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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 134 OF THE
MONETARY POLICY COMMITTEE MEETING HELD ON MONDAY 25th
AND TUESDAY 26th JANUARY 2021
The Monetary Policy Committee (MPC) held its first statutory
meeting for the year 2021 on the 25th and 26th January on the
backdrop of dampened optimism for improvement in global
output recovery, associated with the resurgence of the COVID-19
pandemic and mild success with vaccinations across several
countries. On the domestic front, recovery is expected to progress
reasonably, following the mild contraction recorded during the
third quarter of 2020 and with fourth quarter output growth figures
expected to show further improvement. The Committee reviewed
the developments in the global and domestic economic and
financial environments in 2020 and the outlook for 2021 as well as
the risks to this outlook.
Ten (10) members of the Committee were in attendance.
Global Economic Developments
The Committee noted a better-than-expected recovery in most
economies towards the end of 2020, leading to moderation in the

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contraction of global output. It, however, observed that the rapid
spread of the new variant of the Coronavirus, seemingly associated
spike in fatalities and the recent re-introduction of containment
measures across several economies, may dampen the recovery in
2021. In the Advanced Economies, headwinds largely associated
with the COVID-19 pandemic such as vaccination-related
challenges, weak aggregate demand associated with less than full
employment in labour markets, partially functioning supply chain
networks, the rapid spread of the new variant of the Coronavirus
and a high infection rate dampened the initial rebound in
economic recovery towards the end of 2020.
Output growth in the Emerging Market and Developing Economies
(EMDEs) remained uneven across countries. In China, output
slowed marginally in the third and fourth quarters of 2020, following
a faster-than-expected rebound in the second quarter of 2020.
Following the lull in the second quarter, India’s economy grew
sharply in the third quarter, reflecting welcome adjustment to the
stimulus measures. Accordingly, the International Monetary Fund
(IMF) estimated global growth in 2020 as a contraction of 4.4 per
cent and forecast growth in 2021 to improve to 5.2 per cent. This
forecast is however, hinged on the successful vaccination of a
significant number of people to create the much-desired herd
immunity.
On price developments, the MPC noted that inflation, in most
Advanced Economies, is likely to remain subdued in the short to
medium term as the recent rise in COVID-19 infection and mortality

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rates have resulted in sub-optimal employment and weakened
labour markets, which dampened aggregate demand across
these economies. In the EMDEs, however, inflation remains relatively
high compared with the Advanced Economies, with some
economies confronted with stronger upside risks than others, as a
result of weak accretion to reserves, persisting exchange rate
pressures, poor inflow of capital as well as longstanding structural
issues.
The MPC noted the steady build-up of systemic liquidity across the
global economy, arising from the support by fiscal authorities and
central banks to bolster the recovery and return confidence to the
financial markets. It noted that the response to the pandemic has
heightened the risk of debt accumulation, raising concerns of debt
sustainability and vulnerability of the global economy to financial
crisis once central banks commence normalization of monetary
policy.

Domestic Economic Developments
Real Gross Domestic Product (GDP), according to the National
Bureau of Statistics (NBS), contracted by 3.62 per cent in Q3 2020,
compared with 6.10 per cent in Q2 2020 and a growth of 2.28 per
cent in the corresponding period of 2019. The real GDP contraction
in Q3 2020 was largely driven by the decline of 13.89 per cent in the
oil sector from 6.63 per cent in Q2 2020. The non-oil sector also
contracted by 2.51 per cent in Q3 2020, compared with 6.05 per
cent in Q2 2020. The weak performance observed in both the oil

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and non-oil sectors was largely attributed to the lag effects of the
lockdown, persisting weak global demand for crude oil and security
challenges across the country.

The MPC noted with concern the continuing sluggish recovery in
the Manufacturing and Non-Manufacturing Purchasing Managers’
Indices (PMIs), which remained below the 50-index point
benchmark in December 2020, at 49.6 and 45.7 index points,
respectively, compared with 50.2 and 47.6 index points during the
previous month. This weak performance was attributed to the
resurgence of the pandemic, foreign exchange pressures,
increased costs of production, general increase in prices and
decline in economic activities. Similar trend was also observed in
the employment level index component of the manufacturing and
non-manufacturing
PMIs,
which
contracted
for
the
ninth
consecutive month in December 2020 to 46.3 and 45.1 index points,
respectively, compared with 50.2 and 46.7 index points in the
previous month. The Committee, however, noted that current
growth headwinds would likely moderate in the short to medium
term,
as
the
containment
measures
and
the
sustained
implementation of economic stimulus permeate the domestic
economy.
The Committee expressed concerns on the persisting uptick in
inflationary pressure for the sixteenth consecutive month, with
headline year-on-year inflation moving further to 15.75 per cent in
December 2020 from 14.89 per cent in November 2020. This uptick

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was attributed to the increase in both the food and core
components of inflation, which rose to 19.56 and 11.37 per cent in
December 2020, respectively, from 18.30 and 11.01 per cent in
November 2020. This continued upsurge in food inflation was
attributed to the logistical bottlenecks, spurred by the increasing
security challenges in many parts of the country, which disrupted
food production and supply to the market. Other factors driving the
core inflation, include the recent deregulation of the downstream
sector of the oil industry, which led to hikes in the price of Premium
Motor Spirit (PMS) and the upward adjustment in electricity tariff.
The Committee, however, noted that as output rebounds,
supported by the suites of stimulus packages by both the Federal
Government and the Central Bank, inflationary pressure would likely
begin to moderate in the near term.
On the performance of monetary aggregates, the Committee
noted the further growth in broad money supply (M3) to 10.97 per
cent in December 2020 from 5.02 per cent in November 2020,
driven largely by the growth in Net Foreign Assets. It also noted the
expansion in Net Domestic Assets (NDA) to 4.96 per cent from -0.45
per cent in the previous period. Aggregate domestic credit, also
moved further up by 13.40 per cent in December 2020, compared
with 9.48 per cent in the previous month. This was largely attributed
to the Bank’s policy on Loan-to-Deposit Ratio (LDR), complemented
by
its
interventions
in
various
sectors
of
the
economy.
Consequently, banking sector gross credit as at end-December

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2020 stood at N25.02 trillion compared with N24.25 trillion at the end
of November 2020, representing an increase of N774.28 billion.
Under the Bank’s real sector interventions, under the Anchor
Borrowers Programme (ABP), N554.63 billion had been disbursed to
2,849,490 beneficiaries since the inception of the programme, of
which N61.02 billion was allocated to 359,370 dry season farmers.

In light of the on-going synchronized efforts by the monetary and
fiscal authorities to mitigate the impact of the COVID-19 pandemic,
the Bank has committed substantial amount of money towards this
objective. Indeed, total disbursements as at January 2021
amounted to N2.0 trillion. COVID-19 Targeted Credit Facility (TCF)
meant for household and small businesses, wherein we have
disbursed N192.64 billion to 426,016 beneficiaries. We have also
disbursed N106.96 billion to 27,956 beneficiaries under the AgriBusiness Small and Medium Enterprises Investment Scheme
(AGSMEIS), while in the Health Care Support Intervention Facility,
we have disbursed N72.96 billion to 73 project that comprise 26
pharmaceutical projects and 47 Hospitals and Health Care Services
Project in the country. To support the provision of employment
opportunities for the Nigerian youth, the Central Bank of Nigeria
also provided financial support through the Creative Industry
Financing Initiative and Nigerian Youth Investment Fund amounting
to N3.12 billion with 320 beneficiaries and N268 million with 395
beneficiaries, respectively. On enhancing power supply, the Bank
has so far, provided N18.58 billion for the procurement of 347,853

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electricity reading meters to Discos in support of the National Mass
Metering Programme.
The Committee urged the Bank to sustain its current drive to
improve access to credit to the private sector while exploring other
complementary initiatives, in collaboration with the Federal
Government, to improve funding to critical sectors of the economy.
During the period under review, money market rates remained low,
reflecting the prevailing liquidity conditions in the banking system.
Overall, the monthly weighted average Open Buy Back (OBB) rates
declined further from the 1.13 per cent in November 2020 to 1.09
per cent in December 2020.
On the equities market, the Committee noted the positive
performance, particularly the sustained patronage by domestic
investors largely driven by the prevailing low yields in the money
market. The All-Share Index (ASI) increased by 1.82 per cent to
41,001.99 points as at 22nd January, 2021 from 40,270.72 points on
31st December, 2020. Similarly, Market Capitalization (MC) grew by
1.80 per cent to N21.44 trillion from N21.06 trillion over the same
period. This improved performance was largely attributed to gains
recorded in medium and large capitalized companies, notably in
consumer goods, banking, insurance and oil and gas sectors.
The Monetary Policy Committee (MPC), however, noted the
marginal increase in the Non-Performing Loans (NPLs) ratio which
rose to 6.01 per cent at end-December 2020 from 5.88 per cent at
end-November 2020 and above the prudential maximum threshold

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of 5.0 per cent. While noting that this development is not
unexpected under the prevailing circumstances, it urged the Bank
to strengthen its macroprudential framework to bring NPLs below
the prescribed benchmark.
On the external reserves position, the Committee noted the
increase in the level of external reserves, which stood at US$36.23
billion as at 21st January, 2021 compared with US$34.94 billion at the
end of November 2020. This reflected improvements in crude oil
prices, partial global economic recovery amid optimism over the
discovery and distributions of COVID-19 vaccines by most
developed economies.

Outlook
Overall, the medium-term outlook for both the domestic and global
economies continued to show improved prospects of recovery,
supported by the recent moderate uptick in crude prices and
increased optimism over the procurement and distribution of
COVID-19 vaccines.
Available data and forecasts for key macroeconomic variables for
the Nigerian economy suggest further improvement in output
growth in the first quarter of 2021. This would be supported by the
coordinated and sustained interventions of the monetary and fiscal
authorities, including the broad-based stimulus and liquidity
injections. Inflationary pressure is also expected to commence
moderation as the economy’s negative output gap closes.

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However, underlying uncertainties in the oil market and current
uptick in the second wave COVID-19 infection rate may pose some
downside risks to this forecast.

The Committee’s Considerations
The Committee noted the moderation in output contraction in the
third quarter of 2020, associated with news of the discovery of
COVID-19 vaccines and rising oil prices. The outlook for the
recovery, however, appears to be dampened by the second wave
of the pandemic considering its intensity.
In the Committee’s consideration, it noted that the COVID-19
pandemic and the necessary measures put in place by the
Government to forestall its public health impact, such as the
lockdown and other associated restrictions, contributed to the
Nigerian economy going into recession, much like almost every
other country in the world. Members thus agreed that the
Committee’s current priority remains to quicken the pace of the
recovery through sustained and targeted spending by the fiscal
authority supported by the Bank’s interventions. In this light, it was
thought necessary to increase collaboration with the fiscal
authority by providing complementary spending to finance
productive ventures in a bid to improve aggregate supply and
reduce prices. This is in addition to effectively collaborating with the
Presidential Task Force on COVID-19 through the existing private
sector Coalition against COVID-19 (CACOVID) to procure and

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distribute vaccines to fast-track the pick-up of business activities
and economic recovery.
Members reiterated the adverse impact of insecurity on food
production, stressing that the current uptick in inflationary pressure
could not be solely associated to monetary factors, but due mainly
to legacy structural factors across the economy, including major
supply bottlenecks across the country. The Committee, thus called
on the Government to redouble efforts at strengthening
infrastructural efficiency and address the emerging security
challenges in the country. In addition to this, the Committee called
on the Government to explore the option of effective partnership
with the private sector to improve funding sources necessary to
address the huge infrastructural financing deficit. The Committee
expressed concern over the rising public debt stock, as recurrent
expenditure remained relatively high, compared with capital
expenditure, thus, signalling future debt servicing challenges.
To improve Government revenue sources and investment in
capital, the Committee called on the Government to take
advantage of the take-off of the African Continental Free Trade
Area (AfCFTA), which could boost domestic production and
generate sizeable revenues for Government, as well as improve
domestic productivity and competitiveness.
The Committee commended the Bank’s effort of improving liquidity
in the foreign exchange market, but noted the need to continue to
explore avenues to improve inflow from sources such as the
International
Money
Transfer
Operators
(IMTO),
diaspora

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remittances and non-oil export promotion, given the current
trajectory of crude oil prices. These sources, in the view of the
Committee, would boost foreign exchange supply and ease the
current exchange rate pressure.
The Committee noted the continued improvement in the equities
market as a lead indicator of medium-term macroeconomic
recovery, thus, urging the Bank to maintain its collaboration with the
fiscal authority to improve the investment climate towards
attracting sustainable Foreign Direct Investment (FDI).
The Committee commended the Bank for maintaining a sound
regulatory surveillance over the banking system by ensuring a
reasonably low level of non-performing loans (NPLs), even with the
aggressive credit expansion programme during this crisis period.
Though, NPLs remained slightly above the prudential benchmark,
members noted that the banking system remained stable, strong
and resilient. Given the success recorded under the LDR policy, it
thus urged the Bank to sustain its risk surveillance approach and
ensure the continued soundness of the banking system.
In the Committee’s consideration, it noted the broad-based global
stimulus packages, including expanded credit lines, asset purchase
programme, corporate bond purchase, additional funding facilities
for financial system, commercial paper purchases, special central
bank lending, increase in the Ways and Means limits introduced by
the central banks of different countries to support economic
recovery in their various economies and to prevent further
distortions to the economy caused by the devastating impact of

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the pandemic. The Committee noted the large stimulus packages
deployed by many countries to fast-track growth recovery and
restore livelihoods across the world. For instance, Japan provided
stimulus package valued at 66.9 per cent of its 2019 GDP; UK, 45.04
per cent; USA, 28.4 per cent; Brazil, 27.6 per cent; South Africa, 12.6
per cent; China, 11.5 per cent; India, 10.0 per cent; and Russia 7.1
per cent compared with Nigeria’s paltry 4.0%. The MPC, therefore,
urged the Bank to further expand its current stimulus packages to
support the fiscal interventions to reflate and boost recovery in the
economy.

The Committee’s Decision
At this meeting, MPC was, as in the last meeting, confronted with a
policy dilemma as to whether to aggressively combat the
inflationary pressure or support measures currently aimed at
stimulating growth and reversing the recession.
Although the economy is currently in a stagflation environment with
simultaneous occurrence of inflationary pressures and contracting
output, the MPC resolved to reverse both developments and
continue pursuing price stability in growing the economy.
MPC was of the view, that whereas there may be wisdom in
loosening, given that the impact of the global Covid-19 pandemic
has resulted in constrained activities, disruption to supply chain and
suppress aggregate demand, an accommodative stance may be

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required to stimulate credit expansion and boost recovery in the
short term.
The Committee was also of the view that an expansionary policy
would enable the monetary authorities convince the financial
institutions to reduce loan pricing and defer interest and principal
repayments to critically affected obligors in a sustainable manner.
On the flip side, MPC also opined that an aggressive expansionary
stance may worsen both inflation and the negative real interest
rate, thereby resulting in negative consequences on exchange
rate.
With regard to tightening, MPC concluded that this may run
contrary to its objectives of providing affordable credit to
households, MSMEs, Agriculture, and other output growth and
employment stimulating sectors of the economy.
MPC was therefore of the view that it should pursue its current
stance of systematic synchronization of monetary and fiscal policy
accommodation through its developmental finance initiatives,
aimed at mitigating the impact of the COVID-19 pandemic on
Nigerians.
While expressing understanding of the public health dilemma of the
recent spike in infections, MPC encouraged Government not to
consider a wholesome lockdown of the economy so as not to
reverse the current gains of the stimulus earlier provided in 2020. It
also encouraged the Central Bank of Nigeria Management to
intensify its efforts in the targeted credit facility to household, SMEs,

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the Health Sector, as well as Agric and manufacturing sectors
which would not only boost consumer spending but result in
manufacturing output thereby positively impacting the GDP. On
this basis, the MPC agreed to hold all policy parameters constant.
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:
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
26th January 2021