Classified as


CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 141 OF THE
MONETARY POLICY COMMITTEE MEETING HELD ON MONDAY 21ST
MARCH 2022

The Monetary Policy Committee (MPC) met on 21st March, 2022, in
an environment of heightened geopolitical tensions and persisting
macroeconomic uncertainties, associated with the recent RussiaUkraine crisis and headwinds stemming from the lingering impact of
the COVID-19 pandemic. The Committee reviewed developments
in the global and domestic environments in the first quarter of 2022
and the outlook for the rest of the year. These include the likelihood
of tightening external financial conditions associated with monetary
policy normalization in the Advanced Economies, the cocktail of
sanctions imposed on Russia, global supply chain disruption
associated
with
the
invasion
of
Ukraine,
and
increasing
vulnerabilities associated with the burgeoning global private and
public debt portfolio and risks to financial stability. Others include
increased uncertainties across major financial markets and the
increased risk of continuing rise in prices confronting central banks
due to the huge monetary and fiscal stimuli injected into the global
economy to subdue the downside risks to growth.
Ten (10) members of the Committee attended this meeting.

Classified as

Global Economic Developments
The Committee noted with concern, the recent heightening of
uncertainties confronting the recovery of the global economy as
the Russia-Ukraine conflict and numerous sanctions against Russia,
introduced a new dimension of risk to the tepid recovery of the
global economy. It further took into cognizance, the lingering
headwinds associated with the COVID-19 pandemic and global
supply chain constraints; rising inflationary pressure; and more
recently, the progression of an interest rate hike by the US Federal
Reserve Bank and Bank of England (BOE). Members noted that the
ongoing war and the resultant sanctions against Russia will continue
to have a considerable impact on the global supply chain as both
countries are major players in the global commodities market. With
both countries significantly interconnected to the global financial
markets, global capital flows are expected to experience some
downturn, exacerbated by the increasing sanctions on Russia.
Consequently, the earlier projections by the International Monetary
Fund (IMF) for global output growth in 2022 and 2023 of 4.4 and 3.8
per cent, respectively, are likely to be revised downwards due to the
overarching downside risks identified on the horizon.
Price development across major Advanced Economies continued
to trend upwards and is expected to be accentuated in the short to
medium term, reflecting the persisting supply bottlenecks, rising food
and energy prices, and the ongoing war which heightened the
observed trend. In the Emerging Market and Developing Economies
(EMDEs), inflation remained high, with some economies recording

Classified as

inflation rates well above the average in the Advanced Economies.
This was mostly due to a mix of downside risks from the COVID-19
pandemic, capital flow reversals, legacy structural challenges,
supply-side bottlenecks, and exchange rate market pressures.
In the global financial markets, investors maintained a substantial
portion of their portfolios in gold and other precious metals, as the
uncertainty around market securities persists alongside the
Pandemic and the emergence of new risks following the imposition
of sanctions on Russia. It is still unclear at the moment how the
progression with monetary policy normalization by some key
Advanced Economies will impact the recovery of the global
economy, given the risks associated with this Crisis. Investors are
however adopting a cautious approach in view of the impact of
these developments on activities in the global markets. Global
financial conditions are thus, expected to tighten in the short-term
as the investment horizon gradually becomes clearer. This is
expected to impact capital flows to emerging market economies
as risk-averse portfolio investors adopt a wait-and-see approach.
Consequently, the risks to the overall recovery of the global
economy remain heightened and call for cautious policy
maneuvering to avoid a sharp downturn such as experienced in
2020.
Domestic Economic Developments
According to the National Bureau of Statistics (NBS), Real Gross
Domestic Product (GDP) grew by 3.98 per cent (year-on-year) in the
fourth quarter of 2021, compared with 4.03 per cent in the third

Classified as

quarter of 2021 and 0.11 per cent in the corresponding period of
2020. On a quarter-on-quarter basis, GDP grew by 9.63 per cent in
the fourth quarter of 2021 compared with 11.07 per cent in the
preceding quarter. This indicates the fifth consecutive quarter of real
output expansion, following the exit from recession in 2020. The
positive performance was driven largely by the growth in the non-oil
sector to 12.36 per cent in Q4 2021 from 10.99 per cent in Q3 2021.
Quarrying, transportation & storage; education; financial &
insurance services; information & communication; as well as a
steady rebound in manufacturing and mining activities were key to
the growth of the non-oil sector.
The Committee, however, noted that although the Manufacturing
Purchasing Managers’ Index (PMI), remained above the 50-index
points benchmark in February 2022, it moderated slightly to 50.1
index points from 51.4 index points in January 2022. This sustained
positive performance in the manufacturing PMI reflects the
resilience of the economy in light of persisting headwinds to the
recovery. The Non-Manufacturing PMI, however, remained below
the 50 index points in February 2022 at 49.0 index points, with a slight
moderation compared with 49.01 points in January 2022 as legacy
headwinds such as the persisting insecurity and infrastructural
constraints continued to impact production and the ease of doing
business in Nigeria.
The Committee observed with concern, the marginal increase in
headline inflation (year-on-year) to 15.70 per cent in February 2022
from 15.60 per cent in January 2022, a 0.10 percentage point uptick.

Classified as

This increase was largely attributed to a rise in the core component
to 14.01 per cent in February 2022 from 13.87 per cent in January
2022, while food prices moderated marginally. The rise in core
inflation was mostly due to rising energy prices as a result of the
current scarcity of Premium Motor Spirit (PMS), rise in the cost of
Automotive Gas Oil (AGO), and hike in electricity tariff. The
Committee, however, expressed cautious optimism, that with
sustained interventions by the Bank in various sectors of the
economy and broad fiscal support to tame these legacy structural
constraints, price development will moderate as output growth
improves. The MPC, therefore, urged the fiscal authorities to seek
innovative ways of addressing the current critical supply-side
challenges confronting the economy, to enable the unhindered
transmission of all the recently deployed fiscal and monetary
stimulus to the real economy.
Members noted that the growth rate of broad money supply (M3)
increased to 2.12 per cent in February 2022, compared with 1. 74
per cent in January 2022. This was largely attributed to an increase
in the growth rate of Net Domestic Assets (NDA) to 5.78 per cent in
February 2022 from 2.62 per cent in the previous month.

On the developments in the money market, the Committee
observed the movement in money market rates around the
asymmetric corridor, reflecting the prevailing liquidity conditions in
the banking system. Accordingly, the monthly weighted average
Open Buyback (OBB) and Inter-bank Call rates decreased to 5.81

Classified as

and 9.30 per cent in February 2022 from 6.00 and 16.00 per cent in
January 2022, respectively. The decrease in the rates reflected the
liquidity conditions in the banking system.
The MPC noted the sustained improvements in the equities market in
the review period. The All-Share Index (ASI) and Market
Capitalization (MC) both increased significantly from 42,716.44 and
N22.30 trillion on December 31, 2021, to 47,282.67 and N25.48 trillion
on March 18, 2022, respectively. This prevailing positive performance
was
attributed
to
gradually
improving
macroeconomic
fundamentals which support improved outcomes and returns on
investments from companies quoted on the Nigerian Exchange
Limited.

The MPC also noted the continued resilience of the banking system,
evidenced by the further moderation of the ratio of Non-Performing
Loans (NPLs) to 4.84 per cent in February 2022 from 4.90 per cent in
December 2021. The Committee also noted that Liquidity Ratio (LR)
remained above its prudential limit at 43.5 per cent in February 2022,
while the Capital Adequacy Ratio (CAR), moderated slightly to 14.4
per cent in February 2022 from 14.5 per cent in December 2021.
Overall, Members expressed confidence in the Bank’s regulatory
regime and commitment to maintaining stability in the banking
system, urging the Management to sustain its tight regulatory
surveillance.
On the external reserves position, the Committee noted the
decrease in the level of gross external reserves to US$39.44 billion as

Classified as

of March 17, 2022, from US$40.21 billion on January 25, 2022,
indicating a decrease of 1.95 per cent during the review period. The
moderate accretion to reserves reflects the duality of Nigeria’s
position as an oil exporter and importer of refined petroleum
products.

The Committee reviewed the performance of the Bank’s various
interventions to stimulate productivity in manufacturing, industry,
agriculture, energy, infrastructure, healthcare, and micro, small and
medium enterprises (MSMEs). Between January and February 2022,
the Bank disbursed N29.67 billion under the Anchor Borrowers’
Programme (ABP) for the procurement of inputs and cultivation of
maize, rice, and wheat, three crops that hitherto were significant
concerns of FX demand. These disbursements bring the total under
the programme to over 4.52 million smallholder farmers, cultivating
21 commodities across the country, comes to a total of ₦975.61
billion. The Nigeria Commodity Exchange (NCX) has also been
restructured to effectively aggregate excess outputs from the Bank’s
ABP-financed projects, with the objective of moderating food prices.
The Bank also released N19.15 billion to finance 5 large-scale
agricultural projects under the Commercial Agriculture Credit
Scheme (CACS), bringing the total disbursements under the Scheme
to ₦735.17 billion for 671 projects in agro-production and agroprocessing.

Classified as

In addition to these, the Bank disbursed the sum of ₦428.31 billion
under the ₦1.0 trillion Real Sector Facility to 37 additional projects in
the manufacturing, agriculture, and services sectors. The funds
sourced from the Real Sector Support Facility - Differentiated Cash
Reserve Requirement (RSSF-DCRR), were utilized for both greenfield
and
brownfield
(expansion)
projects
under
the
COVID-19
intervention for the Manufacturing Sector (CIMS). Cumulative
disbursements under the Real Sector Facility currently stand at ₦1.75
trillion, disbursed to 368 projects across the country. Under the 100 for
100 Policy on Production and Productivity (PPP), the Bank has
disbursed the sum of ₦29.51 billion to 31 projects, comprising 16 in
manufacturing, 13 in agriculture, and 2 in healthcare.

As part of its effort to support the resilience of the healthcare sector,
the Bank also disbursed ₦8.50 billion to 6 healthcare projects under
the Healthcare Sector Intervention Facility (HSIF), bringing the
cumulative disbursements to ₦116.72 billion for 124 projects,
comprising of 31 pharmaceuticals, 56 hospitals, and 37 other
services. An additional tranche of N14.7 million was disbursed to 5
researchers
under
the
Healthcare
Sector
Research
and
Development (HSRD) Grant.

To support households and businesses affected by the COVID-19
Pandemic, the Bank disbursed N21.66 billion to 19,685 beneficiaries,
comprising 12,044 households and 7,641 small businesses under the
Targeted Credit Facility (TCF) within the period. The cumulative
disbursements under the TCF stood at N390.45 billion to 797,351

Classified as

beneficiaries, comprising 660,096 households and 137,255 small
businesses.

The Bank disbursed ₦11.11 billion to power sector players, under the
Nigeria Bulk Electricity Trading Payment Assurance Facility (NBETPAF), bringing the cumulative disbursements under this facility to
₦1.28 trillion. The sum of ₦12.64 billion was also released to Distribution
Companies (DisCos) under the Nigeria Electricity Market Stabilisation
Facility – Phase 2 (NEMSF-2). The cumulative disbursement under the
NEMSF-2 thus stood at ₦232.93 billion. Both interventions were
designed to improve access to capital and ease the development
of enabling infrastructure in the Nigeria Electricity Supply Industry.

Outlook
The overall medium-term outlook for the global economy remains
uncertain as the war between Russia and Ukraine persists, alongside
the ongoing COVID-19 pandemic. The sanctions against Russia are
expected to have a considerable backlash against the global
economy as Russia is an interconnected economy both in the global
commodity and financial markets. The extent of the backlash has,
however, not fully crystallized but presents a significant downside risk
to the recovery of the global economy if the crisis is not resolved
immediately.
Additionally, the COVID-19 pandemic remains a significant
downside risk to global recovery as the virus continues to mutate into
highly infectious strains. This is imparting a high level of uncertainty on
economic agents, thus, creating inhibitions towards making the

Classified as

required investments to set the recovery on a sustainable path. As
part of the lifting of restrictions associated with the COVID-19
pandemic, the strong recovery of aggregate demand has
continued to pose a strong upside risk to inflation, as supply
bottlenecks persist. This has been further aggravated by sanctions
imposed on trade with Russia and other blockages associated with
supplies from Ukraine. Consequently, inflation is expected to remain
considerably high in the short term, even as some Advanced
Economies progress with interest rate lift-off. The rise in both
corporate and public debt in the Advanced Economies and
Emerging Market and Developing Economies, is also a major threat
to global financial stability as the risk of sustainability is heightened in
the currently tensed global environment. Capital flows are thus,
expected to be restricted as global financial conditions tighten over
the short to medium term.
In the domestic economy, available data on key macroeconomic
indicators suggest the likelihood of subdued output growth for the
Nigerian economy for most of 2022. This is hinged on the dampening
impact to the growth of rising energy prices in the domestic
economy; tightening external financial conditions as some
Advanced Economies pursue interest rate lift-off; as well as the
persistence of legacy security and infrastructural problems. It is,
however, expected that monetary and fiscal stimuli will remain in
place to continue to support the recovery until the downside risks to
growth and the upside risks to inflation dissipate substantially.
Accordingly, the Nigerian economy is forecast to grow in 2022 by
3.24 per cent (CBN), 4.20 per cent (FGN), and 2.70 per cent (IMF).

Classified as


The Committee’s Considerations
MPC noted with concern the impact which the global price
increase in petroleum and other products is having practically on all
economies. The Committee further noted that this has resulted in
imported inflation on the Nigerian economy and believes that
specific actions need to be taken to ensure that this trend does not
continue given the adverse consequences and aggressive rising
price level could have on the cost of living and purchasing power
of Nigerians.
Before the Russia-Ukraine war, MPC was optimistic that the
moderate decline in inflation was sustainable due to the positive
impact of good harvest on price levels. The MPC worries that,
whereas global prices have gone up, this has been compounded
by the shortage of supply of petroleum products. In the short run,
MPC urges NNPC to take urgent steps to ensure an adequate supply
of petroleum products in Nigeria so as to reduce the rate of arbitrary
increase in the price of petroleum products by oil marketers. The
Committee noted, with grave concern, the unprecedented rate of
oil theft recorded in recent time, and its debilitating impact on
government revenue and accretion to reserves.
In the medium-term, MPC is hopeful that the proposed take-off of
the Dangote Refinery in the course of the year would help to
improve the supply of petroleum products in Nigeria. MPC also notes
that the rising price of diesel is compounded by the problem of

Classified as

inadequate electricity supply which has adversely impacted
domestic prices. MPC advises the CBN Management and the fiscal
authorities to take specific and urgent actions to avoid many power
generating stations shutdown for turn-around maintenance,
resulting in the current unwarranted shutdown of generating assets.
MPC is relieved that food inflation declined marginally due to good
harvest. Although some scarcity is expected as we approach the
planting season, the Committee is optimistic that with the high level
of strategic grain reserves of the CBN, it is relieved that food prices
would
remain
relatively
moderated.
MPC
further
advised
Management to redouble its developmental finance initiatives
aimed at boosting domestic food output which would help in
moderating food inflation going forward, thereby moderating
headline inflation.
The Committee’s Decision
While growth has continued to improve, members noted that
inflation was confronted with upward pressure due to emerging risks
within the domestic and external environment. The MPC, however,
noted that the substantial upward push to price levels continued to
be influenced by supply-side factors such as the scarcity of PMS,
persisting insecurity and backlash from the Russia-Ukraine war. These
require a careful and focused policy intervention to address and
resolve. In this light, the MPC, urged the Bank to continue using the
tools at its disposal, while increasing its collaboration with the fiscal
authority to ensure that inflation is adequately reined in and growth
is returned to a strong and sustainable path.

Classified as

The Committee also encouraged the Bank to continue the use of its
intervention mechanism to deploy funds to output-stimulating and
employment-generating sectors of the economy.
In its consideration as to whether to hold, tighten, or loosen, MPC
remained concerned that the global situation on rising prices may
continue in the near term but may begin to moderate if deliberate
and urgent actions are taken by both the monetary and fiscal
authorities to correct the rising inflation. On another hand,
Committee was satisfied that the use of the Bank discretionary CRR
policy should be deployed more aggressively to control the level of
money supply in the economy.
On tightening in order to rein in the rising price level, MPC was of the
view that given the fragile state of the current GDP growth and the
potential external and domestic headwinds from the Russia-Ukraine
war, a contractionary policy stance would stifle the expected
investment expansion needed to drive growth and absorb the
shocks in Nigeria.
MPC also feels that not only would tightening reverse the steady
improvement recorded in credit expansion, it is also of the view that
tightening would not necessarily tame the inflation, particularly
where the marginal decline is relatively not yet sustainable.
In the case of whether to loosen, the Committee feels that loosening
would trigger further liquidity surfeit and fuel inflationary pressure as
available funds outstrip the economy’s absorptive capacity. MPC
also feels that loosening would trigger FX demand pressure, as the

Classified as

excess liquidity would exert demand pressure on the FX market and
trigger a naira depreciation which would also fuel inflation.
Based on the foregoing, the Committee decided to adopt a hold
stance as it would indicate a precautionary and consistent policy
stance with the prevailing economic conditions particularly as
further economic and financial shocks are exerted from the ongoing
Russia-Ukraine war.
On the strength of the above considerations, three members voted
to raise MPR by 25-basis points, one member voted to raise MPR by
50-basis points, while six members voted to hold all parameters
constant.
The Committee thus decided by a majority vote to retain the
Monetary Policy Rate (MPR) at 11.5 per cent.
In summary, the MPC voted to:
I. Retain the MPR at 11.5 per cent;
II. Retain the asymmetric corridor of +100/-700 basis points around
the MPR;
III. Retain the CRR at 27.5 per cent; and
IV. Retain the Liquidity Ratio at 30 per cent.
Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
21st March, 2022