CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 140 OF THE MONETARY POLICY
COMMITTEE MEETING HELD ON MONDAY 24th AND TUESDAY 25th JANUARY,

The Monetary Policy Committee (MPC) held its first meeting for the year 2022 on
the 24th and 25th of January 2022 in the light of waning optimism for a robust
rebound in global recovery in 2021. This resulted from the persistence of the
COVID-19 pandemic and emergence of new variants of the virus; persisting
supply
bottlenecks;
global
inflationary
pressures;
and
the
imminent
commencement of monetary policy normalization by some major central
banks. In the domestic economy, output growth recovery was relatively strong
in 2021. It is however, expected to continue reasonably in 2022, following
considerable improvement in the third quarter of 2021 and a positive outlook
for the fourth quarter. This was hinged on the continued support of the monetary
and fiscal authorities to sustain the current momentum. The Committee
reviewed the developments in the global and domestic economic and
financial environments in 2021, as well as the outlook and risks for 2022.
Ten (10) members of the Committee attended this meeting.
Global Economic Developments
The Committee noted that while the recovery of the global economy in 2021
fell
below
the
initial
forecast,
final
estimates
showed
considerable
improvements over the 2020 outcome, evidence that the global economy was
pulling out of the doldrum associated with the pandemic. Consequently, the
recovery is gaining momentum with increasing consumer spending, upswing in
investments and soaring world merchandise trade, above pre-pandemic levels.
This reflects the resilience of economic agents in the face of new strains of the

virus and rising infection rates. The Committee, however, took cognizance of
significant headwinds confronting the global economy in 2022, largely
associated with the persisting threats of new variants of the coronavirus. The
Advanced Economies are however, in a strong position to offset the impact of
these headwinds with stronger policy support and better access to COVID-19
vaccines. Consequently, this group of economies have shown better resilience
towards disruptions to the recovery. In the medium term however, the rising
inflationary pressures and the gradual withdrawal of both monetary and fiscal
stimuli may dampen the recovery in 2022.
In the Emerging Market and Developing Economies (EMDEs), poor access to
vaccines and limited policy support meant that this group of economies have
been harder hit by the Covid-19 health crisis and its associated
macroeconomic downturn. In China, one of the few countries that stayed out
of recession in 2020, output weakened in the third quarter of 2021 and has
continued to weaken as the Covid infections continue to rage amid power
supply shortages and a turbulent property market. Following the containment
of the infections in India, the economy has commenced a sharp recovery and
is set to continue on an upward trajectory. Overall, growth in the EMDEs is
expected to slow in 2022 due to the low level of vaccination and limited policy
support in several economies in this group.
On price development, the MPC observed that inflation, in most Advanced
Economies remained high and unlikely to abate in the short to medium term.
This is driven by the persistence of supply side disruptions and pent-up demand
associated with economic recovery. In the EMDEs, inflation has remained high
due to a combination of persisting exchange rate pressures and supply
bottlenecks associated with the lockdown restrictions. With the US Fed and
central banks of other advanced economies now moving towards monetary
policy normalization, the eventual interest rate hike may likely trigger huge
capital outflow from the EMDEs which will further aggravate exchange rate
pressures with a pass-through to domestic prices.

Global financial markets data show significant sell-off, as investors continued to
rebalance their portfolios with the shift from assets such as gold and emerging
market securities to securities of Advanced Economies suggesting market
response to the impending interest rate hike. Thus, global financial conditions
are expected to tighten as risk averse portfolio investors reassign their portfolios
from perceived riskier emerging market securities, to less risky advanced
economy securities with the expectation of improved yields.
Domestic Economic Developments
Staff projections showed that the economy is expected to remain on a path of
positive growth, given the impressive performance in the third quarter of 2021
and continuing rebound in economic activities. The Committee noted with
satisfaction, the significant improvement in the Manufacturing Purchasing
Managers’ Index (PMI), which rose to 52.0 index points in December 2021,
compared with 50.8 index points in November reflecting the continuing
economic recovery. This expansion was driven largely by increasing business
activities in the economy, leading to increase in new orders and uptrend in
employment and production levels. The Non-Manufacturing PMI, however,
declined marginally to 48.0 index points in December 2021 from 48.6 points in
November, largely reflecting a decline in services.
The Committee noted with concern, the slight increase in headline inflation
(year-on-year) to 15.63 per cent in December 2021 from 15.40 per cent in
November following seven consecutive months of decline. The unexpected
increase was attributed to both the food and core components, which rose to
17.37 and 13.87 per cent in December 2021 from 17.21 and 13.85 per cent in
November, respectively. The Committee, however, expressed confidence in
the Bank’s sustained intervention programmes, noting that inflation will continue
to abate as food supply improves. Members also noted that the seasonal drive
in price development associated with the December festive period was largely
contributory to the marginal increase in price levels, and as such, believe that
this episode of increase may be temporary.

Reviewing the developments in monetary aggregates, the Committee noted
that broad money supply (M3) rose further to 13.77 per cent in December 2021,
compared with 10.10 per cent in November 2021. This upthrust was largely
driven by the growth in Net Domestic Assets (NDA) of 15.58 per cent in
December 2021, compared with 9.40 per cent in November 2021. Net Foreign
Assets (NFA), however decreased to 6.06 per cent in December 2021,
compared with 14.98 per cent in November 2021. The sharp growth in Net
Domestic Assets (NDA) was largely attributed to an increase in claims on the
Federal government and other sectors. The slowdown in growth of Net Foreign
Assets (NFA) resulted from a decrease in foreign assets holdings of the banking
system in favour of more domestic investments.
The Committee reviewed the performance of the Bank’s intervention
programmes aimed at stimulating productivity in manufacturing/industries,
agriculture, energy/infrastructure, healthcare and Micro, Small and Medium
Enterprises (MSMEs). Between November and December 2021, under the
Anchor Borrowers’ Programme (ABP), the Bank disbursed N75.99 billion to
support the cultivation of over 383,000 hectares of maize, rice and wheat during
the 2022 dry season, bringing the cumulative disbursements under the
Programme to ₦927.94 billion to over 4.5 million smallholder farmers cultivating
21 commodities across the country. All excess output aggregated from the
financed farmers will be released to the Nigeria Commodity Exchange (NCX)
to help moderate the prices of food in the market. The Bank also released N1.76
billion to finance two (2) large-scale agricultural projects under the Commercial
Agriculture Credit Scheme (CACS).
In addition, the Bank disbursed the sum of ₦151.23 billion under the Real Sector
Facility to 15 additional projects in agriculture, manufacturing, mining, and
services. The funds were utilized for both greenfield and brownfield (expansion)
projects under the Covid-19 Intervention for the Manufacturing Sector (CIMS)
and the Real Sector Support Facility from Differentiated Cash Reserve
Requirement (RSSF-DCRR). Cumulative disbursements under the Real Sector

Facility currently stood at ₦1.40 trillion disbursed to 331 projects across the
country. As part of its effort to support the resilience of the healthcare sector,
the Bank also disbursed ₦498.00 million to two (2) healthcare projects under the
Healthcare Sector Intervention Facility (HSIF), bringing the cumulative
disbursements to ₦108.85 billion for 118 projects, comprising of 31
pharmaceuticals, 82 hospital and 4 other services.
To support households and businesses affected by Covid-19, the Bank disbursed
N20.29 billion to 40,521 beneficiaries, comprising 35,340 households and 5,181
small businesses under the Targeted Credit Facility (TCF) within the period. The
cumulative disbursements under the TCF stood at N369.78 billion to 777,666
beneficiaries, comprising 648,052 households and 129,614 small businesses. To
further promote entrepreneurship development among Nigerian youths, the
Bank disbursed N293 million to 59 beneficiaries under the recently introduced
Tertiary Institutions Entrepreneurship Scheme (TIES).
Under the National Mass Metering Programme (NMMP), the sum of ₦47.83 billion
was disbursed for the procurement and installation of 858,026 electricity meters
across the country under the Scheme’s Phase-0. The Committee also noted the
improved collections by DisCos as a result of increased meter installations. The
Bank released ₦274.33 billion to power sector players, as part of its effort to
support the sector under the Nigeria Bulk Electricity Trading Payment Assurance
Facility (NBET-PAF). This was in addition to the ₦20.58 billion released to
Distribution Companies (DisCos) under the Nigeria Electricity Market
Stabilisation Facility – Phase 2 (NEMSF-2). To further support the development of
enabling infrastructure in the gas industry, the Bank released additional ₦3.00
billion for the augmentation of an existing infrastructure, bringing the
cumulative disbursements under the Intervention Facility for National Gas
Expansion Programme (IFNGEP) to ₦42.20 billion for six (6) projects.
Furthermore, under the 100 for 100 Policy on Production and Productivity (PPP),
which was introduced to stimulate the flow of finance and investments to
enterprises and projects with potential to kick-start a sustainable economic

growth trajectory, accelerate structural transformation, promote diversification,
and improve productivity, the Bank has received 224 applications, valued at
₦294.91 billion for real sector projects in agriculture, energy, healthcare,
manufacturing and services. The applications are currently being processed
and the first batch of beneficiaries under the intervention will be announced on
31st January 2022, with their names published in national dailies. These projects
have been carefully selected in line with the approved selection criteria as
contained in the guidelinesq
Money market rates fluctuated within and above the asymmetric corridor,
reflecting prevailing liquidity conditions in the banking system. The monthly
weighted average Open Buyback (OBB) rate increased to 12.75 per cent in
December 2021 from 10.61 per cent in November 2021. The increase in the Open
Buyback (OBB) rate reflected the tight liquidity conditions in the banking system.
The MPC noted the continuing positive performance in the equities market in
the review period, with the All-Share Index (ASI) and Market Capitalization (MC)
increasing by 1.61 and 1.63 per cent to 42,716.44 and N22.30 trillion on
December 31, 2021, from 42,038.60 and N21.94 trillion on October 29, 2021,
respectively. This positive performance reflected improved corporate earnings
as investors participation increased in the market.

The MPC also noted the sustained resilience of the banking system, following the
progressive improvement in the Non-Performing Loans (NPLs) ratio from 5.10 per
cent in November 2021 to 4.85 per cent in December 2021- a first in a long time.
The Committee also noted that the liquidity ratio remained well above its
prudential limit at 41.3 per cent, though Capital Adequacy Ratio (CAR) declined
marginally to 14.53 per cent in December 2021 from 14.90 per cent in the
previous month. The Committee thus, urged the Bank to sustain its firm regulatory
surveillance.

Members also noted the continued improvement in the external reserves despite
ongoing foreign exchange market pressures. The reserves stood at US$40.20
billion as at December 2021.
Outlook
The broad outlook for the recovery in both the global and domestic economies
is clouded with uncertainty such as the resurgence of the COVID-19 pandemic,
driven by new and mutating strains of the coronavirus; persisting supply
bottlenecks; high and rising inflationary pressures; and dwindling monetary and
fiscal stimuli.
The Emerging Markets and Developing Economies are likely to experience a
sharp downturn as a result of the identified headwinds confronting the outlook.
This is hinged on the back of the ongoing two-speed recovery of the global
economy, driven by continued disparities in the administration of vaccines
between the Advanced Economies and the Emerging Markets and Developing
Economies. While the Advanced Economies will also experience a downturn in
2022, this group of economies are expected to take a less severe hit as most of
them have achieved significant high levels of vaccination.
Staff forecast project output growth at 3.10 per cent in 2021 with an expected
better
outcome
in
2022,
consistent
with
the
expected
improved
macroeconomic performance. The economic recovery is therefore expected
to progress gradually with the ongoing support by the monetary and fiscal
authorities, progress in COVID-19 vaccinations and continued high crude oil
prices.
After a moderate increase in December 2021, headline inflation is expected to
trend marginally upwards in the short-term before moderating towards the end
of the first quarter of 2022. This is expected as food harvests progress towards
the end of the first quarter of 2022 and improve food supply. In general, with
the Bank sustaining its intervention programmes through the year, food inflation
is expected to trend downwards in 2022.

Available forecasts for key macroeconomic variables for the Nigerian
economy, indicated expected rebound in output growth for most of 2022,
sustained by ongoing broad monetary and fiscal stimuli. Accordingly, the
Nigerian economy is forecast to grow in 2022 by 2.86 per cent (CBN), 4.20 per
cent (FGN) and 2.76 per cent (IMF).

The Committee’s Considerations
The Committee accessed the balance of risks confronting the domestic
economy in the near term as they impact output growth and price stability.
Members noted the unrelenting effort by the monetary and fiscal authorities in
mitigating the impact of the virus on the economy. It observed the continued
moderate recovery of the domestic economy but requires further concerted
policy effort by both the monetary and fiscal authorities to improve the
momentum and strengthen the recovery. Members were thus of the view that,
building on the improved growth in the third quarter and the positive PMIs in the
fourth quarter of 2021, output growth is expected to strengthen into 2022.
On the Pandemic, the MPC reviewed its continued impact on the domestic
economy as Members collectively agreed that the downside risks were still
hindering the recovery. In this light, it commended the efforts of the Presidential
Task Force on COVID-19 for procuring vaccines and continuing the drive to
ensure that most Nigerians are fully vaccinated.
On price development, Members continued to express concerns about the
impact of insecurity in farming communities on food inflation. Whereas headline
inflation had been moderating for several months, the committee believed that
its recent uptick was associated with increased demand during the festive
season and was thus of the view that prices will return to the downward
trajectory given the Bank’s ongoing interventions in the agriculture sector. On
this note, Members applauded the efforts of the Bank with the recent launch of
the rice pyramids, noting that these efforts to increase food supply and stem
food inflation were in the right direction. Members, however, reiterated the key

role of the Federal Government in providing the necessary security around the
country, and particularly in the farming communities, to ensure that farmers and
their produce remain safe, and food supply is both boosted and uninterrupted.
The Committee noted that the ongoing dry season farming would further
improve food supply and dampen prices.
Members noted the ongoing debate around the removal of fuel subsidy and
suggested a robust engagement with relevant groups in the country, and
afterward follow a stepwise and gradual approach, to ensure its moderate
impact on cost of transportation and energy for individual, households and
firms. The Committee also noted the need to encourage the take-off of private
refineries across the country to provide alternative competitive local supply
source and reduce the need for government intervention to manage fuel
prices for domestic consumption. In addition to this, the Committee called for
the speedy conclusion of the government gas-powered vehicle conversion
scheme and other alternative sources of fuel.
On the exchange rate, the Committee applauded the Management’s efforts
at maintaining stability over the short term with increasing demand as the
economy continues to reopen. Members noted the dwindling proceeds from
oil sale, despite rising crude oil prices. They further noted the need to address
the persistent reduction in remittance of oil revenue to the Consolidated
Revenue Fund and urged the NNPC to urgently address this anomaly. The
improved foreign exchange supply will thus support the Bank’s demand
management strategy in the foreign exchange market and consolidate
macroeconomic performance, especially those that promote export, reduce
dependence on import and reduce foreign exchange demand pressure. The
MPC welcomed the improvement in foreign capital inflow through diaspora
remittances and urged the Bank to further extend the incentive scope to
attract more remittances to official channels.
The Committee noted the rising government debt profile and the concentration
of the funding sources and its implications for fiscal sustainability and

macroeconomic stability, including its impact on financial system performance
and growth. The MPC continued to urge the Government on the need to
harness other sources of revenue to reduce its dependence on oil as a single
revenue source. In addition, it reiterated the need for government to seek
alternative, more viable, and efficient infrastructure financing sources, in order
to ease its expenditure burden. To this end, Members called on the fiscal
authorities to take advantage of InfraCorp, the private sector driven
infrastructural
vehicle
and
transfer
viable
infrastructure
projects
for
consideration by the Corporation as this would ease pressure on Government.
that would otherwise have to raise revenue through taxes from an already
burdened private and household sector.
The improved performance of the equities market in the review period,
signposted continued investor confidence in the Nigerian economy. This in the
view of Members was a positive sign that the economy remained on a path to
a more robust medium-term recovery.
The banking sector indices, in the consideration of Members, showed no less
resilience as other macroeconomic indicators reviewed; even as obvious
downside risks associated with the Pandemic continued to impact the business
environment. Members thus applauded the Management’s efforts in ensuring
the continued downward trend of Non-Performing Loans (NPLs) ratio, signifying
improving conditions in the banking system. Nevertheless, Members
emphasized the need for the Bank to closely monitor developments in the
sector and swiftly respond to any emerging challenges.
The Committee’s Decision
The MPC observed with concern the moderate rise in inflation in December
2021, noting that this was typical of increased aggregate demand associated
with the end of year festive activities. Members, however, expressed their
continued commitment to drive down domestic prices by putting in place

relevant policy measures to curb the rise in inflationary pressures, while also
supporting the fragile growth recovery.
In its determination as to whether to hold or loosen or tighten its policy stance,
the MPC was mindful that, whereas the US and some Advanced Economies
have signaled their intention to commence policy normalisation which may
result in capital flow reversal for EMDEs, the major focus at these climes were
targeted mainly at reining in the high level of inflation which had been
unprecedent in the last four decades in those climes.
For Nigeria, members were of the view that Nigeria is confronted with, not only
inflation but also fragile output growth. As a result, MPC believes that its current
stance of price and monetary stability conducive for growth remain desirable.
The MPC is convinced that various measures being implemented were helping,
not only in boosting output growth, but also in moderating inflation. The MPC
therefore, enjoyed Management to continue to use its development finance
tools to accelerate output growth, which will also help in boosting
manufacturing output that would ultimately aid moderation in prices. It also
requested Management to continue its use of administrative measures,
including discretionary tools at its disposal through CRR to control money supply
in the economy.
In its final consideration, the Committee was clear that a loosening option was
not desirable because it would trigger liquidity surfeit and fuel inflationary
pressure as available funds may outstrip the economy absorptive capacity or
domestic capacity utilization. It also feels loosening could trigger foreign
exchange demand pressure, as the excess liquidity would be channeled to
either frivolous importations or speculative holding of foreign exchange as
alternative investment channels narrow; leading to foreign exchange
depreciation and or inflation.
The MPC also dropped a tightening option at this meeting in view of the fragile
state of the current GDP growth rate and potential external and domestic

headwinds confronting the economy. The Committee opined that tightening
could truncate the steady improvement in credit performance, including other
financial soundness indicators, and reverse the declining trend in NPLs.
Moreover, tightening could counteract the CBN’s credit expansion motive as a
necessary condition for improved economic growth and employment
generation.
The MPC, therefore, concluded that a HOLD stance remains desirable at this
time, as this would indicate a conservative but cautious and consistent policy
choice given the prevailing economic conditions and outlook, thus
strengthening policy credibility and focus. It also feels that a hold would signal
MPCs realisation of the fragility of the growth recovery and its sensitivity to
emerging global and domestic uncertainties. Hence the need to sustain the
current policy trajectory.
After a careful balancing of the benefits and downsides of each policy option,
the MPC decided to hold all policy parameters constant; believing that a hold
stance will enable the continued permeation of current policy measures in
supporting the recorded growth recovery and further boost production and
productivity, which would ultimately rein-in inflation in the short to medium term.
The Committee thus decided by a unanimous vote to retain the Monetary
Policy Rate (MPR) at 11.5 per cent.
In summary, the MPC voted to retain:
I. The MPR at 11.5 per cent;
II. The Asymmetric Corridor of +100/-700 basis points around the MPR;
III. The CRR at 27.5 per cent; and
IV. The Liquidity Ratio at 30 per cent.
Thank you.
Godwin I. Emefiele

Governor, Central Bank of Nigeria
25th January 2022