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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 129 OF THE MONETARY POLICY
COMMITTEE MEETING OF MONDAY 23RD AND TUESDAY 24TH MARCH 2020
The Monetary Policy Committee (MPC) met on the 23rd and 24th March 2020,
amidst heightened uncertainty in the global macroeconomic environment
arising from major disruptions associated with the outbreak of the Coronavirus
Disease (COVID-19) and the oil price war between Saudi Arabia and Russia. The
Committee
assessed
the
developments
in
the
global
and
domestic
environments in the first quarter of 2020 and the outlook for the rest of the year,
including the threats to capital flows, growing vulnerabilities across global
financial markets, the probability of a global recession, risks to price and
financial stability as well as the quick intervention by central banks to restore
normalcy, with guidance for further action. Ten (10) members of the Committee
were in attendance at this meeting.
Global Economic Developments
The Committee noted with concern, the combined demand and supply shocks
to the global economy arising from the outbreak of COVID-19 and the oil price
war between Saudi Arabia and Russia. It also noted the weakening
performance of global output growth since January 2020, reflected in losses in
global stock values; declining primary commodity prices, disruptions to the
global supply chain associated with large scale global lockdown of mega
metropoles and whole countries; and social distancing. Also, there has been
adverse shocks to global capital flows; vulnerabilities and uncertainties in major

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financial markets; as well as rising corporate debt in the advanced economies
and public debt in some Emerging Market and Developing Economies (EMDEs).
Consequently, global output growth in 2020 is projected to fall significantly
below the initially projected level of 3.3 per cent.
Inflation in the advanced countries continues to trend below long run targets,
except in the United States, especially in the light of prevailing headwinds and
heightened global uncertainties. Central banks in the Advanced Economies
have thus engaged in a coordinated approach with peers to embrace
quantitative easing across every sector, notably in transportation, travel and
tourism, health and setting up of social safety net funds, to stem the impact of
these headwinds on aggregate demand and supply chains. In the EMDEs, price
developments remained mixed with upward inflationary pressure in some of the
key economies.
Domestic Economic Developments
Data from the National Bureau of Statistics (NBS) showed that growth in real
Gross Domestic Product (GDP) continued to improve in Q4 of 2019.
Consequently, real GDP grew by 2.55 per cent in the fourth quarter of 2019,
compared with 2.28 and 2.38 per cent in the preceding and corresponding
quarters of 2019 and 2018, respectively. Growth in Q4 2019, was driven largely by
the strong performance of the oil sector, which grew by 6.36 per cent, though
lower than 6.49 per cent recorded in the previous quarter, while the non-oil
sector grew by 2.27 per cent. The Manufacturing and Non-Manufacturing
Purchasing Managers’ Indices (PMI) expanded, though at a lower rate in
February 2020, for the 35th and 34th consecutive months to 58.3 and 58.6 index
points, respectively. Staff projections indicate that real GDP in Q1 and Q2 2020
will slow because of the tepid global demand, resulting from the recent
outbreak of COVID-19, depressed global aggregate demand and supply, and
the oil price war which has resulted in supply glut and decline in crude oil prices.

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This muted outlook for the first half of the year may thus, dampen overall growth
prospects for 2020. To mitigate this trend, the Bank took decisive action to
safeguard the Nigerian financial system and the economy from the emerging
headwinds. The key policies include: provision of extended moratorium on loans
by an additional 1 year beginning from March 2020. This is to ease pressure on
loan repayments. The Bank also reduced interest rates from 9 to 5 per cent on its
existing intervention programmes over the next one year; created a N50 billion
fund to support households and Small and Medium Enterprises (SMEs) affected
by COVID-19; introduced credit support for the healthcare sector; introduced
regulatory forbearance to consider temporary and time-limited restructuring of
loan terms and tenors to households and businesses affected by COVID-19, and
strengthened the loan-to-deposit ratio (LDR) policy. The Bank also announced
an intervention fund of N1.1 trillion to cushion the adverse effects of the
Coronavirus outbreak on the economy. The sum of N1.0 trillion from this amount
will be used to support local manufacturing to boost import substitution, while
the balance of N100 billion will be used to support the health services sector and
products through the provision of loans to the pharmaceutical companies,
hospitals and other health practitioners to build new hospitals and health
facilities or expand existing ones to first class health centres. This is in addition to
the N1.5 trillion private sector driven Infraco Project fund, designed to target the
construction
of
critical
infrastructure
across
the
country.
In
addition,
pharmaceutical companies would be assisted through loan interventions to reestablish drug manufacturing firms in Nigeria and curtail the spread of the
corona virus. In summary, it is expected that through these interventions, about
N3.5 trillion would be injected as stimulus to support the Nigerian economy
during this trying time.
The Committee noted the continued uptick in headline inflation (year-on-year)
for the sixth consecutive month to 12.20 per cent in February 2020 from 12.13 per
cent in the previous month. The increase in inflation, was largely attributed to

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increases in the food and core components, which rose to 14.90 and 9.43 per
cent in February 2020, from 14.85 and 9.35 per cent in January 2020,
respectively. This was driven by shocks to food prices associated with renewed
insurgency in major food producing areas of the Country and persisting
infrastructural deficits.
The MPC observed that broad money supply (M3) contracted for the second
consecutive month by 2.29 per cent (year-to-date) in February 2020, reflecting
the decline in Net Foreign Assets and Net Domestic Assets. Specifically, the
contraction in M3 was driven primarily by a decline in securities other than
shares and currency outside depository corporations in the review period. Net
Aggregate Credit, however, grew by 1.34 per cent in February 2020.
The Committee noted with satisfaction the growth in aggregate credit by N2.35
trillion since the inception of the LDR policy, reflecting the potency of the policy
and thus urged the Management of the Bank to sustain the current momentum
of improved flow of credit to the private sector in Nigeria. It emphasized the
need for coordination with the fiscal authorities, to strengthen access to credit
to some critical sectors of the economy, including the weak and vulnerable
population, particularly those in the informal sector through the setting up of a
special fund, as well as support the enforcement of credit recovery.
Accordingly, sectoral distribution of credit between end-May 2019 and endFebruary 2020 was as follows: Manufacturing (N533.06 billion); General Retail
and Consumer Loans (N380.71 billion); General Commerce (N229.87 billion);
Agriculture,
Forestry
and
Fishing
(N163.04
billion);
Information
and
Communications (N163.69 billion); Finance and Insurance (N131.20 billion);
Construction (N112.25 billion); and Transportation and Storage (N45.42 billion),
amongst others.
The Committee noted the dismal performance in the equities market as the AllShare Index (ASI) decreased by 17.30 per cent and Market Capitalization (MC)

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by 10.73 per cent between end-December 2019 and March 20, 2020. The
decline was largely attributed to profit taking and divestment by foreign
portfolio investors, the delisting of shares of three quoted companies and capital
outflow associated with the COVID-19 and subdued global economic activity.
The MPC noted the continued resilience of the banking system, evidenced by
the further moderation in the ratio of Non-Performing Loans (NPLs) from 6.59 per
cent in January to 6.54 per cent in February 2020. Although the ratio remained
above the prudential benchmark of 5.0 per cent, the Committee expressed
confidence in the Bank’s regulatory regime and commitment to maintaining
stability in the banking system.
Outlook
The overall medium-term outlook for the global economy remains uncertain with
increased deterioration in financial market conditions and weak global output
growth. The major headwinds to the current projection for global growth
includes: disruption to the global supply chain arising from the COVID-19
pandemic; oil price downturn as a result of subdued global demand,
vulnerabilities in major financial markets; rising corporate debt in the advanced
economies and public debt in some Emerging Market and Developing
Economies; as well as broad uncertainties leading to adverse shocks to foreign
investment flows.
On the domestic front, available data on key macroeconomic variables
indicate the likelihood of subdued output growth for the Nigerian economy in
2020. Based on the current downturn in oil prices, staff projections indicate that
output in the 2020 would be less than earlier envisaged. The major downside risks
to this outlook, however, include: the continued spread of COVID-19; further
decline in crude oil prices and the reduction in accretion to external reserves;
reduced government revenue leading to weak aggregate demand; declining

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non-oil receipts; as well as infrastructural and security challenges. These
headwinds will, however, be partly mitigated by: the timely and effective
response of the monetary and fiscal authorities in containing the spread of the
COVID-19 viral infection, the recalibration and adjustment of the 2020 Federal
Budget to the revised thresholds while pegging expenditure to critical sectors of
the economy, adoption of a new fiscal regime to encourage the build-up of
fiscal buffers; sustained CBN interventions in selected sectors; enhanced flow of
credit to the real sector and deliberate policies to diversify the Nigerian
economy.
The Committee’s Considerations
The Committee reviewed the prevailing adverse conditions in the global
economy such as the COVID-19 pandemic and the oil price shock as well as the
likelihood of continued oil supply glut into the near future, focusing on the
impact of these headwinds on the Nigerian economy.
The Committee observed that not only will the COVID-19 pandemic result in
health crises, it will also result in massive economic crises that will force many
countries into recession, including the leading industrialised countries. The MPC
took into cognisance the impact of the decline in oil prices on accretion to
external reserves and the emergence of exchange rate pressures. The
Committee thus commended and endorsed the Management of the Bank for
its prompt response with the adjustment of the exchange rate to uniform market
rates and the removal of distortions. It, however, took note of the likely impact of
the exchange rate adjustment on the economy.
The Committee noted the weakened revenue position of the Federal
Government, arising from the sharp drop in oil prices. It reiterated the need for
government to urgently reduce reliance on oil revenue by gradually diversifying
the economy and improving tax collection. To this end, the MPC noted the

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speedy response of the Federal Government to the oil price shock by the
revision of the 2020 budget downwards by N1.5 trillion and the oil price
benchmark to US$30 per barrel. The MPC urged the NASS to fully cooperate with
the Federal Government in coming up with a budget that reflects our new
realities. In addition, the Committee noted the introduction of price modulation
measures, resulting in reduction in the pump price of PMS from N145 to N125 per
litre and its contributory effect in boosting aggregate demand, lowering inflation
and improving the welfare of the ordinary Nigerians.
The MPC further noted the persistence of inflationary pressures attributed to a
combination of monetary and structural factors, and thus urged the Federal
Government to leverage on Public Private Partnership (PPP) to intensify
investment in infrastructure to increase output and employment. The Committee
cited the potentials for Foreign Direct Investment (FDI) flows to the Nigerian auto
manufacturing, aviation and rail industries, which could take advantage of
these viable and untapped domestic and regional markets.
The Committee noted the sustained improvement in the financial soundness
indicators, applauding the continued decline in the ratio of non-performing
loans, growth in assets of the banking system and profitability of the industry in
the light of increasing global uncertainties. It also recognised the success of the
Bank’s loan-to-deposit ratio policy and its potential to alleviate production
shortfalls, reduce unemployment and boost aggregate demand, urging the
Bank to pursue this and other related policies to a conclusive end.
The MPC underscored the COVID-19 pandemic as a public health crisis which
will continue to undermine any monetary or fiscal stimulus unless appropriate
measures are taken to trace, test, isolate and treat infected persons in order to
curtail the spread, while ensuring the that migration across the country is
significantly reduced. The MPC, therefore, called on the Federal Government to
take the necessary steps to safeguard the population through close monitoring

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and emergency readiness measures to identify and care for infected persons in
the country, including compulsory restriction of movement to curtail spread of
the pandemic.
On the choices before the Committee, the MPC noted the recent actions of the
Bank, targeted at strengthening the resilience of the financial system and
alleviating the initial impact of the crisis. In its wisdom, the Committee felt that
tightening would result in reining in the rising trend in inflation, and that it would
support reserve accretion. However, it would reduce money supply and limit
DMBs credit creation capacity, thus resulting in increasing the cost of credit, with
adverse impact on output growth. Tightening would also result in a reduction in
aggregate demand as a fall in disposable income results in output compression;
whereas at this time, policy emphasis should be on stimulating aggregate supply
and demand, both already weakened by COVID-19.
With respect to loosening, whereas the Committee felt it would stimulate the
economy in the short term, and boost aggregate supply and demand, the
Committee nevertheless, was of the view that there was a need to be cautious
in loosening given the fact that it would exacerbate an already worsening
inflationary condition, resulting in massive pressure on reserves and the
exchange rate.
Based on the balance of these arguments, the MPC, in taking note of the recent
actions already taken by the Management of the Bank in response to the
COVID-19, resolved to allow time for the measures to permeate the economy
while allowing the pandemic to wear out its plateau before deciding on further
supporting policy measures to boost and strengthen aggregate demand and
supply in the recovery phase of the economy. The choice to hold also
considered the subsisting LDR and the DCRR policies, which sterilize excess
liquidity in the banking system, hence an increase in the MPR would be counterproductive.

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The monetary policy stance arrived at this meeting took cognisance of the
need to address the unfolding unfavourable macroeconomic developments,
rein in inflation, support growth and employment through the extant
interventions and recent initiatives, check capital outflows and support external
reserves accretion, and dampen pressure and ensure foreign exchange market
stability.
A review of the policy options indicates relative tightness of the current
monetary policy stance. The CRR was increased at the last MPC meeting. Time is
required for its full effects to manifest. Increasing the MPR will be contradictory to
the recent reduction of interest rate in the CBN intervention windows from 9 to 5
per cent. Besides, an increase in MPR will be taken by the Deposit Money Banks
(DMBs) as in invitation to increase lending rates and this will be most undesirable
at this point in time when efforts are being made to avert a recession. Besides, a
reduction in the MPR, will not encourage the DMBs to reduce lending rates. But
other strategies of the CBN are making the DMBs to reduce lending rates in
furtherance of the growth objective.
The Committee’s Decision
The Committee noted the continued rise in domestic prices; the glut in oil
supplies and low oil prices in the wake of the current global shocks; exchange
rate pressure and other domestic monetary and fiscal responses to the evolving
crises. In view of the foregoing, the Committee decided by a unanimous vote to
retain the Monetary Policy Rate (MPR) at 13.5 per cent and to hold all other
policy parameters constant.

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In summary, the MPC voted to:
I. Retain the MPR at 13.5 per cent;
II. Retain the asymmetric corridor of +200/-500 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
24th March 2020

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
The Nigerian economy came under severe pressure in the aftermath of the
January 2020 meeting of the MPC. Two new sources of vulnerability emerged
and grew rapidly in importance during the first quarter of the year. The first, and
undoubtedly more invasive, is the novel corona virus (COVID-19) pandemic.
Across the globe, COVID-19 is weighing heavily on economic activity and
financial markets, particularly stock markets, despite attempts by monetary
authorities to ease liquidity conditions. Analysts fear that, at the current rate of
disruption of commerce, trade and movement of goods and services, the
COVID-19 pandemic will orchestrate another global economic downturn.
COVID-19 has had a direct dampening impact on economic activity in Nigeria
through widespread movement restrictions since the index case was uncovered
in February 2020. It is also impacting the domestic economy through the
disruption of global supplies of inputs (and intermediates) as well as the demand
for oil, Nigeria’s main export commodity.
The second source of pressure was the sudden sharp fall in the prices of oil
following the collapse of the OPEC+ production cut discussions and the
consequent price war between Saudi Arabia and Russia. Whereas the shock
to crude oil prices is likely to feed (positively) into activity recovery process in
some countries, it could make recovery even more difficult in oil producing
(developing)
countries
like
Nigeria,
by
undermining
government
revenue/budget, external reserves accretion and exchange rate, in addition to
propagating instability across the financial system.
Meanwhile, against the backdrop of old pressures, particularly geo-political
tensions, Iran sanctions, Brexit and trade disputes, global economic growth was
weak in 2019, but already stabilising until the new pressure unfolded. The global

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economy continues to be heavily burdened by the fallouts of both COVID-19
pandemic and oil price war. Factory closures, supply chain disruptions, cutbacks
in services, travel restrictions – all leading to loss of confidence, have been the
primary channels of the impact of the pandemic on global economic activity.
Stock markets are experiencing bearish runs across the globe, underpinned by
rapidly diminishing business confidence and palpable anxiety about another
economic meltdown, barely a decade after the last. Given the muted global
inflation, central banks are responding to the weakening prospects of economic
activity brought about by COVID-19 in line with the International Monetary
Fund’s suggestion that they should aggressively support demand and
confidence by easing financial conditions. Indeed, some of them, particularly in
low inflation countries, have already lowered interest rates and/or injected more
liquidity.
However, with Nigeria’s current inflation at 12.2 per cent (which is much higher
than the policy reference range of 6.0 – 9.0 per cent) and projected to trend
upwards, the economic challenge is not only about supporting demand -
liquidity expansion (monetary easing) in the circumstance becomes a doubleedged sword and therefore ought to be carefully scrutinized. I voted to hold all
policy parameters at their levels prior to the March 2020 meeting based on this
and other considerations outlined in the reminder of this statement.
Data made available by National Bureau Statistics (NBS) show that in Q4 2019,
real GDP grew by 2.55 per cent, compared with 2.28 and 2.38 per cent in the
previous and corresponding quarters of 2018, respectively. Growth was driven
by the non-oil sector, particularly Services, which contributed the most, 2.60 per
cent in Q4 2019, compared with 1.87 and 2.90 per cent in the previous and
corresponding quarters of 2018, respectively. Overall, non-oil real GDP growth
rate increased to 2.27 per cent in Q4 2019 from 1.85 per cent in the preceding
quarter. Oil real GDP maintained an impressive growth of 6.36 per cent, though

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lower than 6.49 per cent recorded in the previous quarter. The Nigerian
economy appeared set for better outcomes going into 2020 until it confronted
the latest headwinds. The outlook for economic growth has since February
deteriorated as a result of the extra challenges. In fact, both manufacturing and
non-manufacturing PMIs dipped in March 2020, just like the overall business
outlook for “Current” and “Next month”, based on impressionistic staff survey of
businesses, deteriorated. In support of economic activity in view of COVID-19,
the CBN recently announced some measures including direct interventions in
the health and SMEs sectors; one-year moratorium on principal repayments and
reduction of the interest rate on its facilities as well as a regulatory forbearance
allowing banks to restructure existing credit.
I believe that these measures would complement the minimum loan-to-deposit
ratio (LDR) introduced in 2019 and the differentiated cash reserve requirement
(DCRR) to ensure adequate flow of credit to sectors with significant growth and
employment prospects. The LDR policy has done remarkably well – industry
credit rose by over two trillion naira between May 2019 and March 2020, against
the background of improved banking system resilience. It is quite encouraging
that most financial soundness indicators have remained strong notwithstanding
the rapid expansion in credit – strong Tier 1 capital (88.2 per cent of the total
qualifying capital at end-February 2020); relatively low non-performing loans
(NPLs) ratio; rising industry capital adequacy ratio (15.0 per cent in February 2020
from 14.5 per cent in December 2019); and growing industry size. Sustaining the
stability of the banking system continues to be a key policy priority on its own
merit and in view of its importance in the economic growth process.
Since June 2019, inflationary pressures generally started to build particularly in
the food segment, owing to insecurity in the major food-producing regions
(North-east and North-central) of the country and other supply factors like the
partial closure of the country’s land borders. In February 2020, all measures of

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inflation (headline, food and core) increased, taking the headline further away
from the implicit policy target. Food inflation increased to 14.90 per cent in
February 2020 from 14.85 per cent in January while core inflation inched up from
9.35 per cent in January 2020 to 9.43 per cent in February. However, in terms of
short-term outlook, I noted some important moderating factors which somehow
doused my sense of urgency about the need to further tighten the stance of
monetary policy. First, the reduction in pump price of PMS from N145 to N125 per
litre should help to moderate inflationary pressure on commodity prices,
particularly food prices, as transportation cost is expected to reflect the
reduction, albeit with a little time lag. Second, COVID-19 comes with a drastic
reduction in the velocity of money owing to movement restrictions/lockdowns,
implying that spending-induced pressure on prices could moderate in the shortterm. Third, slowing economic activity combined with high inflation points
fundamentally to supply disruption/constraint, which best fixed by measures
aimed at ameliorating supply (output). This is essentially what the Bank’s
interventions in the agricultural sector seek to achieve. Lastly, the increase in
CRR in January 2020 continues to have the desired effect of reining-in excess
liquidity. As a direct consequence, overnight interbank rates, the open-buyback (OBB) and interbank call rates trended upwards in February 2020.
Meanwhile, the country’s external accounts weakened in 2019 with 3
consecutive quarterly current account deficits (Q1 - Q3) and a trade deficit in
Q4. Financing the deficits has meant gradual depletion of the country’s external
reserves from about $45 billion in July 2019 to $38 billion in December 2019. As at
March 2020, the external reserves position had declined to $34.9 billion. The
naira exchange rate, nevertheless, remained stable in January and February in
all the segments of the market, but depreciation pressures crepted in March
following the oil price shock. With receding capital inflows due to the
turbulence in the global economic atmosphere, maintaining stability of the
naira exchange rate, a key priority, can only happen with increased CBN

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intervention in the FX market, drawing on already slowing external reserves.
Clearly, the orientation of monetary policy at this point need not aggravate the
pressure on the external accounts by being anymore lax. I therefore did not
deem it immediately necessary to alter any of the policy parameters.
Finally, in choosing to hold, I am not unmindful of the heavy potential economic
costs of COVID-19; rather, I am persuaded that the various responses by the
CBN, Bankers’ Committee, governments at all levels and the organized private
sector would go a long way in ameliorating the impact of COVID-19 on
livelihoods and the economy in general. Nevertheless, a trust fund by the
Federal Government in support of the informal sector as part of the overall
response to the fallouts of the COVID-19 pandemic in Nigeria would not be out
of place. I should add that effective coordination of responses and some
understanding of sectoral impact of the pandemic would be important in
ensuring efficient allocation of resources and attainment of superior outcomes.

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2. ADENIKINJU, ADEOLA FESTUS
Year 2020 is unfolding to be a very difficult year for Nigeria and indeed for the
global economy. The emergence and rapid spread of coronavirus is proving to
be a challenge that few countries were prepared for. COVID-19 is a public
health issue but with significant socio-economic and financial impacts on
economies across the globe. Global growth for the year has already been
reviewed significantly downward. The channels of transmission of COVID-19 on
national economies are through demand, supply and financing impacts.
Nigeria is already experiencing a fallout from the global pandemic through
sharp decline in the price of oil, declining portfolio investment, falling foreign
reserves, adjustments in exchange rates, shut down of global supply networks,
gradual shutdown of the local economy with direct impacts on travel and
tourisms, entertainment, education, manufacturing, and trade sectors; sharp fall
in capital market and threat of corporate debt default.
There is no doubt that we are still at the early stage of the pandemic. We are
yet to understand the full impacts of the pandemic on our economy as well as
the distribution of the impacts by sectors and economic agents. The primary
focus should be on how to contain the pandemic and address health and
safety concerns of Nigerians. Policy makers have to consider, first, how to
respond to these challenges and mitigate the impacts of the pandemic on the
economy, disruptions on growth, financial stability during and after the crisis and
reduce income uncertainty for economic agents. Second, how to deal with
rising inflation trend from shocks from foreign exchange adjustments, falling oil
price and liquidity surfeit in the banking system. We currently rank 15th among
countries with highest inflation rates.

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Bank Staff Presentations
The presentations from the Bank Staff shows mixed results. The financial system
Stability (FSS) Report shows that most FSS indicators are trending in the positive
direction, NPLS ratio is at single digit, credit creation by deposit money banks
remain strong, and more sectors record increase in credit access in Q1 2020.
Weighted average lending rates also continue to trend downwards. However,
staff model simulation shows that the financial system remains vulnerable to
sharp and persistent decline in oil prices and the coronavirus epidemic.
The Economic Report shows that real GDP rose by 2.55% in Q4 2019 according
to National Bureau of Statistics (NBS), bringing average GDP growth for 2019 at
2.27%. Real GDP Growth was driven by oil and non-oil sectors, especially
information and communication, agriculture, manufacturing, finance and
insurance, entertainment and recreation, accommodation and food services.
In the same vein, headline inflation (y-o-y) rose to 12.20% in February 2020 from
12.13% in January 2020. This is more than 3 percentage points outside the
tolerable band of 6 - 9% for the economy. Growth in headline inflation was
driven by food inflation and core inflation. There is evidence of liquidity surfeit in
the banking system. Foreign reserves also declined to US$34.9 billion in March
2020. Trade and current accounts balances remain negative. Exports grew less
than imports in Q1 2020 Foreign portfolio investment also declined and the
exchange rate was adjusted from N360 to N380/US$ at the I&E window, to stem
the pressure in the foreign exchange market. The capital market also declined
sharply and the uncertainty in the local and global economy is affecting both
the equity and fixed income markets.
The absence of fiscal buffers and falling foreign reserves will not only limit the
capacity of the economy to respond to the unfolding impacts of COVID-2019,
but also impairs the future ability of governments, especially at lower levels, to

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meet their obligations. The falling oil prices (more than 50% between January
and March 2020) will sharply reduce the quantum of inflow to the federation
account and consequently the shares thereof allocated to all levels of
governments. States will struggle to pay workers, contractors and meet other
obligations.
Considerations and Recommendations
The CBN has already rolled out package of incentives to mitigate the impact of
supply and financing disruptions and reduce the growth effect of the
pandemic. The intervention cost provided by the CBN is about N3.5 trillion. This
more than compensates the expected reduction of N1.5trillion in 2020 FG
budgetary expenditure. However, I am worried that the current interventions
may not cover individuals and families and those largely in the informal sector.
The CBN is already in a tightening mode. Given the 500 basis point increase in
the CRR at the January meeting of the MPC. The CBN also has arrays of tools at
its disposal, including the OMO to address inflation as it arises.
My survey of all central banks that had responded to the ongoing pandemic
did not show any that has raised policy rates or tighten monetary policies at this
time. Monetary policy rates have either been reduced or left unchanged.
There are good reasons to advocate for loosening (encourage growth) or
tightening (fight inflation and attract portfolio investment). However, given the
unfolding situation, and the state of our economy, the cost of both actions will
be detrimental, hasty and not appropriate and definitely worsening than just
staying the course.
1. I endorse current measures put in place by CBN to mitigate the impact of
the pandemic.

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2. The Bank should continue to review the situation as it unfolds and take
appropriate measures to stabilize the economy.
3. The fiscal side should consider complementary trade and income policies
to support the measures put in place by the CBN including the reduction
in tariff rates on imported raw materials, intermediate and capital goods.
4. Deferment of implementation of the 50% increase in VAT,
5. Put a hold on increase in utility prices for this year
6. Compensation package for vulnerable households and individuals

My Vote
Based on the unfolding developments in the economy, uncertainties around the
full impacts of COVID-19, and preliminary measures by the CBN, I cast my vote
at this meeting to retain all policy parameters at extant levels. Hence, I vote as
follow:
1. Retain MPR at 13.5%
2. Retain the CRR at 27.5%
3. Retain LR at 30%
4. Maintain Asymmetric corridor around the MPR at -500/+200 basis points.

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3. AHMAD, AISHAH N.
The Monetary Policy Committee held its March 2020 meeting under the dark
cloud of an unprecedented global health and emerging economic crisis
caused by the COVID -19 pandemic. Naturally, discussions at the meetings
focused on the impact of the outbreak on the global economy, with emphasis
on domestic policy implications for the Nigerian economy.
Coronavirus Pandemic: The most pervasive global economic shock in modern
history. Over 150 countries have been affected as infections and deaths
continue to rise exponentially - over 300,000 and about 14,500, respectively as at
24th March 2020. While the economic impact is yet to fully manifest, massive
lock-downs and travel restrictions are in place across multiple countries, leading
to disruptions in global supply chains, particularly in manufacturing, travels,
tourism and trade. Global financial and commodity markets are also in deep
turmoil. The Dow Jones lost 25.6 per cent between 10th March and 23rd March
2020, whilst Bonny light crude oil price dropped 56 percent from an average of
US$65.10pb in January 2020 to US$28.60pb as at 20th March 2020 primarily due
to the Saudi - Russia oil price war, but exacerbated by slowing global demand
due to the Pandemic. As a consequence, global growth in 2020 is expected to
significantly underperform the 3.3 per cent earlier projected by the IMF,
increasing the likelihood that the world economy will slip into a recession.
In response, governments and central banks worldwide have implemented
various measures ranging from social distancing, partial or complete lockdowns, monetary easing, unemployment benefits and other fiscal stimulus and
relief packages. The US Fed made a full percentage point cut to the federal
funds rate to range from 0.00 per cent to 0.25 per cent, coupled with a fiscal
stimulus of US$1trillion among other initiatives. China, UK, Australia, Italy, South
Africa and many other countries announced various forms of stimuli to mitigate
the economic impact of the coronavirus outbreak.

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COVID - 19 in Nigeria: Health and Economic Implications
In Nigeria, COVID-19 cases are low, but are expected to rise as testing capacity
improves (over 40 infections and 1 death as at 24th March, 2020). Should positive
cases grow significantly, there would be tremendous strain on an already weak
healthcare system, causing a severe health crisis. Whilst infection prevention
strategies – travel history monitoring, contact tracing, self-isolation - have been
put in place by the Nigeria Center for Disease Control (NCDC), Federal and
state governments have begun to institute containment measures via lockdown/stay-at-home pronouncements, shutting down schools, religious, business
and social activities. These actions, designed to ‘flatten the curve’ and slow
spread of the coronavirus will have negative consequences for output growth,
price and monetary stability, and key macro economic variables such as
inflation, exchange rate, and the financial system; these are briefly explored
below.
Domestic Output growth
Contraction in oil and gas sector caused by softening demand, glut in the oil
market and a collapse in crude oil prices; disruption in global trade and
domestic business activity due to the lock-downs are all negative for domestic
output growth, which is currently fragile. Under/unemployment levels are also
predicted to rise even as businesses make significant cut backs to cushion losses.
This implies that the rising trend in domestic output (averaging 2.27 per cent)
through 2019, may likely reverse in 2020 as spillover effects from the pandemic
build up.
Naira Exchange rates
The sudden deep crash in oil prices is a seismic shock for a country like Nigeria
which relies on oil exports for over 60 percent of its government revenues and
over 80 per cent of foreign exchange earnings. Furthermore, the exit of foreign

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portfolio investors from emerging markets, due to rising global investor risk
aversion, is a double whammy for foreign reserve levels and exchange rate
stability. Whilst reduced forex demand due to restrictions in travel and global
trade are somewhat compensating, it is reasonable to expect some exchange
rate pressures which may also worsen inflation expectations in view of the high
pass through to domestic prices.
Inflation
The pandemic may temporarily exacerbate an existing trend of rising domestic
prices in the short term. Headline inflation (year-on-year) rose for six consecutive
months to 12.20 per cent in February 2020 from 11.02 per cent as at August 2019
largely driven by the food index, which increased to 14.90 per cent from 13.17
per cent, over the same period. Stock piling of food by households and artificial
supply shortages during the lock-downs may drive food prices higher in the short
term. However, this is expected to be tempered by increasing domestic food
production which has been aggressively pursued since the partial border
closure in August 2019. Increased coordination between states is also expected
to smoothen domestic food supply chains to meet demand. Monetary induced
inflation is also being actively curtailed by the CBN via an increase in the
minimum Cash Reserve Ratio (CRR) from 22.5 per cent to 27.5per cent in
January and dynamic implementation of CRR.
Financial System: Preserving resilience to support macroeconomic stability
The financial system remains vital to support the domestic economy through this
crisis, hence the need for continued vigilance by the Bank to forestall any
reversal of gains recorded so far. The Loan to Deposit Ratio (LDR) policy together
with other complementary measures has been effective (net growth in
aggregate credit of N2.35 trillion between May 2019 and March 2020) in driving
credit to growth enhancing sectors of the economy such as manufacturing,
retail, commerce and agriculture. Furthermore, financial soundness indicators

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such as return on equity, asset quality, capital adequacy and other prudential
ratios remained strong; for instance, capital adequacy ratio strengthened by 50
basis points to 15 per cent as at end February 2020 as a result of capitalization of
strong 2019 earnings.
Notwithstanding, there are imminent risks to the banking sector arising from the
spillover effects of the COVID-19 pandemic. There is potential default risk by
obligors with oil-related repayment sources, or others unable to meet obligations
due to the economic downturn, increased concentration of oil and gas
exposures, deterioration in the foreign currency asset book, pressure on capital
adequacy from currency depreciation, pressure on liquidity from reduced
trading lines and heightened exposure to cyber threats.
Stress tests conducted by Bank staff under low to moderate scenarios revealed
that the financial system remained resilient in the face of tightened financial
conditions. However, under severe stress scenarios certain vulnerabilities in the
system are evident – reduction in earnings, deterioration in asset quality and
decline in capital adequacy. This requires heightened vigilance by the Bank to
mitigate emerging risks and other complementary measures such as
restructuring of credit lines for existing obligors and provision of liquidity
backstops as and when required to safeguard the financial system.
COVID-19 in Nigeria: Policy responses
The fiscal and monetary authorities, working collaboratively have announced
various initiatives to cushion the impact of the pandemic on households,
businesses, fiscal revenues and the economy.
The CBN plans to inject about N3.5 trillion into the economy through various
policy measures ranging from reduction in interest rates and increased
moratoriums on existing intervention programs, a N50 billion fund to support
households and Small and Medium Enterprises (SMEs) most affected by COVID-

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19, and over N1.1 trillion in credit support facilities for hospitals, advanced
diagnostic centers and pharmaceutical companies to improve healthcare and
boost local manufacturing across critical sectors, in line with Government’s
import substitution strategy.
The Bank has also granted regulatory forbearance to deposit money banks to
consider temporary restructuring of loan terms to individual, SME and Corporate
obligors in the financial system whose repayments may be affected due to the
disruptions caused by the pandemic.
Complementary fiscal measures include a new price modulation framework for
petroleum products, reduction of petroleum pump price from N145 to N125 per
litre, cut in public expenditure targets and downward revision of the oil price
benchmark from US$57pb to US$30pb in the 2020 Federal budget.

Policy Decision
The Nigerian economy is facing a significant and unprecedented shock from the
Covid-19 pandemic, accentuated by idiosyncratic structural deficiencies. It
must forestall an imminent severe health crisis, weather a global economic crisis
and maintain financial and macroeconomic stability in the light of exchange
rate pressures, low foreign exchange flows from crude oil receipts amidst a
severely constrained fiscal space and low reserve buffers.
Like other central banks, the Bank has limited policy options in this circumstance.
As it works in collaboration with the fiscal authorities to limit the humanitarian
and economic costs of the pandemic, it will be prudent to focus on structural
reform and the long term objective of diversifying the economy to enhance its
global competitiveness. Initiatives designed to boost local food and
manufacturing production, improve import substitution and support local

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businesses to meet domestic demand, whilst positioning for export and
participation in the global supply chain must be sustained.
As earlier stated, a number of policy responses have been embarked on, which
introduce significant stimulus into the economy to buffer it from the shock of the
pandemic. It is advisable to monitor the effects of these measures in the short
term before further policy actions are contemplated.
I therefore vote to maintain the current stance of monetary policy by retaining
the MPR at 13.5%; Cash Reserve Ratio at 27.5%; Liquidity Ratio at 30%
and Asymmetric corridor at +200 and -500 basis points around the MPR.

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4. ASOGWA, ROBERT CHIKWENDU
Background:
Developments related to the COVID-19 pandemic which recently sparked a
combined health and economic crisis has radically altered both the global
economic outlook for 2020 and the current thinking about monetary policy
priorities. The fears that the economic crisis could possibly lead to liquidity
problems that may threaten financial stability spurred quick monetary policy
actions in many economies across the globe with aggressive cutting of interest
rates and liquidity injections. On the domestic level, the persistent marginal upticks in monthly inflation rates up to February 2020 at a time of gradual output
growth remain a significant concern. Besides, early threats of currency
depreciation were beginning to emerge as external reserves maintain a sharp
fall in the midst of declining oil prices and investors negative sentiments on
portfolios. These unfolding events shaped the thoughts on expected monetary
policy choices at this March 2020 MPC meeting and the options were to ensure
a balance of weights in the risks between the rising domestic headline inflation
(especially in the absence of other fiscal and structural policy support) and the
potential consequences of a prolonged COVID-19 outbreak. While monetary
policy actions need to remain supportive of growth, it may be necessary in the
current situation to monitor the many uncertainties involved so as to be able to
provide coordinated policy actions in the short to medium term.
The Global Economic Outlook and the Threat of COVID-19
Prior to the COVID-19 outbreak, the estimation was that the global GDP growth
will improve to 3.3 per cent in 2020 compared to 2.9 per cent in 2019, especially
with the US-China ‘phase one’ trade agreement in January 2020 and the
conclusion of BREXIT on 31st January, 2020. In the fourth quarter of 2019, GDP
growth slowed in a number of developed and emerging market economies. For

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instance, Eurozone real GDP increased just 0.1 per cent in the fourth quarter of
2019 with Germany’s output remaining flat, while Italy and France suffered
contractions. The UK fourth quarter 2019 output also slumped to 0.0 per cent
from 0.5 per cent in the third quarter. Similarly, there was output contraction in
the fourth quarter of 2019 in Japan as a result of sharp declines in household
consumption, while marginal increases in quarter four output growth were
recorded in few emerging markets such as China and India, but output growth
in the US remained the same in Q4 2019 as in Q3 2019. At the start of 2020,
available data was suggestive of a path to solid growth as several indicators
had begun to stabilize and modest improvements observed in the
manufacturing sector in many countries. In addition, financial market conditions
in Europe and America started off on a strong note following monetary policy
accommodation measures in the Eurozone and other advanced economies as
well as the reduced global trade tensions.
Unfortunately, the stress arising from the spread of COVID-19 virus appears to
have eroded the 2020 early year gains. There are new predictions that the
global economy will be heading for a recession as a downturn is imminent
possibly as from the second quarter of 2020. In China, where the corona virus
first appeared, industrial production, sales and investment all fell in January and
February 2020 and this has largely disrupted the global supply chains. The effects
of the disruptions on the commodity and travel markets across the world have
also been substantial. Subsequent outbreaks in other economies have led to
unprecedented restrictions in economic activities and declaration of national
emergencies especially in North America and Europe.
On the basis of the pandemic, global growth prospects have now been revised
downwards from 2.9 per cent in 2019 to 2.4 per cent in 2020 with growth possibly
hitting the negative territory in the first quarter of 2020. Growth is however
expected to pick up in 2021 as the effect of corona virus pandemic reduces

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leading to recovery of global production and trade. These expectations have
generated significant across–the-board cuts in the forecasts for GDP growth in
major economies such as China, the Eurozone, UK, USA and Japan. Even
developing markets with highly concentrated trade exposures are particularly
vulnerable to the expected growth slowdown in these major economies and
their growth prospects also remain highly uncertain. Many commodity-
exporting economies are hard hit as world demand depresses amid increasing
travel and business restrictions. The early year production disagreements
between Russia and Saudi Arabia led to the high uncertainty in the global oil
market and a consequent slump in prices, while the effect of the pandemic has
driven prices further down. The financial market has since February 2020 been
affected by the COVID-19 pandemic thus adding to the persisting financial
vulnerabilities. The stock market particularly experienced sudden bouts of
volatility in several countries fuelled by uncertainty related to both the oil market
and the COVID- 19 pandemic. The currencies of many emerging markets have
also come under severe pressure as investors are reducing risk in their portfolios
due to the increasing negative sentiments worldwide.
In response to the deteriorating economic outlook arising from COVID-19,
Central Banks across developed and developing countries have initiated
several monetary policy measures which are expected to complement some
discretionary fiscal easing by the national authorities. The US Federal Reserve
Bank lowered its target rate by 50 basis points to 0.0-0.25 per cent, while the
Bank of England cut its rate by 50 basis points to 0.25 per cent. The European
Central Bank has also rolled out strategies including the expansion of their asset
purchase programmes so as to deliver cheap liquidity for banks to prevent
credit market crunches. Other Central Banks in Asia, Latin America and Africa
have also implemented rate cuts recently. It is however not clear if the interest
rate cuts and asset purchases will stimulate economic activity at this immediate
period as the pandemic keeps spreading, but they at least represent important

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market signals which will help to restore market confidence and support
economic recovery.
The Domestic Economic Outlook:
There were signs of stabilisation of the domestic economy in the early parts of
2020 despite the mild inflationary upticks. The quarter four real GDP grew by 2.55
per cent, compared with 2.28 per cent in the previous quarter with an
impressive performance of the non-oil sector, especially services. There was also
a relative expansion in the Purchasing Managers Index for both manufacturing
and non-manufacturing sectors in January 2020 as compared to the levels in
December 2019. Signs of economic pressure started to manifest in early March
with a downward spiral in oil prices arising from the impact of the raging COVID19 pandemic and the dispute between OPEC and non-OPEC oil producers
relating to output stabilization. The possible impact of the plunging oil prices on
government revenues and the external reserves unleashed fears on the
domestic economy and this has subsequently triggered some policy response
by Federal government and the Central Bank of Nigeria. The outlook for
domestic output growth in 2020 now looks uncertain and a short but sharp dip is
highly anticipated especially in the first half of the year. Should oil prices remain
at the current low levels for a sustained period, then the near term economic
outlook for Nigeria will be extremely challenging. However, based on historical
experience, a bounce back in global demand for commodities may be very
likely once there is gradual recovery from the pandemic.
There are still downside risks which may weaken growth further and slowdown
an early recovery from the effects of COVID-19. First, Inflationary developments
remain a huge concern with a seventh consecutive increase from 12.13 per
cent in January 2020 to 12.20 percent in February 2020 which is the highest rise
since April 2018. CBN Staff estimates suggest a further increase in the March 2020
inflation rates, with a slowdown expected as from May 2020, but the impact of

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an extended COVID-19 pandemic may further worsen the current inflationary
situation. Second, the domestic currency is under pressure now as oil prices
wobble and foreign investors are drastically reducing their portfolio risk due to a
global negative sentiment. A serious currency depreciation will affect the
country’s ability to service the foreign currency debt and with the current huge
exposure to foreign-currency denominated debt, a contraction in governments
capital and social infrastructure spending becomes highly inevitable. In
addition, the domestic equity market has also taken a big hit as the All Share
Index (ASI) and the Market Capitalization, both of which had increased
between October and December 2019 fell by 17.30 and 10.73 per cent,
respectively, in February 2020. These declines have been attributed to the
building financial market volatility across the globe and investors fear that the
spread of COVID-19 will hamper future domestic economic growth.
Interestingly, threats to bank stability remain minimal. Although CBN staff report
show a minimal negative trend in the non- performing loans ratio and the banks’
profitability indicators (ROE and ROA) in February 2020 as compared to
December 2019, the banking system remains somewhat robust. The consistent
increase in both the banking industry total assets since November 2019 and total
deposits since August 2019 apparently demonstrates some internal resilience
within the industry. If the COVID-19 crisis becomes prolonged and the banks
experience any further increases in the non-performing loans ratio, then the
Central Bank and the Government may need to introduce some policy
measures to forestall any possible short-term banking distress.
Decision:
Given the severity of the COVID-19 pandemic globally and its rising trend in
Nigeria at the time of this meeting, monetary policy changes at this early
containment phase will have limited effectiveness. While moves to enhance
monetary policy accommodation at this time may be good to send future

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market signals, its ability to stimulate domestic output in this immediate period
when there are both supply and demand sides disruptions is highly doubtful.
What may be needed now, are short term measures to ensure enough liquidity
in the financial system while the pandemic containment phase lasts. These
measures should support any existing fiscal measures to cushion the adverse
effects on vulnerable groups. Once the pandemic outbreak ceases, policy
adjustments will have more meaningful impact of accelerating demand
recovery and boosting investment confidence. It is necessary that the
monetary policy decisions now should align with the current inflationary realities
and the need to mitigate future risks to financial stability.
My opinion therefore, is that policy parameters should remain largely
unchanged at this March 2020 MPC meeting. I will thus vote to:
• Retain the MPR at 13.5 %
• Retain the CRR at 27.5%
• Retain the Asymmetric Corridor at +200/-500 basis points around the MPR
• Retain the Liquidity Ratio at 30.0%

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5. BALAMI, DAHIRU HASSAN
GLOBAL ECONOMIC AND FINANCIAL ENVIRONMENT
Global Growth
In year 2020, the global economy started with a hint of recovery, owing to
positive outlook such as the US-China trade negotiations, successful resolution of
the BREXIT crisis and growth in the manufacturing sector. However, shocks
shattered hopes of higher level of growth emerged in the Q1 2020. These
include the Corona Virus pandemic which started in China; oil price war
between Saudi Arabia and Russia on crude oil production cut as Russia and its
allies stand firm against production cut; US/China trade dispute remains largely
unresolved; negotiations with the European Union (EU) and the United Kingdom
(UK) have still not been fully resolved, with the UK threatening to pull out and
pursue a no deal BREXIT, if the EU remains rigid.
These developments will affect the global growth. The International Monetary
Fund (IMF) had earlier estimated global output growth at 3.3 percent in 2020,
from 2.9 percent in 2019 due largely to the Corona Virus pandemic, shocks to
travel and tourism, along with the fall in Chinese exports in the first two months of
2020. These would lead to lower demand for our crude oil, increase the level of
unemployment, business failures, reduce economic activities, as well as weaken
demand for non-essential items globally and domestically.
Growth in Advanced Economies has been marked down to 1.6 percent in 2020,
from 1.7 percent in 2019. In the Emerging Market Economies, output growth is
expected to slow down, while in Europe growth is expected to fall to 1.4 percent
in 2020 from 1.5 percent in 2019. In Africa, output growth is expected to rise to
3.9 percent in 2020 from 3.4 in 2019, due to moderate expansion in the
continent’s “big Five” (Algeria, Egypt, Morocco, Nigeria, South Africa).

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The evolving global trend has implications for the Nigerian Economy. It is
estimated that the Nigeria’s major trading partners like China and Russia, have
also been hit by the nibbling effects of the virus resulting in broken supply chains.
These would also result in large decline in both Foreign Direct Investments (FDIs)
and Foreign Portfolio Investments (FPIs) to Nigeria. This has Implications for the
external reserves and the foreign exchange market.
The return to monetary accommodation led by the US federal reserves, implies a
huge capital outflow from the Nigerian economy to safer assets such as gold.
This may require Nigeria’s government to refocus its attention on gold reserves in
the country, diversify its external reserves from oil, the primary foreign exchange
earner due to the crash in price and demand. As a consequence, the Nigeria
economy will be hit with significant revenue shock in the absences of buffers.
The shock to the economy of major oil exporters like Nigeria could lead to
depletion of their foreign reserves. This may weaken the naira, if the situation
persists, heightened the downturn in the Nigerian Stock Exchange, weakened
domestic aggregate demand, increase unemployment, and overall presents
challenging business environment that would dampen growth in Nigeria.

Global Exchange Rates
The effect on global currencies showed that the British pound, euro, and Russian
rubble depreciated against the US dollar by 3.98, 0.91 and 6.45 percent,
respectively. In Asia, the Japanese yen and the Chinese yuan appreciated
marginally by 1.2 and 0.5 percent, respectively, against the US dollar, while the
Indian rupee depreciated against the US dollar by 2.56 percent. In North
America, the Canadian dollar and Mexican Peso depreciated by 3.02 and 2.94
percent respectively. In South America, the Brazilian Real, Argentine Peso and
Columbian Peso depreciated by 11.61, 3.99 and 2.16 percent, respectively.
However, in Africa, the Ghanaian cedi and Egyptian pound appreciated by

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5.77 and 2.56 percent respectively, while the South African and Kenyan shillings
depreciated by 8.77 and 1.27, percent respectively.

Policy Rates
In the developed economies, the US Federal Reserve Bank and Bank of England
cut their policy rates by 50 basis points, while in Emerging Markets and
Developing economies (EMDEs), Russia cut its policy rate by 25 basis points, and
Reserve Bank of South Africa by 100 basis points. Kenya, Brazil, Russia, China and
Indonesia had also lowered their rates in response to broad weakening of the
global economy, while the Reserve Bank of India maintained their policy rate in
response to the need for economic stabilization.

DOMESTIC ECONOMIC AND FINANCIAL ENVIRONMENT
Output Growth
National Bureau of Statistics (NBS) 4th Quarter 2019 data showed that GDP grew
by 2.55 percent compared to 2.28 percent in 2020. Growth was driven by the
non-oil sector mainly finance, insurance and information and communication
technology, entertainment and recreation, food, services, agriculture, and
industry sub-sector. Oil gdp grow by 6.36 percent lower than 6.49 recorded in
the last quarter of 2019. This was due to the decline in crude oil output from
1.91million bpd in 3Q 2019 to 1.8 million bpd in 4Q 2019.
The expansion in non-oil Gross Domestic Product (gdp) was driven by finance,
insurance, information and communication technology. Growth in the economy
is depicted by expansion of purchasers’ managers index, relative stable
exchange rates, rising consumer loan, and credit to the manufacturing sector.
The headwinds to growth which include oil price volatility, lack of fiscal buffers,
security challenges, infrastructure shortage, and novel corona virus pandemic,
have crushed the hopes for stronger growth in 2020. Overall the macro
economy remains relatively weak.

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Domestic Inflation
Inflation in the domestic economy inched up from 12.13 percent in January 2020
to 12.20 percent in February 2020, due to monetary and structural factors. It
should be noted that an inflation rate of more than 12 percent is inimical to
growth in the Nigerian economy. Some of the structural factors include
decaying infrastructure, shortage of food due to insecurity in major food
producing areas of the North-East and North-West, border closure, and the
emergence of the novel coronavirus and its impact, due to social and
economic shutdown. It should be noted that the adjustment of the exchange
rate at the I&E to N380/US$ from N360/US$ is inflationary, along with increase in
food inflation could be major contributors to inflation in Nigeria.

Financial Soundness Indicators
Stress tests for Deposit Money Banks (DMBs) show that Capital Adequacy Ratio
(CAR) has improved from the level in December 2019. The Non-Performing Loans
(NPLs) ratio performance at 6.1 percent as at December 2019 is also
commendable because it is close to the prudential requirement maximum of 5
percent. Furthermore, the Liquidity Ratio (LR) of the industry was above the
prudential requirement of 30 percent and comparable to that of Turkey, South
Africa and Malaysia. Likewise, the Return on Assets (ROA) of 1.9 percent was
also laudable. Lastly, the Return on Equity (ROE) at 20.5 percent is above most of
similar countries such as Turkey at 13.3 percent; South Africa, 18.7 percent; and
Malaysia, 13.3 percent. This clearly shows that the banking industry system is
stable. However, it should be noted that the headwind affecting the banking
system include the following: credit fault, credit concentration, liquidity,
solvency, increasing cybercrime, and the side effect of corona virus pandemic.
The CBN should therefore continue to monitor the performance of the DMBS
and intervene appropriately.

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Policy Choice
On the basis of the above analysis, the three policy options are to tighten,
loosen or to hold. The monetary stance is already tight, therefore there is no
need to adjust or tinker the Monetary Policy Rate and the Cash Reserve Ratio
(CRR), because raising these tools will negatively affect growth. On the other
hand, loosening will be inflationary, and contradict the Bank’s earlier policies,
hence the Bank should hold all parameters to allow the earlier polices and the
current interventions taken by the Central Bank to work its way through. The
Central Bank’s interventions should be encouraged and maintained.
Given the weak public revenue profile, exchange rate stability is essential to
support the current outlook, besides, there is need to give assurance to the
market. The monetary policy decision should be made to attract both foreign
direct investment and foreign portfolio investment. Therefore, the need for
cooperation between monetary and fiscal authorities is indispensable, as it
relates to developing strategic policies to manage the impact of the corona
virus pandemic. As highlighted earlier, economic growth should be the
responsibility of fiscal authorities, while monetary policy should play a
complimentary role. Notably, government finance would be negatively
impacted by low crude export receipts. The budget which is riddled with high
recurrent expenditure needs to be drastically reduced.
In addition to the above, the CBN should continue to monitor developments in
the financial sector, recommend, implement and monitor the appropriate
management tools.
Based on the above analysis, I vote to hold, therefore, to retain:
i.
The Monetary Policy Rate (MPR) at 13.50%,
ii.
The Cash Reserve Ratio (CRR) at 27.50%,
iii.
The Liquidity Ratio (LR) at 30.00%
iv.
To retain the asymmetric corridor at +200 / -500 basis points.

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6. OBADAN, MIKE IDIAHI
The 272nd meeting of the Monetary Policy Committee was held against the
backdrop of the coronavirus (also called COVID-19) pandemic which has
spread like wild fire to about 148 countries with devastating effects on the global
economy and individual economies. In some severely-hit countries, the spread
of the disease has taken a geometric dimension with the death rate also
assuming the same character. The micro and macro-economic impact of the
disease is such that recession is feared in the global economy and many
individual economies, prompting governments to roll out stimulus packages.
THE CORONAVIRUS PANDEMIC AND THE GLOBAL ECONOMY
In an effort to contain the coronavirus disease, the Chinese economy, where
the outbreak first occured, has been locked down and many businesses and
firms shut down, setting the stage for contraction of economic activities. Indeed,
the Chinese economy is expected to slow considerably in 2020 from the 6.1
percent growth in 2019. Many other countries where the virus has berthed, have
taken similar containment measures with significant threat to global growth,
trade and financial flows. In other words, considering the containment measures
taken by countries so far, coronavirus has resulted in a retrenchment of
globalisation with negative implications for growth, trade, financial flows,
inflation and welfare. China is the world’s second largest economy and the
largest importer of crude oil. Its impact on global trade and growth is significant.
With the corona virus, the initial expectations of improved global growth in 2020
have subdued and agencies like the IMF and OECD have cut their growth
projections. For Nigeria, China is the largest source of imports. It also buys some
of Nigeria’s oil and gas and other exports. With the developments in China and
other
countries
where
the
coronavirus
has
taken
firm
root,
global
macroeconomic stability is under serious threat as portrayed by the following:

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• Highly reduced growth projections because of lockdown of major
economies. A fall in global growth of output could disrupt supply chain of
manufacturing inputs, decreasing domestic productivity, increasing
unemployment and macroeconomic instability.
• High likelihood of global recession in 2020 considering the lockdowns and
travel restrictions in several countries including China, United States and
European countries.
• Weakened global trade. Global trade in 2020 is expected to further drop
to below the 1.4 percent recorded in 2019 due to prolonged trade wars
and disruption in supply chains occasioned by the coronavirus pandemic.
• Global financial market volatility with corporate debt building up at
unsustainable levels across several advanced economies. Several global
stock markets across the globe have plunged, recording huge losses.
March 9, 2020 recorded the highest single day loss since 2008 as the US
Dow Jones Industrial Average (Dow Jones), National Association of
Securities Dealers Automated Quotations (NASDAQ) and Standard and
Paul (S&P) 500 indices fell by 7.79, 7.29 and 7.60 percent, respectively.
• Increased inflation prospects due to widespread recourse to monetary
accommodation by many countries as a response to the coronavirus.
• Heightened unemployment in the major affected countries as a result of
the shutdowns and lockdowns.
• Collapsed crude oil market with oil prices dropping from about US$ 65.0
per barrel in January 2020 to about US$ 26.0 per barrel as at March 20,
2020, reflecting highly reduced demand and increased supply due to
inability of OPEC+ countries to agree on production cuts, price war
between Saudi Arabia and Russia and United States’ shale oil policy.
World oil demand for 2020 has been revised from 100.65 mb/d to 99.73
mb/d, while supply is expected to increase from 100.6 mb/d in 2019 to
102.09 mb/d in 2020.

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• Microeconomic impact on individuals, households and firms, especially
those affected by the shutdowns, lockdowns, travel restrictions and those
in the aviation and travel/tourism industry. These groups have suffered
different forms of economic losses and/or social dislocations which need
to be addressed.
In order to address the above issues at the country level, several governments
have responded with various fiscal stimulus packages and monetary
accommodation measures entailing downward policy rate adjustment and
quantitative easing, among others, especially to encourage investment,
stimulate aggregate demand, sustain employment and avert recession.
CORONAVIRUS AND THE NIGERIAN ECONOMY
Certain features of the Nigerian economy make the country to be very
vulnerable to the impact of the coronavirus. The economy is highly open and
strongly connected to the rest of the global economy through trade and
financial flows. The economy is not diversified in any meaningful sense. It relies
rather precariously on crude oil production and export for the bulk of its
domestic revenue and foreign exchange earnings. Oil revenue propels over 50
percent of the Nigerian economy. The country has no fiscal buffers to fall back
on when there are unfavourable disturbances in the world oil market as is
currently the case as a fall-out of the corona virus pandemic. The Excess Crude
Account is less than US$ 80.0 million while the Sovereign Wealth Fund has about
US$ 2.0 billion compared to Saudi Arabia’s over US$ 500.00 billion. Nigeria thus
has very limited financial capacity to deal with the social and economic impact
of the coronavirus.
In other countries experiencing lockdowns and shutdowns, the corona virus has
had both macro and microeconomic impact. So far, in Nigeria, the very visible
impact has been macro in nature, especially in relation to government finances

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and macroeconomic performance. Now that the virus has begun to spread
with 46 confirmed cases, necessitating restrictions in movements and gradual
lockdowns affecting the production and distribution enterprises, the likelihood is
that the impact will become visible on individuals (whose means of livelihood
depends on their daily efforts), households and firms, thus eliciting the kind of
fiscal responses in the USA and Europe where the virus has intensified.
Meanwhile, the following current features of the Nigerian economy should guide
the monetary policy response.
• Reduced growth projections and possibility of the economy slipping into
recession, thus reversing the gains made in the past one year. The
Nigerian economy showed signs of encouraging recovery in 2019 with
increasing growth rates each succeeding quarter culminating in 2.55
percent in the fourth quarter and an average of 2.27 percent for the
whole year. That growth is now threatened by numerous factors: COVID19-induced lockdowns and input supply disruptions arising from limited or
no imports, rising inflation, high unemployment rate, crude oil market
collapse, depleting external reserves, contraction in capital inflows,
balance of payments pressures, rise in fiscal deficits and public debt level,
continued herdsmen-farmers clashes, etc.
• Increased inflation rate as a result of the legacy factors and possible
supply shortages because of the retrenchment of globalisation. All
measures of inflation (headline, food, core) increased further in February
2020 with the headline inflation moving into the zone which is considered
anti-growth. The headline inflation has moved further away from the
target threshold of 6 - 9 percent.
• Notable drop in expected government revenue due to the sharp drop in
oil prices and exports. Even when the oil market was still stable, the

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Federal Government retained revenue decreased from N557.79 billion in
October 2019 to N369.49 billion in December.
• Increasing borrowing to finance growing fiscal deficits and associated
public debt accumulation. At the end of 2019, the overall Federal
Government fiscal deficit stood at –N4,838.79 billion, far above the
budgeted deficit. Less financing through domestic borrowing of N912.82
billion, the net overall deficit stood at –N3,925.97 billion for possible
inflationary monetary financing.
• Weak balance of payments position and declining foreign exchange
reserves. In quarter 4 of 2019, the overall balance of payments recorded a
deficit of -US$2,624.89 million, while the external reserves declined from
US$38.07 billion in December 2019 to US$34.9 billion in March 2020.
• Threats to foreign exchange market and exchange rate stability. The
threats arise from declining external reserves and escalating capital
outflows due to market uncertainties and volatilities.
• Stock market collapse and heightened capital outflows. The All-Share
Index declined by 17.3 percent to 22,198.43 index points on March 20,
2020 from 26,842.07 index points at end December 2019 driven by
increased financial market volatility, foreign exchange market pressure
and concerns over the impact of coronavirus.
The above features are most likely to be exacerbated by the coronavirus
pandemic. At a time when Nigeria’s economic growth, which had been weak
and fragile since 2016, was beginning to show signs of improvement, the
coronavirus is posing a notable threat to the growth prospects with fears of a
likely return to the stag-flationary era.
Therefore, the key issues to consider in the monetary policy decision relate to the
need to:
• Support growth and employment and prevent recession

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• Rein in inflation which has trended up uncomfortably for sometime and
which will worsen if unaddressed in the corona virus era
• Check capital outflows and support external reserves accretion
• Reduce pressure and ensure stability in the foreign exchange market
Generally, price and monetary stability remains the primary responsibility of the
Bank. Consequently, it will only complement the efforts of the fiscal authority in
addressing the growth objective. This, the Bank can continue to do through its
unconventional monetary policy measures while the fiscal authority takes the
lead in promoting growth.
OTHER POINTS OF NOTE
For some time, various indicators have pointed to a misalignment of the
exchange rate in an environment of dwindling external reserves and intensified
market pressure and so the recent exchange rate adjustment is in order. But
there is need to dampen uncertainties and speculation in the foreign exchange
market. This means that assurance needs to be given to the market to the effect
that the Bank will continue to do the needful to maintain a stable exchange
rate in the context of a managed float exchange rate system. Finally, the
monetary policy decision should support the need for external reserves
accretion through capital inflows. The current monetary accommodation
stances of the advanced and EMDEs provide an opportunity to attract capital
inflows given the right policies and environment. Nigeria has the balance of
advantage in relative returns to investment.
The government needs to be reminded that the current situation is grave; the
dreaded disease is being battled at a time the country is facing a serious
revenue challenge unlike the advanced countries where the virus is also being
battled. It is a situation whereby the country is consuming more than its income.
In a period when the rest of the world is struggling for survival, the prospects of

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getting foreign assistance including loans are dim for now. The government
would therefore need to look inwards, undertake adjustment by cutting luxurious
and inefficient expenditures and explore imaginative options for revenue
generation. Inefficient expenditures include the huge petrol subsidy payments
with high opportunity cost. The government should use the opportunity of the
low crude oil prices which has robbed off positively on pump prices in the
country to deregulate the petroleum downstream sub-sector and free the
economy of burdensome subsidy payments.
As the economy gradually locks down, it is not clear as to the feasibility of
gathering information in support of evidence-based public policy responses,
especially with respect to the microeconomic impact. Nevertheless, there is a
group of individuals who are going to be adversely impacted by the lockdowns.
These are the individuals who may lose their jobs and/or lose their means of
livelihood because of the nature of their occupations as daily-paid workers,
artisans, traders and others. For this group to have succour, the government may
need to consider setting up a fund (COVID-19 Relief Fund) with the support of
stakeholders. With assistance they should be able to maintain a certain amount
of consumption and boost aggregate demand. It is a socio-economic initiative
that the government should consider seriously.
Finally, two crucial lessons need to be learnt from the economic impact of the
coronavirus pandemic: First, is the need to build fiscal buffers to eliminate panic
and anxiety on the part of the government in difficult times like we are in.
Second, is the need to take the diversification of the economy very seriously. A
country whose economy is diversified has a much greater capacity to respond
to the present type of socio-economic crisis than a country like Nigeria that is
commodity dependent and lacks meaningful diversification.

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MONETARY POLICY OPINION
It is important to stress that monetary policy decisions need to be taken with a
view to achieving a clear objective(s); they should not be taken because other
countries have taken similar decisions as circumstances tend to differ. For
example, in the present situation that is conditioned by the coronavirus
pandemic, the infected advanced countries are battling to redress the
unemployment, loss of revenue and loss of demand arising from the shutdowns
of their economies; consequently, monetary easing and fiscal stimulus packages
are being implemented to stimulate aggregate demand and avert recession.
This contrasts with the Nigerian situation where the micro impact is limited as at
now, but could be high in the event of serious lockdowns aimed at combatting
the virus.
The current monetary policy stance in Nigeria is already tight with MPR at 13.5
percent and CRR at 27.5 percent. It will not be desirable under the present
circumstance to raise them. Raising the MPR will be interpreted by the deposit
money banks (DMBs) as a signal to raise their lending rates which will neutralise
the gains under the Loans-to-Deposit Ratio policy. Reducing the MPR to entice
DMBs to reduce lending rates will be an academic exercise as they relate to the
MPR in an asymmetrical way.
In light of the foregoing, I vote to retain the policy decision parameters at their
current levels, while the Bank will vigorously implement the extant intervention
measures and those recently rolled out, specifically, in response to the impact of
the corona virus pandemic.

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7. OBIORA, KINGSLEY ISITUA
In light of the unprecedented, yet unfolding, impact of the
COVID-19 pandemic, and in support of the measures already
announced by the Management of the CBN to mitigate these
effects, I voted to retain the MPR at 13.5 percent, the CRR at
27.5 percent, the LR at 30 percent, and the asymmetric corridor
of +200/-500 basis points around the MPR. This stance allows for
better dimensioning of the effects and preserves the flexibility
for further actions once they are fully calibrated.

The December 2019 outbreak of the Novel Coronavirus Disease (COVID-19) in
China has fundamentally altered the global economy. Although this is first and
foremost a public health crisis, the spillover economic damages are already
unparalleled in many ways: stock valuations for the Nikkei, Dow Jones and FTSE
100 have declined by 22.2, 24.1, and 28.8 per cent, respectively; global airlines
have lost about US$252 billion in revenues, due to sharp decline in average
global flights from 188,901 daily to 69,508 as of 28 March 2020; year-on-year car
sales in China sank a record 80 percent in February 2020, while exports fell by
17.2 percent for January and February combined; cancelled and/or postponed
events have cost the sports and entertainment industry more than US$10 billion;
close to 10 million Americans filed for unemployment benefits in the first two
weeks of March, and many analysts expect U.S. unemployment rate would spike
to about 15 percent in the coming months, which would be the highest such
number in over 70 years.
This impact has also been drastic on the domestic front, with the most
immediate spillover reflecting in the price of crude oil. Global crude oil prices fell
from about US$63 per barrel in January to as low as US$17 per barrel by the end
of March. Given that oil contributes a large share of both revenues for the
government and reserves for the Central Bank, I cannot exaggerate the effect

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of this slump, especially as the 2020 Budget was planned with a US$57 per barrel
oil price benchmark. Furthermore, many foreign investors have, as usual, settled
their fears on the side of caution, and withdrawn investments from the Nigerian
Stock Exchange, with about N2.3 trillion wiped off in losses in the three weeks
following the first confirmed case of the virus in the country. In addition,
widespread local and international travel restrictions and supply disruptions
have dramatically changed the way we live at the moment.
Regrettably, these outcomes are a setback for the promising signs of progress in
the economy, particularly in the fourth quarter of 2019. Growth was gradually
picking up from 1.6 percent contraction in 2016 to 2.1 percent expansion over
the next three years. During the fourth quarter of 2019, the country recorded a
2.55 percent growth rate, its highest quarterly growth since the 2016 recession.
This fourth quarter performance culminated in a 2.3 percent year-on-year GDP
growth for 2019, largely driven by the non-oil sector, which increased to 2.26
percent in the fourth quarter of 2019 from 1.85 percent in the third quarter of
2019. Similarly, the agriculture sector grew marginally by 2.31 percent in the
fourth quarter of 2019 from 2.28 percent in the third quarter of 2019. Although
headline inflation rose to 12.2 percent in February 2020, it did so at a decreasing
rate when compared with the 12.13 percent rate in January 2020. While food
inflation increased by 14.9 percent in February 2020, the rate of increase was
0.12 percentage point lower than it was in January 2020. To my mind, these
were preliminary signs that inflation may have plateaued and ready to turn the
corner towards a deceleration.
There were also significant improvements in the financial system, reflecting
proactive policies by the Central Bank. The policy on Loan-to-Deposit Ratio
(LDR) appears to have boosted lending to key sectors of the economy, as credit
increased by N2.35 trillion between end-May 2019 to mid-March 2020. This credit
expansion was largely recorded in manufacturing, consumer credit, general
commerce, ICT, and agriculture. Reflecting recoveries, write-offs and disposals,

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non-performing loans (NPLs) decreased to 6.54 percent at the end of February
2020, compared to 11.28 percent in the corresponding period of 2019. Shortterm interest rates continue to suggest some surfeit in the system with average
Open Buy Back (OBB) and inter-bank call rates opening at 9.40 and 10.50
percent on January 27, 2020, and closing at 15.50 and 16.42 percent on
February 28, 2020, respectively. As of end-February 2020, gross external reserves
stood at US$36.5 billion, representing a decrease of 0.54 percent or US$199.52
million when compared with US$36.730 billion at the end of January 2020. This
outcome largely reflects lower-than-anticipated receipts from oil revenues and
the outflow of funds by portfolio investors in the wake of the COVID-19 outbreak.
In light of a somewhat hazy economic outlook, I believe that the Central Bank
must remain vigilant and retain the flexibility to act at short notice. No one knows
for sure the length and depth of potential effects of this pandemic on key
macroeconomic variables. But it does appear that the net effect of the
associated temporary supply shocks and the reductions in the price of PMS
would be a slight moderation in both inflationary and related fiscal pressures in
the coming months. At the moment, many financial sector indicators suggest
that the industry remains safe and sound, but several downside risks may
materialize in the short term, particularly those related to loan exposures. This
implies that both the Central Bank and Deposit Money Banks (DMBs) must be
ready with nimble and effective strategies to contain and/or mitigate these risks.
That is why I support the recent policies by the Central Bank that grants
regulatory forbearance allowing DMBs to restructure existing loans, while also
providing immediate reprieve to households and businesses through interest rate
reduction and moratorium on both new and existing loans. These policies also
provide direct credit facility to the healthcare industry, and strengthens the LDR
policy to ensure greater flow of credit to other key sectors at this critical time. I
believe that these measures are already helping to cushion the worst effects of
the crisis on the economy.

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I also think that coordinated and targeted policies are needed to ensure we do
not
waste
the
latent
opportunities
presented
by
this
pandemic.
As
aforementioned, this is first and foremost a public health problem, and as such,
the most immediate priority is clearly to keep people as healthy and safe as
possible. Precautionary and temporary measures would be needed to limit the
reproductive rate of the disease using travel/movement restrictions, closures of
all forms of public gathering, and voluntary/involuntary quarantines. All of these
require policy coordination at the highest levels of the government. More also,
considering that the economic fallout would not be even or symmetric and may
be more acute in specific sectors, coordination is required to objectively
dimension
these
effects,
design
appropriate
policies
and
implement targeted fiscal, monetary, and financial market measures to help
affected households, corporates and aspects of government operations. This
could entail using new realities to re-prioritize both revenues and expenditures in
the entire budget, undertake more aggressive health awareness campaigns,
and provide temporary and targeted stimulus to help households and
businesses stay afloat. Alongside these measures, however, we must also harness
the opportunities being presented by this pandemic. For example, the ongoing
supply shocks in processed food, ICT, personal healthcare and medical services
clearly offer opportunities for investments, job creation and local sourcing of
production inputs that could all boost economic growth in the near-term.
While awaiting the unfolding magnitude of effects and the incipient adjustments
from the policy actions of the Central Bank, I believe the best course of action at
this meeting is to leave our policy parameters unchanged. In light of the
uncertainty of the outlook for economy in the short- to -near-term, and in
support for the immediate policy actions already taken by the Bank’s
Management, I voted to:

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1. Retain the Monetary Policy Rate (MPR) at 13.5 percent;
2. Retain the Cash Reserve Requirement (CRR) at 27.5 percent;
3. Retain the Liquidity Ratio (LR) at 30.0 percent; and
4. Retain the asymmetric corridor at +200/–500 basis points around the MPR.

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8. SANUSI, ALIYU RAFINDADI
1.0
Decision:
My perception of the multi-dimensional effect of the COVID-19 global
pandemic on the domestic output and inflation informed my decision to hold all
the parameters unchanged. In my opinion, the appropriate public health policy
measures required to curb the spread of the virus (local and international travel
restrictions, border closure, social distancing or complete lockdown), would
necessarily reduce output at best, or lead to a recession. This recession would
result from the effect of the containment measures on both Demand-side and
Supply-side of the economy. During this period, therefore, monetary policy
response must strike a delicate balance in addressing the demand-side and
supply-side effects of the shock so that in doing so, the policy does not
exacerbate the inflationary pressure already observed before the shock. In my
opinion, therefore, monetary policy should not boost the Aggregate Demand
when the lockdown measures limit the scope of Aggregate Supply to
adequately increase. The already announced targeted interventions are
appropriately directed at supporting production and distribution in the health
sector so as to shorten the duration of the pandemic as well as support the few
businesses that remain operational during the pandemic. In the postcontainment period, these interventions would facilitate fast-recovery. Easing
the monetary policy stance, at the moment, is therefore inconsistent with the
appropriate public health containment policy. As the probability of global
economic recession rises, with attendant implications on the domestic output, a
policy-induced stagflation environment must be avoided.

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2.0
Background and Justification
2.1
Global Economic Developments
The necessary epidemiological solution to the outbreak of the COVID-19 that is
fast spreading across the world has induced a global economic recession.
Economic response to this shock must, therefore, focus on ensuring that the
recession is both short-lived and the recovery is V-shaped.
The global economic environment was hit by a debilitating global response to
an unprecedented global health pandemic. The highly infectious coronavirus
disease (COVID-19), which started in China, has been ravaging the world with
unprecedented speed. In addition to the international travel restrictions since
January 23, 2020, the global public health policy response to reduce the peak
critical care demand in the affected countries was a combination of caseisolation, home quarantine and population-wide social distancing. Workers
were, therefore, asked to work from home; schools, sports & entertainment
events, bars, restaurants and markets were shut down. As the number of COVID19 cases outside China continues to accelerate rapidly, the chances of
economic shutdown increases as more of the heavily affected countries impose
these public health containment measures. These measures will continue to
cause significant disruptions in the global supply chain, increase uncertainty and
threaten global investments, trade, capital flows and increase the vulnerability
of the global financial markets. At the global level, therefore, the public health
response to containing the spread of COVID-19 is an intentionally-induced
unavoidable economic recession.
Before the global outbreak, the global macroeconomic environment had
already started showing clear signs of weakness due to weak growth and risk of
recession in the advanced economies and Emerging Market and Developing
Economies (EMDEs) as well as the lingering trade war. This weakness was

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reflected in slower output growth, losses in major financial markets, rising
corporate debt in advanced economies and public debt in EMDEs. Several
global output growth projections were, therefore, already revised downwards.
For instance, OECD cut its forecasts for global output growth in 2020 from the
earlier 2.5% announced to 2.4%. On account of the COVID-19 outbreak, Fitch
has reduced its projection for global growth in 2020 from 2.6% to 1.3%.
Inflation in the Advanced Economies is projected to rise by 1.7% in 2020 from
1.5% in 2019. Except in the US, inflation in the Advanced Economies continued to
trend below their long-run target in February 2020. In the Euro area, inflation
decreased to 1.2% in February 2020 compared to 1.4% in January 2020, mainly
due to declining energy prices. In the US, inflation fell from 2.5% in January 2020
to 2.3% in February 2020 due to the declining energy costs. In Japan, inflation
also decreased from 0.8% in January 2020 to 0.7% in February 2020 due to a
decrease in fuel prices and utilities. The combination of weak output and
declining inflation that is below its long-term target, monetary policy easing
could be an appropriate response to the COVID-19 pandemic in these
economies.
Apart from the effect of COVID-19 on global demand for crude oil, the
declining demand from China, as well as the warmer-than-expected winter in
the Northern Hemisphere, had already caused over-supply in the international
oil market. The failure of the OPEC+ to reach agreement on production cut
(December 2019 and March 2020) ignited an oil price war between Saudi
Arabia and Russia that has led to the oil price crash. As at March 11 2020, the
price of Bonny Light stood at US$36 per barrel compared with US$67 per barrel
on January 8, 2020, and by March 20, 2020, Bonny light has declined to US$26.07
per barrel. Given the effect of the COVID-19 on global demand, failure of
production cut agreement by the OPEC+, the global oil market will continue to
be volatile with price remaining low. This volatility has serious implication on

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Nigeria's international reserves accretion as well as the Government's' fiscal
revenue.
2.2
Domestic Economic Developments and their Implications
Data from the NBS shows that output recovery continued in the fourth quarter of
2019, with the quarterly real output growth of 2.55% in Q4 2019. The annual
growth of real output for the year 2019 was 2.27%, which is 0.38 percentage
points above the 1.9% achieved in 2018. In Q4 2020, the output growth was
driven by both oil and non-oil sectors. The non-oil sector, which contributed
92.68% of the real GDP, grew by 2.27% in Q4 2019 compared with 1.85% in the
preceding quarter. Industry (2.75%) Services (2.60%) and Agriculture (2.31%)
were the key drivers of the non-oil GDP growth in Q4 2019. Oil GDP, which
contributed 7.32% of the real GDP, grew by 6.36% in Q4 2020, which is lower
than achieved in Q3 2019. The decline in the growth of oil GDP during the
quarter was attributable to the fall in oil output from 1.91mb/d in Q3 2019 to
1.84mb/d in Q4 2019. Although lower than desired, the output growth in Q4 2019
is the highest rate recorded since the 2016 recession and reflects the effects of
the massive increase in credit flows to the economy induced by the Bank’s LDR
policy during the period.
As noted earlier, however, the outlook for the rest of the year remains poor as
Nigeria joins the rest of the world in enforcing the public health containment
measures against the spread of the COVID-19. As major cities and urban centres
lockdown, real output would necessarily decline in what can be seen as an
intentional and unavoidable recession. The depth and length of this inevitable
recession will depend on how successful these public health measures
(domestic and global) are in containing the spread of the virus as well as the
appropriateness of the fiscal and monetary policy responses to the economic
consequences of this public health crisis. Staff forecasts suggest that, in Q4 2020,

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real output growth decline on account of weak global demand due to the
COVID-19 and developments in the crude oil market.
Available data from NBS shows that, in February 2020, inflation has continued on
the upward trajectory, which started since September 2019 following the closure
of all land borders on August 20, 2019. Headline inflation (year-on-year) has
increased to 12.20% in February 2020, compared with 12.13% in January 2020.
The increase was mainly due to increases in food & non-alcoholic beverages
and core inflation. Food inflation (year-on-year) increased from 14.85% in
January 2020 to 14.90% in February 2020. The key components that drive food
price developments include processed foods, garri and vegetables. Imported
food prices increased by 2.51 percentage points in February 2020. Core
inflation increased (year-on-year) to 9.45 % in February 2020 from 9.35% in
January 2020. The increase in core inflation was driven by processed foods;
clothing and footwear; housing; water; gas & other fuel; furnishing; household
equipment & household maintenance. On the month-on-month basis,
however, headline inflation declined from 0.87% in January 2020 to 0.79% in
February 2020. Both the food and core components have also declined (monthon-month) in February 2020. According to staff forecasts, inflation would
continue an upward trajectory. The upside risks to inflation include increased
shortages induced by the containment measures against the COVID-19
pandemic; increased foreign exchange market pressure; and high cost of
imported food arising from the border closure.
Review of the Banking System Stability Report shows that the banking system
continues to be stable and resilient. The Non-performing loan (NPLs) ratio
decreased from 6.59% in January 2020 to 6.54% in February 2020. Total assets of
the industry have grown from N38.57 trillion in November 2019 to N42.89 trillion in
February 2020. Total credit to the economy has also continued to increase from
about N15.69 trillion in February 2019 to N17.62 trillion in February 2020. Since the

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introduction of the LDR policy, total credit has increased by N2.35 trillion
between end-May 2019 and March 17, 2020. Manufacturing, consumer credit,
general commerce, ICT and agriculture continue to receive the highest share of
this new credit.
Owing to the outbreak of COVID-19, the CBN has announced several policy
measures and interventions to mitigate the adverse effect of the pandemic on
the economy. These measures include an extended moratorium on loans by
one year to ease repayments given the cashflow disruptions; reduction of
interest rate on all interventions from 9% to 5% over the next one year;
introduction of time-limited regulatory forbearance for DMBs to temporarily
restructure terms of loans and tenors to businesses and households affected by
the COVID-19 containment measures; and a total of N3.5 trillion in various
targeted interventions to support the economy during the difficult times,
including support for local pharmaceutical firms to manufacture the drugs and
medical supplies needed in the fight against the pandemic.
3.0
The Basis for My Policy Choice
The appropriate scientific measure of combating the COVID-19 health
pandemic across the world necessitates slowing down of production, as all
economic activities that involve physical interaction would drastically reduce.
These measures, as I noted earlier, imply that economic recession is
unavoidable, and output will contract as firms either require workers to work
from home or completely shut down in major cities. Because the supply chain is
also disrupted, unaffected businesses would suffer rising costs and slower
production activities. The stay-at-home measure also implies that household
consumption would significantly fall not only because of the implied income
losses,A but also as many bases for expenditure are unfeasible. This suggests that
the COVID-19 measures would reduce both Aggregate Supply, as firms produce
less, and depress the Aggregate Demand as consumption declines. The effect

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of this measure on output and inflation, therefore, depends on its relative impact
on the Aggregate Demand and Aggregate Supply. Given that, even before the
emergence of COVID-19, inflation was trending on upward trajectory owing to
the scarcity that followed the land border closure, I am convinced that the
effect would be disproportionally more significant on the Aggregate Supply. This
would further raise the inflationary pressure amidst contracting output (leading
to stagflation). Given that production must fall, an appropriate monetary policy
response should therefore not seek to boost AD when the scope for increasing
AS is limited. On the one hand, the effect of a conventional monetary policy
easing will be to raise the Aggregate Demand at a time when Aggregate
Supply may not sufficiently increase; this exacerbates the already existing
inflationary pressure. On the other hand, conventional tightening to rein in
inflation would be inconsistent with the state of the economy when the few
businesses that remain operational may suffer from cashflow disruptions and
may need low-cost credit. Indeed, the N3.5 trillion intervention funds already
introduced by the CBN seek to make funding available to such businesses at a
reduced cost. In considering my options, therefore, I am convinced that the
best option is to hold all policy parameters, for now.
Consequently, I voted to:
Retain the MPR at 13.50 per cent;
Retain the CRR at 27.5 per cent;
Retain the asymmetric corridor at +200/–500 basis points around the MPR; and
Retain liquidity ratio at 30.0 per cent.

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9. SHONUBI, FOLASHODUN A.
Coronavirus pandemic (Covid-19) and a troubled global oil market are the
challenges to global and domestic economic growth prospects in 2020. The
public health shock from rapid outbreak of Covid-19 is fast causing widespread
economic paralysis that is set to lead to severe contraction of the global
economy. The resulting demand shock in the oil market, along with the collapse
of the OPEC+ agreement, has created a heavily oversupplied market, with
implications for near-historically low prices. These developments have
aggravated the precarious domestic economic conditions, characterised by
fragile output growth, rising inflation, tighter fiscal space and pressured external
sector. To address the challenges, the Bank must continue to pay attention to
the
fundamentals
and
peculiarities
of
the
domestic
macroeconomic
environment, while implementing policies that are focused on maintaining the
delicate balance of achieving price and monetary stability that is conducive for
economic growth.

Global and Domestic Economic Developments
Prospects of global growth in 2020 is significantly dampened, initially because of
the collapse of global oil market and further aggravated by the outbreak of
Covid-19. The rapid spread of Covid-19 has created global demand shock via
loss of consumer and investment spending, as well as, supply disruption, in terms
of widespread forced shut-downs. This has liquidity and solvency implications for
operators in the real economy, investors and producers. Overall, global growth is
generally subdued, with a high probability for global recession, especially as
Covid-19 shock persists, creating human and economic challenges.
The uptick in domestic inflation continued, as headline inflation rose to 12.20 per
cent in February 2020, from 12.13 per cent in January 2020, on account of rise in
both food and core inflation. Food inflation reached 14.90 per cent at end-

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February 2020, from 14.85 per cent in the previous month. Core inflation also rose
to 9.43 per cent, just as imported food inflation increased for the 6th consecutive
month to 16.14 per cent in February 2020. It is worth noting that headline,
food and core inflation moderated, on month-on-month basis.
Output growth, according to National Bureau of Statistics (NBS) improved to 2.55
per cent in the fourth quarter of 2019, driven by improvement in both oil and
non-oil sector, resulting in overall growth of 2.27 per cent for fiscal 2019. Though
growth continued on a positive trajectory, the expansion rate remained weak
and fragile, underscoring the need for a strengthening of measures designed to
facilitate
continuous
expansion.
Declining
manufacturing
and
nonmanufacturing purchasing manager’s Indices further highlighted slowing
growth.
Sustained resilience of the banking system continued to provide some respite
and hope for promoting expansion of the domestic economy. Though recent lull
in the international oil market and uncertainties in the global economy has led
to some stress, industry financial soundness indicators remained generally within
regulatory thresholds. Aggregate industry credit continued to grow, as a result of
the LDR policy, even as industry capital adequacy ratio improved to 15.0 per
cent at end-February 2020. Slight increase in non-performing loan ratio to 6.5 per
cent, from 6.1 per cent in December 2020, reflected regulatory induced
provisioning, an outcome of targeted risk weighted assets examination for final
account approval. Industry liquidity ratio declined to 44.2 per cent, but
remained well above the regulatory threshold. Return on asset and equity, at 1.9
and 20.5 per cent, respectively, fell slightly, to reflect current lull in the business
environment.
Though liquidity conditions underscore the presence of monetary influence on
inflation, performance of monetary aggregates showed that broad money
supply (M3) contracted by 2.29 per cent at end-February 2020, against the 10.26

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per cent provisional growth benchmark. Low yields on government fixed income
securities continued to impact patronage, while slightly higher money market
rates reflected the effect of net liquidity withdrawals from the banking system.
Developments in the capital market were generally bearish, reflecting the
investors’ concerns about uncertainties in the market.
The fiscal space is characterised by persistent revenue shortfall, on account of
declining proceeds from crude oil sales, due to low global oil demand and
price, thereby causing near-zero capital release, rising deficit and increasing
debt. The squeezed fiscal space has made it more difficult for the Government
to effectively carry out its fiscal operations. The external sector faces severe
difficulties as external reserves continue to decline on account of low foreign
exchange earnings and net capital outflow, which exerts significant pressure on
the exchange rate.
Overall Considerations and Decision
The public health shock of Covid-19 is causing extensive human and economic
challenges, with far-reaching implications for the global economy. Actions by
various government has likened the outbreak to a war-like situation that requires
prompt and aggressive responses. A weakened global economy portends
danger for the Nigerian economy, the effects of which can be further worsened
by escalating outbreak on Covid-19 in the domestic environment. As a first step,
Nigeria must rise to the occasion both as a sovereign nation and in
collaboration with international community, by acting appropriately and
promptly to stop the pandemic, to at least reduce the painful economic
consequence that may follow.
In taking proactive actions to ameliorate the pain of the public health shock on
the domestic economy, we must continue to take actions to rein in inflation,
especially as it becomes inimical to growth, while addressing other impediments

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to growth. Today, the monetary policy rate (MPR) serves more as a reference
rate and a tool for signaling, while the cash reserve ratio has proven to be a
more effective tool for liquidity management. The loan-to-deposit ratio policy is
achieving the credit growth and interest rate reduction targets. Clearly, our
current actions to support growth is working in the right directions and only
requires us to be steadfast, for the full benefit to materialize.
At this juncture, the fiscal authority is advised to be more pragmatic in its
engagement of the issues. As I mentioned in my earlier statements, Government
is encouraged to explore aggressive expenditure rationalisation, including
significant reduction of recurrent expenditure, in the face of persistent revenue
shortfall and consider opportunities to use excess liquidity in the banking sector
for deficit financing.
Though this crisis time provides opportunity for us to reset, our actions must take
cognizance of our economic fundamentals. The speed by which confidence is
restored will depend on the effectiveness of policy implementation. Even as we
identify the drivers of inflation, to further intensify and target our efforts, I believe
that the current tight policy stance will eventually serve to moderate inflationary
pressure. Adjusting the MPR either way or increasing liquidity will be
contradictory and not align with our current stance and recent actions.
I therefore vote to retain:
• MPR at 13.50 per cent;
• Asymmetric corridor of +200/-500 basis points around the MPR
• Cash Reserve Ratio (CRR) at 27.5 per cent; and
• Liquidity Ratio at 30.0 per cent.

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10. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
Since the last MPC, an already fragile global macroeconomy was further
weakened by a fast spreading pandemic, the COVID-19. The various
containment measures being put in place to prevent or slow down the spread
of the pandemic is taking massive tolls on global economic activity. The
hitherto expected stabilisation of global output and increased growth
momentum in 2020 now appears fragile. An unusual shock, the impulse of the
COVID-19 pandemic is shifting both demand and supply functions of
contemporary market system; and affecting every facet of economic, social,
and political order globally. We have seen significant weakening in every genre
of markets (including financial, primary commodities, and even tertiary
products) following the outbreak at the beginning of the year. Global
economic outlook for 2020 is realistically downgraded, following general
lockdowns, disrupted production schedules, widespread layoffs, travel
restrictions, border closures, portfolio capital flights, and heightened debt
vulnerability. This reflects the expected adverse effects of the outbreak on both
advanced economies and EMDEs. Accordingly, the 3.3 percent global growth
projected by the IMF for 2020 is expected to be significantly downgraded. As a
matter of fact, the IMF warned that coronavirus pandemic will cause a global
recession in 2020 that could be worse than the one triggered by the global
financial crisis of 2007-2008.
Developments in the Domestic Economy
For the domestic economy, short-term outlook has tapered considerably as the
impact of the pandemic is exacerbated by the huge plunge in crude oil prices,
with significant knock-on ramifications for fiscal operations and FX receipts.
Previously envisaged consolidation of domestic economic recovery is now

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enfeebled, as eventual growth outcome for 2020 may fall significantly below
the initial projection of about 2.4 percent. This is also reflected in the
moderation of the Manufacturing and Non-Manufacturing Purchasing
Managers’ Indices (PMI) that expanded at lower 58.3 and 58.6 index points in
February 2020 respectively, than in January. These are irrespective of the
steadily rising momentum recorded throughout 2019, with annual growth rate
of 2.3 percent from 1.9 percent recorded in 2018.
The oil sector grew by 4.6 percent in 2019, contributing 0.4 percentage point to
total growth, while non-oil sector, with a growth of 2.1 percent, accounted for
1.9 percentage points. This underscores the importance of the non-oil sector for
the economy. Recent realities indicate that the economy could slowdown in
the short-term as businesses come to standstill following lockdowns and other
containment measures to stem coronavirus. The diminished prospect, due to
global headwinds and local imbalances, provides the opportunity to reposition
the economy, prop domestic productivity, and strengthen domestic demand. I
note the proactive and recent efforts of the CBN to stimulate the Nigerian
economy and defuse the prevailing shock, with an expected injection of about
N3.5 trillion.
Domestic price levels maintained an upward trend, for the sixth consecutive
month, due essentially to structural and supply factors. Year-on-year headline
inflation rose to 12.2 percent in February 2020 from 12.1 percent in January,
reflecting rises in both food and core components. This is attributable, in part, to
border protection policy, disruptions and challenges around food production
belts, and pass-through from the recent VAT increase. Short-term outlook
suggests a gradual but continuously rising inflationary pressure. This may be
aggravated by the inherent infrastructural deficits and emergent FX market
pressures, especially as oil receipts dwindle and capital outflows persist. Given
the trade-off between output stabilisation and price stability, I want to

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emphasize the importance of a cautiously balanced and coordinated policies
by fiscal and monetary authorities.
Aggregate liquidity in the economy decreased in February 2020 as the broad
money supply (M3) contracted by 2.29 percent, driven by decline in net foreign
assets (given the observed depletion in FX reserves). Aggregate Credit to the
domestic economy grew by 1.34 percent in February 2020. The All-Share Index
(ASI) and Market Capitalization of the Nigerian Stock Market declined by 17.30
and 10.73 percentage points, respectively, driven by concerns over the
coronavirus pandemic and sharp decline in crude oil prices.
External reserves position stood at US$34.9 billion in March 2020 as against
US$38.07 billion in December 2019. The depletion in external reserves was driven
by FX sales to BDCs and I&E Window as well as dwindling oil receipt. The current
level of reserves is estimated to finance about 6.30 months of imports.
Consequently the value of the naira at the I&E window was readjusted by 4.53
per cent to N380.00/US$1 on March 20, 2020 from N363.53/US$1 as at endDecember 2019, and at the BDC window by 5.48 per cent to N380.00/US$1 from
N360.25/US$1 at end-December 2019. Overall, the BOP recorded a further
deficit of US$4.018 billion in Q3 2019 as against a deficit of US$48.76 million in Q2
2019. The overall balance as a percentage of GDP in Q3 stood at -3.22 per
cent.
The Banking System Stability Review indicate robust financial soundness
indicators. The banking industry Capital Adequacy Ratio (CAR), for example,
strengthened to 15.0 per cent at end-February 2020 as against 14.5 per cent at
end-December 2019 and prudential limit of 15.00 per cent for banks with
international authorization. Tier 1 capital accounted for 88.2 per cent of the
total Qualifying Capital at end-February 2020. Similarly, the non-performing loan
(NPL) ratio stood at 6.5 per cent in February 2020 compared with 6.1 per cent in

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December 2019 and our prudential limit of 5.0 per cent. Although the industry
NPL ration is still above the prudential limit of 5.00 per cent, it however,
represents a substantial improvement when compared with 11.3 per cent in
February 2019. Similarly, the industry average liquidity ratio of 44.2 per cent at
end-February 2020 is well above the prudential minimum of 30.00 per cent.
I note with satisfaction, the positive impacts of the new LDR policy introduced in
July 2019 to improve lending to the real sector. Total gross credit of the banking
system increased by N1,997.72 billion from N15,567.66 billion at end-May 2019 to
N17,565.37 billion at end-December 2019 and recorded an additional growth of
N353.85 billion between end-December 2019 and March 17, 2020. The credit
growth were mainly recorded in manufacturing, consumer credit, general
commerce, information and communication as well as in the agricultural
sectors. I continue to emphasize the importance of enhanced credit flows to
strategic and high impact private sector ventures through an effective
collaboration of all stakeholders. I reiterate that CBN will continue to propel
credits to the private sector, even as I remain mindful of the risk aversion of
banks to supposedly high risk real sector ventures.
Key Considerations
In my consideration, I affirm that the objective of price and exchange rate
stability remain sacrosanct. I note the emergent pressure in the FX market due
to oil price softening and the need to unify the exchange rate across all
segments. On the weakened short-term growth outlook following the recent
pandemic and allied global shocks, I also note the need to adequately support
domestic productivity and buoy aggregate demand. In this respect, the CBN
has taken recent measures to support critical private sector businesses and
earmarked stimulus packages to assist households and Micro, Small and

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Medium Enterprises (MSMEs). The recent LDR policy to enhance credit flows to
the private sector is, again, hereby acknowledged.
In order not to undermine price stability, I want to emphasize the importance of
cautiously aggressive and coordinated responses that are adequate. Inflation
outlook suggests a rise in the short-term. The continued fall in oil prices which
could heighten FX market pressures and undermine price stability needs to be
sufficiently mitigated. Money market conditions including the real interest rates
should be appropriate to retain investors’ confidence and boost sentiments.
Policy Preference
I believe that the recent economic stimulus pronouncements by the CBN are
adequate to spur domestic conditions. The adjustment and unification of
exchange rates is also a step in the right direction. I am equally of the view that
the effects of the changes to CRR is still permeating the system. It is important,
thus, to allow the effect of these actions to touch-down so as to avert
indeterminate equilibrium, which could accompany too many sudden policy
impulses. Overall, I am of the view that the current levels of key policy
parameters are sufficient to balance the objectives of exchange rate stability,
price stability and output stabilization without introducing disruptive policy
shocks. Therefore, I vote to:
• Retain the MPR at 14.0 percent;
• Retain the asymmetric corridor at +200/–500 basis points;
• Retain the CRR at 27.5 percent; and
• Retain liquidity ratio at 30.0 percent.

GODWIN I. EMEFIELE, CON
Governor
March 2020