reached their highest level in 18 years at the time of the decision under discussion, along with a sustained decline in inflation and continued economic growth.

He said the CBN’s engagement with the media after MPC meetings helps explain the rationale behind policy decisions and helps market participants understand the broader economic context.

Mr Cardoso maintained that credibility is essential to managing market expectations, arguing that confidence is built when investors consistently observe an institution making sound decisions and communicating them clearly.

He said the ultimate objective is to establish a monetary policy committee whose decisions are trusted because they are based on independent judgment, transparency and robust deliberation.