CENTRAL BANK OF NIGERIA
MONETARY
MONETARY
POLICY REVIEW
POLICY REVIEW
MONETARY
POLICY REVIEW
FEBRUARY 2023
FEBRUARY 2023
VOLUME XII, NUMBER 1
VOLUME XII, NUMBER 1
FEBRUARY 2023
VOLUME XII, NUMBER 1
Central Bank of Nigeria
33 Tafawa Balewa Way
Central Business District
P.M.B. 0187, Garki,
Abuja
Phone: +234 (0)9 462 36011
Website: www.cbn.gov.ng
E-mail:
ISSN: 2141-6281
©2021 Central Bank of Nigeria
iii
CBN Monetary Policy Review
CBN Monetary Policy Review
CBN Monetary Policy Review
Mandate
§Ensure Monetary and Price Stability
§Issue Legal Tender Currency in Nigeria
§Maintain External Reserves to safeguard the international
value of the Legal Tender Currency
§Promote a Sound Financial System in Nigeria
§Act as Banker and Provide Economic and Financial
Advice to the Federal Government
Vision
“To be a people-focused Central Bank promoting
confidence in the economy and enabling an
improved standard of living”
Mission Statement
“To ENSURE Monetary, Price and Financial System
Stability as a Catalyst for Inclusive Growth and
Sustainable Economic Development.”
Core Values
Integrity
Partnership
Accountability
Courage
Tenacity
Central Bank of Nigeria
CONTENTS
Page
iv
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CBN Monetary Policy Review
Statement by the Governor

vii
Table of Contents
Chapter 1: Overview.. ..


2.1
Global Output ....


3.2
Domestic Price Developments..


3.4
Domestic Financial Markets Developments.. ..
..
..

Chapter 4: Economic Outlook and Risks..


4.1
Outlook for Global Output .. ..


2.2
Global Inflation ..


3.1
Output in the Domestic Economy .. ..
..
..
..

Chapter 2: The Global Economic Developments
..
..
..

2.3
Global Financial Market Developments ..
..
..
..

Chapter 3: The Domestic Economy


3.3
Monetary Policy and Liquidity Management..
..
..

4.2
Outlook for Global Inflation .. ..


4.3
Outlook for Domestic Output Growth ..
..
..
..

4.4
Outlook for Domestic Inflation ..


4.5
Outlook for Monetary Policy in 2021 ..
..
..
..

4.6 The Risks to the Outlook ..


Appendices ..


December 30, 2022


Table 2.3:
Sovereign Yields Spreads (Benchmark 10-Year Government
List of Tables
Table 2.1:
Policy Rates of Selected Central Banks July – December


Bonds) as at December 30, 2022
..
..
..

Table 2.4:
Exchange Rates of Selected Countries (value in currency
Table 2.2: Selected International Stock Market Indices as at


units to US$)


Table 3.1:
Growth Rates of Real GDP by Expenditure (%), 2021 – 2022 25
Table 3.2:
Inflation Rates, July – December 2022 ..
..
..

December 2022) (N'billion)


Table 3.3:
Actual and Seasonally Adjusted Headline Inflation
Table 3.5:
CBN Standing Lending Facility (January 2021 -
Table 3.4: OMO Bills Auction (January 2021 - December 2022)
Table 3.6:
CBN Standing Deposit Facility (January 2021 -


December 2022) (N'billion)


Table 3.7:
Foreign Exchange Supply by the CBN (US$ Million) ..

July – December 2022


(N'billion)


Table 3.8a:
The Performance of Monetary Aggregates and their


Implications


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Page


December 2022


December 2022


Figure 3.12:
Major Components of Food Inflation (Y-on-Y) July –
Figure 3.14: Major Components of Core Inflation (Y-on-Y) July –


December 2022


December 2022


Figure 3.13: Major Components of Food Inflation (M-on-M) July –


December 2022


December 2022


Figure 3.15:
Major Components of Core Inflation (M-on-M) July –


December 2022


Figure 3.17:
OMO bills Auction (July – December 2022) ..
..

Figure 3.11: Major Components of Headline Inflation (M-on-M) July –
Figure 3.16:
Actual and Seasonally Adjusted Headline Inflation July –
Table 3.9: Weighted Average Monthly Money Market Interest Rates
Table 3.8b:
The Performance of Monetary Aggregates and their


Implications


Table 3.10:
Average Nominal and Real Effective Exchange Rates


Indices (July 2021 - December 2022) ..
..
..

(July 2021 - December 2022) ..
..
..
..

(July 2021 - December 2022) ..
..
..
..

Table 4.1 Outlook for Global Output


Table 4.2 Global Inflation Outlook


List of Figures
Figure 2.1:
Global Output Growth (2018 – 2025) ..
..
..

(December 2021 – December 2022) ..
..
..

Figure 2.2
Global Inflation (2018 – 2025) ..
..
..
..

Table 3.13:
NSE All-Share Index (ASI) and Market Capitalization (MC)


(July – December 2022)


Table 3.11:
Monthly Foreign Exchange Flows through the CBN
Table 3.12:
Monthly Foreign Exchange Flows through the Economy
Figure 3.8: Monthly Bonny Light Price, Jan 2021 - December 2022

Figure 3.6:
Sub-Components Services Sector Growth (2020Q1 –
Figure 3.9:
Headline, Core and Food Inflation Rates (July –
Figure 3.3: Oil Sector Performance (2020Q1 – 2022 Q2) ..
..

2022 Q4)


2022 Q4)


December 2022)


Figure 3.10:
Major Components of Headline Inflation (Y-on-Y) July –
Figure 3.2:
Non-oil Sector Performance (2020Q1 – 2022 Q4)
..

Figure 3.4:
Sub-Components of Agricultural Sector Growth (2020Q1 –


2022 Q4)


Figure 3.5:
Industrial Sector Contribution by Activity, (2020Q1 –
Figure 3.7:
Quarterly Domestic Oil Production and Export (2020Q1 –
Figure 3.1:
Gross Domestic Product Growth Rate (2020Q1 – 2022 Q4)

2022 Q4)


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December 2022)


Figure 3.24: NDA, NDC and Other Assets (Net) (July – December 2022) 41
Figure 3.22:
Growth in Money Supply (M1), (M2) and (M3) (July -
Figure 3.19:
Standing Deposit Facility (July – December 2022)
..

Figure 3.18:
Standing Lending Facility (July – December 2022)
..

Figure 3.20: Total FX Supply Including Forward Sales (July –


December 2022)


Figure 3.21: Money Supply (M1), (M2) and (M3) (July - December 2022) 40
Figure 3.23:
Net Domestic Assets (NDA) (July – December 2022) ..

Figure 3.25: Domestic Credit to Private Sector (July – December 2022)

Figure 3.26:
Weighted Average Monthly Money Market Interest Rates

(July – December 2022)


Figure 3.29: Monthly Naira/US Dollar Exchange Rate (January -
Figure 3.30:
Average Nominal and Real Effective Exchange Rates


Indices (January 2021 - December 2022)
..
..

(July 2021 – December 2022)..
..
..
..

Figure 3.32:
Monthly Foreign Exchange Flows through the Economy
Figure 3.31:
Monthly Foreign Exchange Flows through the CBN
Figure 3.27: Daily Interbank Call Rate (July – December 2022)
..

Figure 3.28:
Daily Open Buy Back Rate (OBB) (July – December 2022)

December 2022)


(July 2021 – December 2022) (US$ Million)
..
..

Figure 3.33: NSE All Share Index (ASI) and Market Capitalization (MC)


(December 2021 – December 2022) ..
..
..

Figure 3.34:
NSE Market Capitalisation by Sector as at End-


December 2022


Figure 3.35:
10-Year U.S. Dollar-denominated Bond Yield for Nigeria

(December 2021 – December 2022) ..
..
..

2022 Vs December 31, 2021 ..
..
..
..

Figure 3.37: Structure of the Nigerian Capital Market as of December,
Figure 3.36:
FGN Bonds Yield Curves: December 29, 2022 & June 29,
Figure 4.2: Inflation Forecast


Figure 4.1: Fan Chart of Inflation Forecast
..
..
..


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D
onetary Developments in the global and domestic environments presented
daunting challenges to the conduct of Monetary policy in the second half
of 2022. Several global developments have intensified the disruptions to the
global supply chain, resulting in a sharp rise in food and energy prices across several
economies. Key among these were the persistence of the war between Russia and
Ukraine and lockdowns in major Chinese industrial cities to combat the resurgence
of the COVID-19 Pandemic. The intractable inflationary pressures confronting
advanced economy central banks necessitated spates of monetary policy
normalization, exacerbating further tightening of financial conditions, thus, fuelling
capital reversals and exchange rate pressure among Emerging Markets and
Developing Economies.
The money market remained broadly active, while liquidity conditions in the
banking system continued to underpin fluctuations in market rates. Reflecting
several shocks from the global and domestic financial and economic environment,
the capital market moderated marginally, as shown in the All-Share Index (ASI) and
Market Capitalisation (MC). Notwithstanding, the period under review witnessed
improved activities in the equities segment of the market, suggesting sustained
investor confidence in the Nigerian bourse.
Monetary policy in the review period took cognizance of the foregoing global and
domestic developments and their effects exacerbating domestic inflationary
pressures, capital flow reversals, and exchange rate pressures. While keeping sight
STATEMENT BY THE GOVERNOR
On the domestic scene, the balance of forces between structural and economic
headwinds, on the one hand, and a coordinated fiscal and monetary policies
stimulus, on the other, maintained the economy on a moderate but steady
recovery. Key amongst the challenges from the domestic front were the incidence
of flooding in various communities causing acute shortages in food supply;
unabating security challenges that disrupted business activities, especially in the
farming communities; perennial scarcity of Premium Motor Spirit (PMS) and high cost
of other energy sources, which disrupted productive activities; as well as oil theft in
the Niger Delta. Data from the National Bureau of Statistics (NBS), however, showed
that real Gross Domestic Product (GDP) grew by 2.25 per cent (year-on-year) in the
third quarter and accelerated to 3.52 per cent (year-on-year) in the 4th quarter of
2022, driven largely by the non-oil sector. Inflationary pressure intensified while the
foreign exchange market witnessed significant pressure arising from low accretion
to external reserves.
vii
GODWIN I. EMEFIELE
February 2023.
of the need to sustain the growth trajectory, monetary policy prioritized the primacy
of its price and financial stability mandate and focused more on taming inflation.
Thus, the monetary policy stance was contractionary during the review period.
Consequently, the Monetary Policy Committee raised the MPR to 16.5 per cent;
retained the asymmetric corridor of +100/-700 basis points around the MPR; raised
the CRR to 32.5 per cent; and retained the Liquidity Ratio at 30 per cent.
Outlook for the domestic economy over the short-to-medium term indicates that
inflationary pressure would decelerate. This is premised on the dampening impact
of tight monetary policy, and the sustained intervention by the Bank in the
Agriculture sector is expected to increase food output and moderate prices.
Monetary policy will continue to be proactive and supportive of financial stability
and non-inflationary growth.
Inflationary pressures in the short to medium-term will thus be monitored to ensure
that the upside risks to inflation are minimized.
Governor, Central Bank of Nigeria
viii
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CBN Monetary Policy Review

CHAPTER ONE

1.0
OVERVIEW
his
chapter
summarises
major
economic
and
financial
developments and the attendant
policy responses by the Bank that
shaped monetary policy during the
second half of 2022. These include
developments in output, prices, financial
market,
liquidity
management
and
monetary policy in the global and
domestic economies.

At
the
global
scene,
the
key
developments were the persistence of
the war between Russia and Ukraine as
well as lockdowns in major Chinese
industrial
cities
to
combat
the
resurgence of the COVID-19 Pandemic,
both of which intensified the disruptions
to the global supply chain. This was
characterized by a sharp rise in food and
energy prices across several economies.
In addition, the lag impact of the
substantial liquidity injections to ease the
downside
risks
of
the
COVID-19
pandemic continued to put upward
pressure on price levels across several
economies.
Consequently,
several
Advanced
Economy
central
banks
sustained their earlier thrust towards
monetary policy normalization, resulting
in a broad tightening of global financial
conditions and capital flow reversals as
well as exchange rate pressures in
Emerging
Markets
and
Developing
Economies (EMDEs).

On the domestic front, the economy
maintained a moderate but steady
recovery in the face of new and legacy
headwinds. Key amongst these were the
incidence
of
flooding
in
various
communities causing acute shortages to
food
supply;
unabating
security
challenges disrupting business activities,
especially in the farming communities;
perennial scarcity of PMS and high cost
of other energy sources which disrupted
productive activities; oil theft in the Niger
Delta;
as
well
as
exchange
rate
pressures. Other legacy infrastructural
deficits such as poor road networks and
epileptic power supply also impacted
production and logistics across the
country.

In the second half of 2022, growth was
largely sustained by the services and
agricultural sub-sectors on the back of
continued policy support by both the
fiscal and monetary authorities. This was
achieved through the implementation
of
the
Medium-Term
National
Development
Plan
(MTNDP)
and
aggressive credit policy intervention in
targeted sectors of the economy by the
Central Bank of Nigeria.

Accordingly, data from the National
Bureau of Statistics (NBS) showed that
real Gross Domestic Product (GDP) grew
by 2.25 per cent (year-on-year) in the
third quarter of 2022 compared with 4.03
and 3.54 per cent in the corresponding
and preceding quarters, respectively.
The growth in the third quarter was
driven mainly by the non-oil sector which
expanded by 4.27 per cent, compared
with 5.44 and 4.77 per cent in the
corresponding and preceding quarters,
respectively. The oil sector, however,
contracted further by 22.67 per cent in
Q3 2022, compared with -10.73 and -
11.77 per cent in the corresponding and
T


CBN Monetary Policy Review

preceding quarters, respectively. Output
growth in the fourth quarter of 2022
continued to be sustained by the
combined effort of both the fiscal and
monetary authorities. Consequently, real
GDP grew by 3.52 per cent (year-onyear) in the fourth quarter of 2022,
compared with 3.98 and 2.25 per cent in
the
corresponding
and
preceding
quarters, respectively. This was mainly
driven by the non-oil sector which grew
by 4.44 per cent, compared with 4.73
and 4.27 per cent in the corresponding
and preceding quarters, respectively.
The oil sector, however, contracted by
13.38 per cent in the fourth quarter
compared with contractions of 8.06 and
22.67 per cent in the corresponding and
preceding quarters, respectively.

In terms of prices, headline inflation
increased by 1.70 percentage points
from 19.64 per cent in July to 21.34 per
cent in December 2022. Food inflation
(year-on-year)
increased
by
1.73
percentage points from 22.02 per cent in
July to 23.75 per cent in December 2022.
Core
inflation
also
rose
by
2.23
percentage points from 16.26 per cent in
July to 18.49 per cent in December 2022.

Pressure in the foreign exchange market
continued in the second half of 2022 due
largely to the persistent decline in
foreign exchange inflows resulting in low
accretion
to
reserves.
The
Bank,
however, sustained its intervention in the
market to boost liquidity and stabilise the
exchange rate. To shore-up supply of
foreign exchange, the Bank sustained
the implementation of existing policies
such as the Naira-4-Dollar and RT200. It
also
directed
International
Money
Transfer
Operators
(IMTOs)
to
pay
diaspora remittances in foreign currency
to encourage remittance flows through
official sources.

In the second half of 2022, the Nigerian
financial
market
remained
resilient
despite considerable headwinds from
the global and domestic environments.
The Bank continued to deploy the
following instruments to achieve its
objective
of
price
and
monetary
stability. The instruments were: the
Monetary Policy Rate (MPR); the Cash
Reserve Ratio (CRR); Liquidity Ratio;
Open Market Operations (OMO); and
Discount Window Operations. These
were occasionally complemented with
interventions in the foreign exchange
market. The Monetary Policy Rate (MPR)
remained the Bank’s key instrument for
monetary policy management in the
review period. The MPR was raised thrice
by 100 basis points (bp), 150 bp and 100
bp in July, September, and November
2022, respectively, to 16.5 per cent from
13.0 per cent. The asymmetric corridor
was however, retained at +100/-700
basis points around the MPR during the
period. The tight policy stance was
adopted to rein in inflation and reduce
the negative real effective interest rate
margin.

In the second half of 2022, the Bank
maintained the use of Open Market
Operations (OMO) as its primary tool for
liquidity management. Total OMO sales
decreased significantly by 86.07 per
cent to N95.84 billion in the second half
of 2022 from N688.12 billion in the
preceding
half
of
2022.
This
also
represented a decrease of 98.48 per


CBN Monetary Policy Review

cent from N6,319.46 billion in the
corresponding
half
of
2021.
The
development partly reflected shortage
of liquidity in the system as well as the
Bank’s effort to reduce the cost of
liquidity management.

Money market activities in the second
half of 2022 fluctuated moderately,
reflecting liquidity condition in the
banking system. The major sources of
banking system liquidity were: statutory
monthly disbursement of funds to the
three tiers of governments by the
Federation
Account
Allocation
Committee
(FAAC);
maturing
government securities; and the various
CBN interventions. The CBN, however,
maintained its Open Market Operations
to moderate liquidity levels in the
market. In addition to this, the Bank
maintained a tight monetary policy
stance by hiking the policy rate to tame
inflationary pressures. To this end, money
market
rates
oscillated
within
the
standing facilities corridor, suggesting
moderate stability in the market.

The interbank segment of the market
witnessed lower activities in terms of
volume and active days relative to the
OBB segment. The higher activities in the
OBB segment reflected preference for
lower risk exposure as transactions in the
segment are collateralised.

In the capital market, the All-Share Index
(ASI) and Market Capitalisation (MC)
moderated marginally, even as the
economy was confronted with several
shocks from the global and domestic
environment,
suggesting
continued
investor confidence in the Nigerian
bourse. Consequently, All-Share Index
(ASI) decreased by 1.09 per cent from
51,817.59 at the end of June 2021 to
51,251.06 at end-December 2022. This
was, however, an increase of 19.97 per
cent compared with 42,716.44 at endDec 2021. Market capitalization (MC)
also, decreased by 0.07 per cent from
N27.94 trillion at end-June 2022 to N27.92
trillion
at
end-December
2022.
Compared with N22.30 trillion in the
corresponding period of 2021, MC
increased by 25.20 per cent to N27.92
trillion at end-December 2022.

Activities in the bond market were
dominated by Federal Government of
Nigeria (FGN) securities in the second
half of 2022. There were also some
activities in the State/Municipal bonds
and corporate bond segments of the
market, with the former recording the
least share by market volume.

In terms of outlook, Output growth in the
domestic economy is expected to be
sustained in 2023. This is predicated on
improved prospects in the non-oil sector,
especially services and agriculture. In
addition, the effective implementation
of the National Development Plan
(NDP);
expansion
in
manufacturing
activities;
positive
impact
of
CBN
interventions
on
growth-enhancing
sectors;
improvement
in
business
confidence; and recovery in oil price are
expected to drive growth in 2023. On the
downside,
supply
chain
disruptions
mainly from intermittent shortage of PMS
and the rising cost of energy could
affect economic activities. Other factors
that pose significant headwinds to the
growth
outlook
include
legacy


CBN Monetary Policy Review

challenges associated with epileptic
power
supply,
poor
transport
infrastructure and lingering insecurity.

Headline
inflation
is
expected
to
accelerate to 21.43 per cent in January
2023, from 21.34 per cent at endDecember 2022 (CBN Staff estimates).
However, it is estimated to decelerate to
21.32 and 21.26 per cent, in February
and March, respectively, and ease
further to 20.92 per cent in June 2023. This
projection
is
premised
on
the
anticipated dampening impact of tight
monetary policy and implementation of
the Naira Redesign Policy on price levels.
In addition, the sustained intervention by
the Bank in the Agriculture sector is
expected to increase food output and
moderate prices. Inflationary pressures in
the short to medium-term will thus be
monitored to ensure that the upside risks
to inflation are minimized.

Monetary
policy
formulation
and
implementation will, therefore, continue
to
focus
on
dealing
with
these
challenges, while pursuing the primary
objective of price stability conducive to
sustainable economic growth.


CBN Monetary Policy Review

CHAPTER TWO
THE GLOBAL ECONOMY

2.1
Global Output
lobal
growth
in

was
estimated by the International
Monetary Fund (IMF) at 3.4 per
cent, significantly lower than 6.3 per
cent in 2021. The slowdown in global
economic
activities
resulted
from
several factors, including the Russian
invasion
of
Ukraine,
energy
price
volatility, general rise in living costs and
China's economic downturn following
the extension of COVID-19 lockdowns. In
addition, the rapid increase in monetary
policy rates across several central banks
to bring inflation down to long-run
objectives, led to the tightening of
global
financial
conditions
with
dampening
effects
on
aggregate
demand.

In the advanced economies, output
growth was estimated at 2.7 per cent in
2022 down from 5.4 per cent in 2021. The
significant
slowdown
in
economic
activities was
largely
attributed
to
volatile
energy
price
and
supply
disruptions associated with the RussiaUkraine war. In the United States, growth
was estimated at 2.1 per cent in 2022,
compared with 5.9 per cent in 2021. This
was mainly due to rising inflation, which
reduced real income and weakened
consumer demand. In addition, the rise
in
interest
rate
contributed
to
a
slowdown in investment. Growth in the
Euro Area was estimated at 3.5 per cent
in 2022, compared with 5.4 per cent in
2021. In Japan, growth declined to 1.1
per cent in 2022 from 2.1 per cent in
2021, while in the United Kingdom,
output growth also slowed to 4.0 per
cent compared with 7.1 per cent in
2021.

Figure 2.1: Global Output Growth (2018 - 2025)

Source: IMF Database (2023)

In the Emerging Market and Developing
Economies (EMDEs), growth in 2022 was
estimated at 4.0 per cent, compared
with 6.9 per cent in 2021, due to
improvement in demand driven by
massive fiscal stimulus during COVID-19
period. While India growth was the
highest in this group, it slowed down
substantially to 6.8 per cent in 2022,
compared with 9.1 per cent in the
previous year. Growth in China was
estimated at 3.0 per cent in 2022, a sharp
drop from 8.4 per cent in 2021. This
resulted from the Government’s zeroCOVID policy in which major industrial
cities were placed on lockdown to
contain the further spread of the Virus. In
Brazil, output growth was estimated at
2.9 per cent in 2022, compared with 5.0
per cent in 2021. Growth in Russia also
slowed significantly to 2.1 per cent in
2022, compared with 5.6 per cent in
2021. The moderation in the growth of
this group of economies was largely

World

AEs

EMDEs


per cent
World
AEs
EMDEs
G
Estimates
Forecast


CBN Monetary Policy Review

attributed
to
high
inflation,
which
resulted in capital flow reversals, leading
to exchange rate pressures. Other
factors include: supply-chain disruptions
from extended COVID-19 lockdowns in
China; energy price volatility due to the
Russia-Ukraine war and the backlash of
sanctions against Russia; as well as
tightening global financial conditions as
central
banks
in
the
advanced
economies aggressively hiked policy
rates to dampen inflationary pressures.

In sub-Saharan Africa, output growth
was estimated to slow to 3.9 per cent in
2022 from 4.8 per cent in 2021. The main
factors responsible for the moderation in
growth across the region include the
incidence of capital flow reversals and
volatile energy prices, which heightened
inflationary pressures and dampened
investments as global financial condition
tightened.
The
Nigerian
economy,
however, grew by an estimated 3.8 per
cent in 2022, compared with 2.7 per
cent in 2021. In South Africa, growth
declined to 2.0 per cent in 2022 from 4.9
per cent in the previous year. Also,
growth in Kenya moderated to 5.4 per
cent in 2022 from 7.5 per cent in 2021.
Growth in the Ethiopian economy,
however, improved moderately to 6.4
per cent in 2022 from 6.3 per cent in
2021.

2.2
GLOBAL INFLATION
Global inflation remained elevated in
the second half of 2022, due to persisting
shocks to food and energy supply and
demand. On the supply side, the
sanctions
imposed
on
Russia
and
associated backlash as well as the
lockdown measures which followed
China’s zero-COVID policy to contain
the spread of coronavirus, disrupted
global
supply
chains
and
exerted
upward pressure on prices. On the
demand side, the residual pent-up
demand
from
the
post-COVID
economic
stimulus
also
mounted
upward
pressure
on
price
levels.
Accordingly, global inflation rose to 8.8
per cent in 2022 from 4.7 per cent in
2021.

In the advanced economies, inflation
rose to 7.3 per cent in 2022 from 3.1 per
cent in 2021. In the United States,
inflation rose sharply to 8.0 per cent in
2022 up from 4.7 per cent in 2021. In the
Euro Area, inflation also increased to 8.4
per cent in 2022 from 2.6 per cent in
2021. The uptick in inflation in the United
Kingdom was the highest in the group, as
it rose to 9.1 per cent in 2022 from 2.6 per
cent in 2021.

Figure 2.2: Global Inflation (2018 - 2025)

Source: IMF Database (2023)
In the Emerging Market and Developing
economies, inflation rose to 9.9 per cent
in 2022 from 5.9 per cent in 2021. In Brazil,
inflation increased to 9.3 per cent in

World 3.6193.5073.2474.6958.7316.974 4.87 3.912
AEs
1.958 1.4 0.6823.1047.2734.6622.5792.067
EMDEs 4.9145.1255.1765.874 9.81 8.6296.4615.161

World
AEs
EMDEs
Estimates
Forecast


CBN Monetary Policy Review

2022, compared with 8.3 per cent in
2021. Inflation in India also rose to 6.5 per
cent in 2022 from 5.5 per cent in the
previous
year.
In
China,
inflation
increased to 1.9 per cent in 2022 from 0.9
per cent in 2021, while Russia recorded
the highest uptick in the group with
inflation rising to 13.8 per cent in 2022
from 6.7 per cent in 2021.

In sub-Sahara Africa, inflation increased
to 14.5 per cent in 2022 from 11.0 per
cent in 2021. The major drivers of
headline inflation in most countries within
the group included exchange rate
depreciation, rising food and energy
prices, and supply chain disruptions due
to
infrastructural
and
security
challenges. Ghana experienced the
highest increase in inflation to 31.9 per
cent in 2022 from 10.0 per cent in 2021.
In Kenya, inflation rose to 7.6 per cent in
2022 from 6.1 per cent in 2021, while the
South African inflation also rose to 6.9 per
cent in 2022 from 6.1 per cent in 2021.
Inflation in Nigeria increased moderately
to 18.8 per cent in 2022 from 17.0 per
cent in 2021.

2.3
Global
Financial
Market
Developments
Most equity markets in the Advanced
Economies (AEs) and Emerging Market &
Developing Economies (EMDEs) during
the review period experienced high
volatility as a result of headwinds from
various shocks, which forced investors to
seek safe haven assets. Prominent
among these was the impact of the
Russia-Ukraine war which dampened
global
growth
recovery.
Also,
the
sanctions imposed on Russia and the
associated backlash led to heightened
commodity
and
energy
prices
culminating in
elevated inflationary
pressures. Consequently, major central
banks sustained the pace of monetary
policy
normalization,
thus
further
tightening global financial conditions
with adverse impact on sovereign debt
and debt service. This resulted in a flight
by investors from equity to fixed income
market due to rising yields.

2.3.1
Money Market and Central Bank
Policy Rates
The general trend across central banks
in both the Advanced Economies (AEs)
and Emerging Market & Developing
Economies (EMDEs) during the second
half of 2022 was the hike in policy rate. In
the Advanced Economies, tightening
was implemented to moderate the
persistent headline inflation that stood
considerably
above
the
long-run
objectives of most central banks in this
group. The high inflationary pressure
emanated largely from a combination
of pent-up demand and wage growth,
as governments maintained post-COVID
fiscal
stimulus.
In
the
EMDEs,
the
increased capital outflows put upward
pressure on exchange rates and price
levels.
This
was
accentuated
by
commodity price shocks associated with
global geo-political tensions.

Among the fourteen (14) central banks
surveyed in the review period, eleven
(11) raised their policy rates, two (2)
lowered, while only one (1) maintained
its rate.


CBN Monetary Policy Review

In the advanced economies, the U.S.
Federal Reserve Bank (the Fed), the
European Central Bank (ECB), and the
Bank of England (BOE) raised their policy
rates between 200 and 250 basis points,
as inflationary pressure persisted, staying
considerably
above
their
long-run
objectives. The Bank of Japan, however,
kept its policy rate unchanged to boost
aggregate demand.

In the EMDEs, the Reserve Bank of India,
the Central Bank of Indonesia, the
Central Bank of Egypt, the Central Bank
of Kenya, the South Africa Reserve Bank,
the Bank of Ghana and the Central Bank
of Nigeria raised their policy rates
between 50 and 800 basis points. The
primary objective of these rate hikes was
to stem capital outflows, moderate
exchange rate pressures and dampen
inflation. The Peoples Bank of China and
the Central Bank of Russia, however,
remained accommodative, lowering
their policy rates by 50 basis points,
apiece.

With
inflation
remaining
high
and
trending upwards, the US Fed, BoE and
ECB maintained guidance of an upward
trajectory
of
their
policy
rates.
Consequently, the likelihood of mediumterm capital inflows to EMDEs remain
bleak, as fixed-income yields in these
economies improve. Monetary policy in
Nigeria should, therefore, focus on
retaining the current stock of port-folio
capital by raising the policy rate and
maintaining a stable exchange rate
regime.


Table 2.1
Policy Rates of Selected Countries July 2022 –
December 2022
Country

July
-

Aug
-

Sept
-

Oct
-

Nov
-

Dec
-

Egypt
11.2

11.2

11.2

11.2

11.2

16.2

Kenya

S. Africa

Ghana
19.0

19.0

22.0

24.5

24.5

27.0

Nigeria
14.0
14.0
15.5

15.5

15.5

16.5

Brazil
13.2

13.7

13.7

13.7

13.7

13.7

USA

Japan

Euro
Area

India

Russia

China

UK

Indonesi
a

Source: cbrates.com

2.3.2 Global Capital Markets
Most global stock markets recorded a
mixed performance in the review period,
reflecting continued uncertainties as
inflation rates surged higher and central
banks around the globe tightened
monetary policy further.
In Europe, the French CAC 40, the
German DAX and the UK FTSE 100 indices


CBN Monetary Policy Review

increased by 9.3, 8.9 and 3.9 per cent,
respectively, in the second half of 2022.

In North America, the Canadian S&P/TSX
Composite, the Mexican Bolsa and the
United States S&P 500 indices also rose
by 2.8, 2.0 and 1.4 per cent, respectively.

In South America, the Argentine Merval
index increased significantly by 128.50
per cent, while the Columbian COLCAP
and
the
Brazilian
Bovespa
indices
decreased by 2.8 and 1.8 per cent,
respectively.

In Asia, the Indian BSE Sensex increased
by 14.8 per cent, while the Chinese
Shanghai SE and the Japanese Nikkei
225 indices decreased by 9.1 and 1.1 per
cent, respectively.

In Africa, the Egyptian EGX CASE 30, the
South African JSE All-Share and the
Kenyan Nairobi NSE 20 indices increased
by
58.2,
10.3
and
3.9
per
cent
respectively. Conversely, the Ghanaian
GSE All Share index and the Nigeria NGX
All-Share Index decreased by 4.0 and 1.1
per cent, respectively.


CBN Monetary Policy Review

Table 2.2: Selected International Stock Market Indices as at December 30, 2022


Source: Bloomberg

2.3.3 Bond Market and Sovereign Yields
The 10-year U.S. Treasury Bond was used
as the benchmark to gauge the
performance of similar bonds in other
countries. Ghana, Columbia, Nigeria,
Brazil, Mexico, Italy and Greece with
positive yield spreads of 4,185, 908, 796,
221, 201, 80 and 63 basis points,
respectively, were considered higher
credit risk countries than the US.

In contrast, Japan, Germany, China,
France, Canada, Portugal, Spain and
UK, with negative yields of 347, 132, 105,
78, 58, 31 24 and 22 basis points
respectively, suggest lower credit risk
than a US bond of similar class.
The yield spreads of 796 basis points on
the Nigerian bond indicates a high-risk
premium, thus investors in this security
would require a higher return. The
Ghanian bond with a yield spread of
4,185 basis points, is however, a riskier
security for investors.
Country
Index
31-Dec-21
30-Jun-22
30-Dec-22
Dec 31, 2021 - December
30, 2022 % Change
June 30, 2022 - December
30, 2022% Change
AFRICA
Nigeria
NGX All-Share Index

South Africa
JSE All-Share Index

Kenya
Nairobi NSE 20 Share index

Egypt
EGX CASE 30

Ghana
GSE All-Share Index


NORTH AMERICA
US
S&P 500

Canada
S&P/TSX Composite

Mexico
Bolsa

SOUTH AMERICA
Brazil
Bovespa Stock

Argentina
Merval

Columbia
COLCAP

EUROPE
UK
FTSE 100

France
CAC 40

Germany
DAX

ASIA
Japan
NIKKEI 225

China
Shanghai SE A

India
BSE Sensex

Table 2.2: Selected International Stock Market Indices as at December 30, 2022


CBN Monetary Policy Review

Table 2.3: Sovereign Yields Spreads (Benchmark 10-Year Government Bonds) as at December 30, 2022
Country
December 31, 2021
Yield (%)
August 31, 2022
Yield (%)
October 31, 2022
Yield (%)
December 30, 2022
Yield (%)
Change in Yield
(Basis Points)
December 30, 2022 Spread over the
U.S. (Basis points)
AFRICA
Nigeria (U.S. $)


Ghana (U.S. $)

NORTH AMERICA
Canada

Mexico


US


SOUTH AMERICA
Brazil


Columbia


EUROPE
France

Germany

Greece


Italy


Portugal

Spain

UK

ASIA
China

Japan

Table 2.3: Sovereign Yield Spreads (Benchmark 10-Year Government Bonds) as at December 30, 2022
Data for Columbia @ 29th December 2022


2.3.4 Global Commodity Prices
During the second half of 2022, global
commodity
prices
decreased,
attributable to the weakening global
demand and the impact of Black Sea
Grain Initiatives anchored by the United
Nations and Turkey, which allowed
export of grains from Ukraine to other
parts of the world.

As a result, the IMF primary commodity
price index decreased by 16.08 per cent
to 194.35 points at end-December 2022
from 231.60 points at end-June 2022. All
the major sub-indices under the primary
commodity index also fell during the
period. Energy, food and Beverages,
non-fuel, industrial inputs, and metals
declined by 21.21, 12.59, 9.02, 10.22 and
7.97 per cent to 258.50, 134.04, 150.00,
161.98 and 184.30 points at endDecember 2022 from 328.12, 153.35,
164.88, 180.42 and 200.26 points at endJune 2022, respectively.

The performance of the oil sector also
weakened
during
the
period
as
reflected by a 29.68 per cent decline in
the actual price per barrel of the OPEC


CBN Monetary Policy Review

Reference Basket to US$81.29 per barrel
at the end of December 2022 from
US$115.60 per barrel at the end of June
2022.

Similarly, the Food and Agriculture
Organization (FAO) Food Price Index
declined by 14.80 per cent to 131.80
points at the end of December 2022
from 154.70 points at end-June 2022. All
the sub-indices under the FAO Food
Price Index fell during the period. Meat,
dairy, cereals, vegetable oils, and sugar
fell by 10.72, 7.99, 11.43, 31.73 and 0.09
per cent, respectively, to 112.40, 138.20,
147.30, 144.60 and 117.20 index points at
end-December 2022 compared with
125.90, 150.20, 166.30, 211.80 and 117.3
points at end-June 2022.
The
decline
in
commodity
prices
particularly food prices is expected to
result in moderation of inflation on
imported food, however, the gain that
should accrue from high commodity
prices, in form of foreign exchange
earnings, could be eroded. This could
potentially lead to exchange rate
pressure due to low accretion to external
reserves. Also, the depreciation of the
currencies of most EMDEs against the US
dollar could lead to high inflation due to
import
dependent
nature
of
most
EMDEs. This would necessitate central
banks among the EMDEs to raise interest
rates to curb inflationary pressure which
may cut investments and production in
the short to medium term.

2.3.5 Global Foreign Exchange Market
In the second half of 2022, most
currencies depreciated against the US
dollar. This was driven largely by the
sharp increase in capital outflows from
these
countries
to
US
dollardenominated
assets,
following
the
aggressive normalization of US monetary
policy.

In Africa, the Nigerian naira, the South
African rand, the Kenyan shilling, the
Egyptian pound, and the Ghanaian
cedi, depreciated against the US dollar
by 9.78, 4.01, 4.46, 24.07 and 20.67 per
cent, respectively.

In North America, the Canadian dollar
depreciated by 5.15 per cent, while the
Mexican Peso appreciated by 3.23 per
cent against the US dollar.

In South America, the Argentine and the
Colombian
pesos
depreciated
significantly by 29.30 and 14.38 per cent,
respectively, while the Brazilian real
depreciated marginally by 0.57 per
cent.

In Europe, the British pound sterling
depreciated moderately against the US
dollar by 1.20 per cent, while the Russian
ruble depreciated substantially by 25.63
per
cent.
The
Euro,
however,
appreciated by 1.06 per cent in the
review period.

In Asia, the Chinese yuan and the Indian
rupee depreciated against the US dollar
by 2.90 and 4.51 per cent, respectively,
while the Japanese yen appreciated by
2.98 per cent.


CBN Monetary Policy Review

Table 2.4
Exchange Rates of Selected Countries (value in currency units to US$)


Currency
31/12/2021
30/06/2022
30/12/2022 PTP* % App/Dep
YTD % App/Dep
AFRICA
a
d
c
d
PTP (%)
YTD (%) a/d
Nigeria
I&E
435.00

415.00

460.00

(9.78)

(5.43)

South Africa
Rand
15.94

16.28

16.96

(4.01)

(6.01)

Kenya
Shilling
113.14

117.90

123.41

(4.46)

(8.32)

Egypt
Pound
15.71

18.80

24.76

(24.07)

(36.55)

Ghana
Cedi
6.18

8.06

10.16

(20.67)

(39.17)

NORTH AMERICA
Canada
Dollar
1.26

1.29

1.36

(5.15)

(7.35)

Mexico
Peso
20.51

20.11

19.48

3.23

5.29

SOUTH AMERICA
Brazil
Real
5.57

5.26

5.29

(0.57)

5.29

Argentina
Peso
102.75

125.22

177.12

(29.30)

(41.99)

Colombia
Peso
4,064.92

4,153.19

4,850.83

(14.38)

(16.20)

EUROPE

UK
Pound
0.74

0.82

0.83

(1.20)

(10.84)

Euro Area
Euro
0.88

0.95

0.94

1.06

(6.38)

Russia
Ruble
75.22

54.70

73.55

(25.63)

2.27

ASIA
Japan
Yen
115.11

135.75

131.82

2.98

(12.68)

China
Renminbi
6.36

6.70

6.90

(2.90)

(7.83)

India
Rupee
74.30

79.01

82.74

(4.51)

(10.20)

PTP= Period to Period
YTD = Year to Date
Source: Bloomberg
Exchange Rates of Selected Countries (Value in local currency units to US$)


CBN Monetary Policy Review

CHAPTER THREE
THE DOMESTIC ECONOMY

3.1
Output Growth
n the second half of 2022, growth was
largely sustained by the services and
agricultural sub-sectors on the back of
continued policy support by both the
fiscal and monetary authorities. This was
achieved through the implementation
of
the
Medium-Term
National
Development
Plan
(MTNDP)
and
aggressive credit policy intervention in
targeted sectors of the economy by the
Central Bank of Nigeria.

Data from the National Bureau of
Statistics (NBS) showed that real Gross
Domestic Product (GDP) grew by 2.25
per cent (year-on-year) in the third
quarter of 2022 compared with 4.03 and
3.54 per cent in the corresponding and
preceding quarters, respectively. The
growth in the third quarter was driven
mainly by the expansion of the non-oil
sector by 4.27 per cent, compared with
5.44
and
4.77
per
cent
in
the
corresponding and preceding quarters,
respectively. The key drivers of the nonoil sector growth were Services (7.01%),
Agriculture (1.34%), and Industry (0.51%).
Accordingly, the contribution of the nonoil sector to real GDP increased to 94.34
per cent in the third quarter of 2022 from
92.51 and 93.67 per cent in the
corresponding and preceding quarters,
respectively.

The oil sector, however, contracted
further by 22.67 per cent in Q3 2022,
compared with -10.73 and -11.77 per
cent
in
the
corresponding
and
preceding
quarters,
respectively.
Accordingly,
average
daily
oil
production fell to 1.20 million barrels per
day (mbpd) in the third quarter of 2022,
compared with 1.57 and 1.43 mbpd in
the
corresponding
and
preceding
quarters, respectively. This was mainly
attributed to operational inefficiencies,
technical
hitches,
and
security
challenges in the oil-producing Niger
Delta region.

Output growth in the fourth quarter of
2022 continued to be sustained by the
combined efforts of both the fiscal and
monetary authorities. Consequently, real
GDP grew by 3.52 per cent (year-onyear) in the fourth quarter of 2022,
compared with 3.98 and 2.25 per cent in
the
corresponding
and
preceding
quarters, respectively. This was mainly
driven by the non-oil sector which grew
by 4.44 per cent, compared with 4.73
and 4.27 per cent in the corresponding
and preceding quarters, respectively.
The key drivers of the expansion in the
non-oil sector growth were Services
(5.69%), Industry (4.09%), and Agriculture
(2.05%). The share of non-oil in real GDP
rose to 95.66 per cent in the fourth
quarter from 94.81 and 94.34 per cent in
the
corresponding
and
preceding
quarters, respectively.

The oil sector, however, contracted by
13.38 per cent in the fourth quarter
compared with contractions of 8.06 and
22.67 per cent in the corresponding and
preceding
quarters,
respectively.
Average daily oil production in the fourth
quarter of 2022 stood at 1.34 million
barrels per day (mbpd) from 1.50 and
I


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1.20 mbpd in the corresponding and
preceding quarters, respectively.

Figure 3.1: Gross Domestic Product Growth Rate
(2020Q1 – 2022Q4)

Source: National Bureau of Statistics (NBS)

3.1.1 DOMESTIC ECONOMIC ACTIVITIES
In real GDP in the second half of 2022
was largely driven by activities in the
non-oil sector which expanded by 4.27
and 4.44 per cent in the third and fourth
quarters, respectively.

The major contributors to the overall
performance of the non-oil sector in the
third quarter were: Transportation and
Storage (41.59%); Mining and Quarrying
(38.01%);
Financial
and
Insurance
(12.70%);
Information
and
Communication
(10.53%);
Arts,
Entertainment & Recreation (7.79%);
Accommodation
&
Food
Services
(6.77%); Construction (5.52%); Trade
(5.08%); Human Health & Social Services
(4.58%);
Real
Estate
(4.56%);
Administrative
&
Support
Services
(3.93%); and Water Supply, Sewage &
Waste
Management (3.89%).
These
performances
compared
with
their
respective growth rates of 20.61, -2.14,
23.23, 9.66, 3.68, 2.09, 4.10, 11.90, 4.99,
2.32, 3.36 and 12.97 per cent in the
corresponding period of 2021.

The
oil
sector
output,
however,
contracted further by –22.67% (year-onyear) in the third quarter of 2022,
compared with -10.73 and -11.77 per
cent
in
the
corresponding
and
preceding quarters, respectively. This
followed an average drop of daily oil
production to 1.20 million barrels per day
(mbpd) in the third quarter of 2022,
representing decreases of 0.37 mbpd
and 0.23 mbpd compared with 1.57
mbpd and 1.43 mbpd recorded in the
corresponding period of 2021 and the
preceding quarter, respectively. The
development
was
attributed
to
divestments
by
oil
majors
and
incidences of insecurity such as oil theft
and vandalism which continued to
hamper domestic oil production and
export.

In the fourth quarter of 2022, the major
activities
that
shaped
the
overall
performance of the non-oil sector were:
Mining & Quarrying (22.04%); Electricity,
Gas, Steam & Air conditioner (15.22%);
Financial
&
Insurance
(11.61%);
Information & Communication (10.35%);
Water
Supply,
Sewage
&
Waste
Management
(8.81%);
Arts,
Entertainment & Recreation (7.52%);
Accommodation and Food Services
(5.12%); Trade (4.54%); Human Health &
Social Services (4.20%); and Construction
(3.80%). These performances compared
with their respective growth rates of
43.50, 2.78, 24.14, 5.03, 28.84, 4.31, 1.27,
5.34, 5.14, and 3.46 per cent in the
corresponding period of 2021.

2020-Q1
2020-Q2
2020-Q3
2020-Q4
2021-Q1
2021-Q2
2021-Q3
2021-Q4
2022-Q1
2022-Q2
2022-Q3
2022-Q4


CBN Monetary Policy Review

During
the
period,
the
oil
sector
contracted by 13.38 per cent (year-onyear) compared with -8.06 and -22.67
per cent in the corresponding and
preceding
quarters,
respectively.
Average daily oil production stood at
1.34 million barrels per day (mbpd) in the
fourth quarter of 2022 from 1.50 mbpd
and
1.20
mbpd
recorded
in
the
corresponding period of 2021 and the
preceding quarter, respectively. The
increase in oil production during the
review period
compared with the
preceding quarter was attributed to the
improved security architecture in the oilproducing areas.

Figure 3.2: Non-oil Sector Performance (2020Q1 –
2022Q4)

Source: NBS


Figure 3.3: Oil Sector Performance (2020Q1 –
2022Q4)

Source: NBS

3.1.2 Sectoral Analysis
This section analyses the key factors in
each sector that contributed to output
growth in the review period.

3.1.2.1 Agriculture
In the third quarter of 2022, real output
growth
in
the
agriculture
sector
increased marginally to 1.34 per cent,
from 1.22 and 1.20 per cent in the
corresponding and preceding quarters,
respectively. Output growth in the sector
was mainly driven by forestry which
expanded by 2.19 per cent, compared
with 1.98 and 1.29 per cent in the
corresponding and preceding quarters,
respectively.
This
was
followed
by
livestock which grew by 1.55 per cent,
compared with 0.12 and -2.87 per cent
in the corresponding and preceding
quarters, respectively. Crop production
however, slowed to 1.33 per cent from
1.36
and
1.54
per
cent
in
the
corresponding and preceding quarters,
respectively. The share of the agriculture
sector in overall GDP fell marginally to
29.67 per cent in the third quarter of 2022

2020Q1
2020Q2
2020Q3
2020Q4
2021Q1
2021Q2
2021Q3
2021Q4
2022Q1
2022Q2
2022Q3
2022Q4
Per cent
Agriculture
Industry

Q1-2020
Q2-2020
Q3-2020
Q4-2020
Q1-2021
Q2-2021
Q3-2021
Q4-2021
Q1-2022
Q2-2022
Q3-2022
Q4-2022
Per cent


CBN Monetary Policy Review

from 29.94 per cent in the corresponding
quarter.
It
was,
however,
an
improvement compared with 23.24 per
cent in the preceding quarter.

During the fourth quarter of 2022, real
output growth in the agriculture sector
slowed to 2.05 per cent compared with
3.58 per cent in the corresponding
quarter.
It
was,
however,
an
improvement in comparison with 1.34
per cent in the preceding quarter.
Growth in the sector was driven mainly
by Crop production which expanded by
2.41 per cent, compared with 1.33 per
cent in the preceding quarter. This was,
however,
a
moderation
when
compared with 3.87 per cent in the
corresponding quarter. The Forestry subsector grew by 1.63 per cent compared
with 1.41 and 2.19 per cent in the
corresponding and preceding quarters,
respectively. Fishing and Livestock subsectors, however, contracted by -3.02
and –1.59, compared with 1.69 and 0.41
per cent in the corresponding quarter,
and 0.32 and 1.55 per cent in the
preceding
quarter,
respectively.
Consequently,
the
share
of
the
agriculture
sector
in
overall
GDP,
decreased to 26.46 per cent in the fourth
quarter from 26.84 and 29.67 per cent in
the
corresponding
and
preceding
quarters, respectively.


Figure 3.4: Sub-Components of Agricultural Sector
Growth (2020Q1 – 2022Q4)

Source: NBS

3.1.2.1.1
Agricultural
Policies
and
Institutional Support
In
the
review
period,
the
Bank
continued
its
interventions
in
the
agriculture sector to support economic
recovery using a variety of existing
policies and institutional support, as
highlighted below:

3.1.2.1.1.1
Commercial Agriculture
Credit Scheme (CACS)
Under the scheme, ₦997.00 million was
disbursed to two beneficiaries across
large-scale
agro-enterprises
in
the
second half of 2022, compared with
₦28.30
billion
disbursed
to
twelve
beneficiaries in the first half of 2022. A
total of ₦46.05 billion was repaid in the
review period, compared with ₦32.86
billion in the first half of 2022.


Per cent
Crop Production
Livestock


CBN Monetary Policy Review

3.1.2.1.1.2
Micro, Small and Medium
Enterprises Development Fund (MSMEDF)
The sum of ₦10.00 million was disbursed
to 130 beneficiaries during the second
half of 2022. There was, however, no
disbursement in the first half of 2022.
Repayments during the review period
totalled ₦5.08 billion, compared with
₦2.52 billion in the preceding half year.

3.1.2.1.1.3
Anchor
Borrowers’
Programme (ABP)
In the second half of 2022, the sum of
₦103.73 billion was disbursed to 245,361
smallholder farmers across the country
for the cultivation of rice, maize, and
wheat. This compares with ₦35.52 billion
disbursed to 28,876 smallholder farmers
in the first half of the year. In the review
period, the sum of ₦63.37 billion was
repaid compared with ₦42.99 billion in
the preceding half year.

3.1.2.1.1.4
Accelerated Agriculture
Development Scheme (AADS)
The Scheme recorded a disbursement
of ₦180.00 million in the second half of
2022, compared with ₦1.50 billion in the
first half. The sum of ₦1.64 billion was
repaid in the period, compared with
₦4.37 billion in the previous period.

3.1.2.1.1.5
Agribusiness/ Small and
Medium Enterprises Investment Scheme
(AGSMEIS)
In the review period, ₦1.33 billion was
disbursed to 592 projects, compared
with ₦1.60 billion to 2,720 projects in the
first half of 2022. Repayment in the
review
period
was
₦2.10
million,
compared with ₦7.66 million in the first
half.

3.1.2.1.1.6
Paddy
Aggregation
Scheme (PAS)
Under the Scheme, there was no
disbursement in the second half of 2022,
while the sum of ₦6.20 billion was
disbursed to three (3) projects in the first
half. In the second half of the year,
however, the sum of ₦1.00 billion was
repaid, while no repayment was made
in the first half due to the extension of the
moratorium.

3.1.2.1.1.7
National Food Security
Programme (NFSP)
There was no disbursement under this
programme in the review or preceding
period. A total of ₦4.39 billion was repaid
in the review period, compared with
₦2.03 billion in the first half.

3.1.2.2 Industry
The industry sector further contracted
by 8.0 per cent in the third quarter of
2022, compared with -1.63 and -2.30 per
cent
in
the
corresponding
and
preceding quarters, respectively. Mining
& Quarrying accounted largely for the
contraction in the sector in the third
quarter of 2022, shrinking by -21.83 per
cent, compared with -10.56 and -11.09
per cent in the corresponding and
preceding quarters, respectively. Crude
Petroleum and Natural Gas led the
contraction in the Mining and Quarrying


CBN Monetary Policy Review

sub-sector, as it contracted by 22.67 per
cent in the third quarter compared with
-10.73 and -11.77 per cent in the
corresponding and preceding quarters,
respectively. Electricity, Gas, Steam & Air
conditioner sub-sector also contracted
by 3.56 per cent in the third quarter of
2022, compared with 14.36 and -11.48
per cent in the corresponding and
preceding quarters, respectively. The
manufacturing
sub-sector
also
contracted by 1.91 per cent in the third
quarter of 2022, compared with growth
of 4.29 and 3.0 per cent in the
corresponding and preceding quarters,
respectively.

The contraction in the industry sector
was, however, moderated by growth in
the Construction and Water Supply,
Sewage & Waste Management subsectors. The Construction sub-sector
recorded an improvement of 5.52 per
cent in the third quarter of 2022
compared with 4.10 and 4.02 per cent in
the
corresponding
and
preceding
quarters, respectively. Water Supply,
Sewage & Waste Management also
grew by 3.89 per cent in the third quarter
of 2022 compared with 12.97 and 23.73
per cent in the corresponding and
preceding quarters, respectively.


Figure 3.5: Industrial Sector Contribution by
Activity (2020Q1-2022Q4)

Source: National Bureau of Statistics

3.1.2.2.1
Industry
Policies
and
Institutional Support
During the review period, the Bank
sustained its support to the industry
sector as highlighted below:

3.1.2.2.1.1
Real
Sector
Support
Facility (RSSF) Using Differentiated Cash
Reserve Ratio (RSSF-DCRR)
Under the Facility, the sum of ₦89.55
billion was disbursed to 16 projects in the
second half of 2022, compared with
₦210.29 billion to 34 projects in the first
half. A total of ₦11.32 billion was repaid
in the second half of 2022, compared
with ₦18.50 billion in the preceding half
year.

3.1.2.2.1.2
Export
Development
Facility (EDF)
A total of ₦22.39 billion was disbursed to
14 projects under the Facility in the
review period, compared with ₦17.08
billion to 15 projects in the preceding

Q1-2020
Q1-2021
Q1-2022
Per cent
Mining and Quarrying
Electricity,Gas,Steam & Air conditioner
Manufacturing


CBN Monetary Policy Review

period. There was no repayment in both
periods as some facilities were under
moratorium.

3.1.2.2.1.3
Creative
Industry
Financing Initiative (CIFI)
In the second half of 2022, the sum of
₦174.30 million was disbursed to one (1)
project under this initiative. There was,
however, no disbursement in the first half
of 2022. In the second half of 2022, the
sum of ₦304.38 million was repaid
compared with ₦280.24 million in the
previous half.

3.1.2.2.1.4
Targeted Credit Facility
(TCF)
DDuring the period under review, ₦1.21
billion was disbursed to 2,160 projects,
compared with ₦24.37 billion to 50,302
projects in the previous period. In the
second half of 2022, ₦835.48 million was
repaid, while no repayment was made
in the previous half, as facilities were
under moratorium.

3.1.2.2.1.5
Presidential
Fertilizer
Initiative (PFI)
Under this initiative, there was no
disbursement, while a total of ₦4.00
billion was repaid in the review period,
compared with a repayment of ₦3.00
billion in the preceding period.

3.1.2.2.1.6
Real
Sector
Support
Facility (RSSF)
TThere was no disbursement under this
Facility in the review period, as the
intervention has been discontinued. A
total of ₦11.15 billion was, however,
repaid in the second half of 2022,
compared with ₦21.65 billion in the
preceding half year.

3.1.2.2.1.7
Non-oil Export Stimulation
Facility (NESF)
There was no disbursement in the
period under review. A total repayment
of ₦7.91 billion was made in the second
half of 2022, compared with ₦2.00 billion
in the preceding period.

3.1.2.2.1.8
Shared
Agent
Network
Expansion Facility (SANEF)
There was no disbursement in the
review period. Total repayment stood at
₦606.31 million in the second half of
2022, compared with ₦369.25 million in
the preceding period.

3.1.2.2.1.9
Nigeria Youth Investment
Fund (NYIF)
There was neither disbursement nor
repayment
in
the
review
period.
However, a total of ₦278.50 million was
repaid in the preceding period.

3.1.2.2.1.10
Health
Sector
Intervention Fund (HSIF)
The sum of ₦16.03 billion was disbursed
to 8 projects in the second half of 2022,
compared with ₦17.21 billion to 11
projects in the first half. A total of ₦2.13
billion was repaid in the review period,
while there was no repayment in the


CBN Monetary Policy Review

previous period as a significant portion
of the facilities were under moratorium.

3.1.2.2.1.11 Healthcare Sector Research
and Development Intervention Scheme
(HSRDIS)
There was no disbursement in the
review period, while the sum of ₦14.75
million was disbursed as additional
tranche to one (1) of the five (5)
projects/grant
recipients
in
the
preceding period.

3.1.2.2.1.12
COVID-19
Intervention
Facility for the Manufacturing Sector
(CIMS)
In the review period, the sum of ₦112.91
billion was disbursed to 29 projects
compared with ₦413.89 billion to 50
projects in the first half. A total of ₦3.52
billion was repaid in the review period,
compared with ₦12.00 billion in the
preceding period.

3.1.2.2.1.13
SME/Rediscounting
&
Refinancing Facility (SMERRF)
Under this facility, no disbursement was
made in the period under review. The
sum of ₦4.21 billion was, however, repaid
in the second half of 2022.

3.1.2.2.1.14
CBN-BOI
Industrial
Facility (CBIF)
In the second half of 2022, a total of
₦50.00 billion was disbursed, same as the
amount disbursed in the preceding
period.
There
was,
however,
no
repayment in both periods.
3.1.2.2.1.15
Textile Sector Intervention
Facility (TSIF)
The sum of ₦1.50 billion was disbursed
to one (1) project in the review period,
while there was no disbursement in the
first half of 2022. The sum of ₦4.49 billion
was repaid in the period under review,
compared with ₦8.62 billion in the
preceding period.

3.1.2.2.1.16
100 for 100 Policy for
Production and Productivity (100 for 100
PPP)
Under this Initiative, the sum of ₦82.54
billion was disbursed to 31 projects in
the second half of 2022, compared
with ₦69.13 billion disbursed in the first
half
to

projects
across
manufacturing,
agriculture,
and
healthcare. A total of ₦1.14 billion was
repaid in the review period compared
with ₦1.32 billion in the first half.

3.1.2.2.1.17
Tertiary
Institutions
Entrepreneurship Scheme (TIES)
The
sum
of
₦62.53
million
was
disbursed
to

youth-led
entrepreneurial projects in the review
period, compared with ₦264.04 million
disbursed in the preceding period to 53
beneficiaries. No repayments have
been made so far as the facilities are
still under moratorium.

3.1.2.2.1.18
Youth
Entrepreneurship
Development Fund (YEDP)
In the period under review, there was
no disbursement or repayment. The sum


CBN Monetary Policy Review

of ₦116.94 million was, however, repaid
in the preceding period.

3.1.2.2.1.19
Power
and
Airline
Intervention Fund (PAIF)
There was no disbursement in the
period under review, however, a total of
₦10.47 billion was repaid. This compares
with ₦15.91 billion repaid in the first half
of 2022.

3.1.2.2.1.20
Nigerian Bulk Electricity
Trading
-
Payment
Assurance
Programme (NBET-PAF)
There was no disbursement in the
period under review, compared with the
sum of ₦26.93 billion disbursed to Nigeria
Bulk Electricity Trading Plc. (NBET) in the
first half of 2022. A total of ₦977.16 billion
was repaid in the second half of 2022
compared with ₦322.87 billion in the
preceding period.

3.1.2.2.1.21
Nigerian
Electricity
Market Stabilization Facility (NEMSF 1 &
2)
The sum of ₦6.47 billion was disbursed in
the second half of 2022, compared with
₦34.37 billion in the first half. A total of
₦11.51 billion was repaid during the
period compared with ₦10.91 billion in
the preceding period.

3.1.2.2.1.22
National Mass Metering
Programme (NMMP)
During the second half of 2022, the sum
of ₦3.11 billion was disbursed, compared
with ₦199.90 million in the first half. A total
of ₦364.16 million was repaid in the
second half of 2022, while there was no
repayment in the preceding period as
the facilities were still under moratorium.

3.1.2.2.1.23
Intervention Facility for
National Gas Expansion Programme
(IFNGEP)
The sum of ₦9.30 billion was disbursed in
the second half of 2022 to two (2)
projects, compared with ₦26.00 billion to
four (4) projects in the first half.

3.1.3.1 Services Sector
In the third quarter of 2022, the sector
grew by 7.01 per cent compared with
8.41
and
6.70
per
cent
in
the
corresponding and preceding quarters,
respectively. The growth in the sector
was driven by Transportation & Storage
(41.59%); Financial & insurance (12.70%);
Information & Communication (10.53%);
Art, Entertainment & Recreation (7.79%);
Accommodation
&
Food
Services
(6.77%); Trade (5.08%); Human Health &
Social Services (4.58%); Real Estate
(4.56%);
Administration
&
Support
Services
(3.93%);
and
Public
Administration
(2.33%).
These
performances
compare
with
their
respective growth rates of 20.61, 23.23,
9.66, 3.68, 2.09, 11.90, 4.99, 2.32, 3.36,
and -0.15 per cent in the corresponding
period of 2021. Growth in the sector was,
however, moderated by a contraction
of 2.67 per cent in Other Services subsector, compared with 0.73 per cent in
the corresponding quarter.

During the fourth quarter of 2022, the
sector grew by 5.69 per cent compared


CBN Monetary Policy Review

with 5.58 and 7.01 per cent in the
corresponding and preceding quarters,
respectively. Growth in the sector was
driven by Financial & Insurance (11.61%),
Information & Communication (10.35%),
Arts,
Entertainment
&
Recreation
(7.52%),
Accommodation
&
Food
Services (5.12%), Trade (4.54%), Human
Health
&
Social
Services
(4.20%),
Professional,
Scientific
&
Technical
Services
(2.92%),
Administrative
&
Support Services (2.86%); and Real Estate
(2.78%). These growth rates compare
with their respective performances of
24.14, 5.03, 4.31, 1.27, 5.34, 5.14, 1.50,
2.70,
and
1.47
per
cent
in
the
corresponding
quarter.
The
sector's
share in overall GDP rose to 56.27
compared with 55.11 and 51.96 in the
corresponding and preceding quarters,
respectively.

Figure 3.6: Sub-Components of Services Sector
Growth (2020Q1-2022Q4)

Source: Statistics Department

3.1.4.1 Oil Sector
During the second half of 2022, the
performance of the oil sector was largely
influenced
by
both
external
and
domestic factors. Some of these factors
include the Russia-Ukraine war which
caused
significant
supply
chain
disruptions.
The
development
compounded
the
fragile
recovery
caused by the effect of the COVID-19
pandemic.
Other
factors
include
divestments
by
oil
majors
and
incidences of insecurity such as oil theft
and vandalism which continued to
hamper domestic oil production and
export.

Consequently,
average
daily
oil
production fell to 1.20 million barrels per
day (mbpd) in the third quarter of 2022,
compared with 1.57 and 1.43 mbpd in
the
corresponding
and
preceding
quarters, respectively. Average daily oil
production stood at 1.34 mbpd in the
fourth quarter of 2022 compared with
1.50
and
1.20
mbpd
in
the
corresponding and preceding quarters,
respectively.

The price of Nigeria’s reference crude,
the Bonny Light 370API, stood at US$82.50
per barrel (pb) at end-December 2022
compared with US$74.81 per barrel (pb)
at end-December 2021 and US$130.30
per barrel (pb) at end-June 2022.

Overall, the average price of Bonny
Light in the second half of 2022 at
US$98.72 pb stood above the Federal
Government
of
Nigeria’s
budget
benchmark of US$62.0 pb for 2022.
Barring any production challenges, the
healthy difference between current oil
prices and budget benchmark should
bud well for improved fiscal revenue and
lower deficit, accretion to external
reserves and ease pressure in the foreign
exchange
market.
However,
the
persistently lower crude oil production
owing
to
incidences
of
pipeline
vandalization and oil theft has kept the

Q1-2020 Q4-2020 Q3-2021 Q2-2022
Trade
Accommodation and Food Services
Transportation and Storage


CBN Monetary Policy Review

country from benefiting from high oil
prices in the international market as
Nigeria has failed to meet it OPEC quota
for oil export over time.

Figure 3.7: Quarterly Domestic Oil Production and
Export (2020Q1-2022Q4)

Source: NBS

Figure 3.8: Monthly Bonny Light Oil Price, January
2022 - December 2022

Source: Statistics Department


Table 3.1
Growth Rates of Real GDP by Expenditure (%), 2021 – 2022

Q1-

Q2-

Q3-

Q4-

Q1-

Q2-

Q3-

Q4-

GDP (Basic Price)

GDP (Market Price)

Household Consumption

Gov. Consumption Expenditures

Gross Fixed Capital Formation

Net Exports


77.9

58.2

14.38
National Disposable Income

Compensation of Employees

Operating Surplus

Other Current Transfers from RoW
Net


11.0

31.4

56.48
Source: NBS


Q1-2020
Q1-2021
Q1-2022
Million Barrels Per Day

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
US$


CBN Monetary Policy Review

3.2
Domestic Price Developments
Inflationary pressures persisted in the
review
period,
driven
primarily
by
continued supply chain disruptions and
shock
spill
overs
from
the
global
economy. In addition, structural factors
such as insecurity, infrastructural deficit
and rising energy prices sustained the
uptrend in the domestic price level.
Consequently, all three measures of
inflation, headline, food, and core,
maintained an uptrend in the review
period, with headline inflation remaining
significantly above the ceiling of the
Bank’s 6.00 to 9.00 per cent indicative
benchmark. Price developments in the
review period generally reflected the
combined effects of both demand- and
supply-side factors.

Food inflation remained the key driver of
the general price level, aggravated
mainly by persisting insecurity, rising cost
of
logistics
and
adverse
weather
conditions. In addition, the RussiaUkraine war contributed to disruptions to
global
food
supply.
Furthermore,
shortage in foreign exchange earnings
and capital reversals, attributed largely
to
low
oil
revenue
receipts
from
production shut-ins and oil price volatility
exerted pressures on prices. Also, the
considerable dip in migrant remittances
during the period reduced exchange
rate supply and therefore widened the
premium. To shore-up the supply of
foreign exchange, the Bank sustained
the implementation of existing policies
such
as
Naira-4-Dollar
and
RT200,
among others.

On the demand side, the expansionary
fiscal policy, arising from increased
government borrowing due to revenue
shortfalls, coupled with the residual
impact of the COVID-19 interventions
put upward pressure on domestic prices.
To moderate the demand pressure on
price
development,
the
Bank
maintained its tight monetary policy
stance throughout the period. This
impacted
activities
in
the
money
market, reflected by higher rates in the
Interbank Call and Open Buy Back
windows compared with the previous
half year. Consequently, credit growth
declined moderately as most banks
failed to meet the Bank’s loan-to-deposit
ratio of 65 per cent in the review period.

3.2.1 Trends in Inflation
The
three
measures
of
inflation
maintained upward trajectories during
the period under review. The headline,
core,
and
food
measures
of
the
consumer price index (CPI) rose to 499.4,
421.7 and 590.2, in December 2022, from
463.6, 393.0 and 545.6, respectively, in
July 2022. Food inflation (year-on-year)
thus increased by 1.73 percentage
points to 23.75 per cent in December
2022 from 22.02 per cent in July. The Core
measure, also rose by 2.23 percentage
points to 18.49 per cent in December
2022 from 16.26 per cent in July.
Consequently,
headline
inflation
increased by 1.70 percentage points to
21.34 per cent in December 2022 from
19.64 per cent in July (Figure 3.9 and
Table 3.2). Thus, food inflation was the
major contributor to the overall uptick in


CBN Monetary Policy Review

consumer prices during the period
(Table 3.4).

Table 3.2: Inflation Rates, July – December 2022

Headline
Inflation
Core Inflation
Food Inflation

C
PI
Y
o
Y

M
MA
C
PI
Y
o
Y

M
MA
C
PI
Y
o
Y

M
MA
Jul-

3.

.6

16.

3.

.2

14.

5.

.0

18.

Aug
-

1.

.5

17.

9.

.2

14.

6.

.1

19.

Sep
-

8.

.7

17.

5.

.6

14.

4.

.3

19.

Oct
-

4.

.0

17.

9.

.7

15.

1.

.7

19.

Nov
-

0.

.4

18.

6.

.2

15.

9.

.1

20.

Dec
-

9.

.3

18.

1.

.4

16.

0.

.7

20.

Source: Nigerian National Bureau of Statistics
database

Figure 3.9: Headline, Core, and Food Inflation
Rates (July – December 2022)

Source: Nigerian National Bureau of Statistics
database


3.2.1.1 Headline Inflation
The increase in headline inflation during
the review period was largely driven by
Food & Non-Alcoholic Beverages, which
rose to 14.10 per cent in December 2022
from 13.02 per cent in July. Health,
Transport, and Education increased to
0.43, 1.16, and
0.57 per cent in
December 2022 from 0.38, 1.01, and 0.50
per cent, respectively, in July (Figure
3.10). Headline inflation thus increased
to 21.34 per cent in December 2022 from
19.64 per cent in July.

The uptick in headline inflation in the
review period resulted primarily from
continued disruptions to food supply due
to the lingering insecurity in farming
communities and incidences of flood.
Also, the shocks to energy prices resulted
in rising electricity tariffs which impacted
the cost of production; high price of
automotive gas oil (AGO), which put
upward pressure on the cost of logistics
as well as continued scarcity of premium
motor spirit (PMS). Other factors such as
increased spending towards the 2023
general elections also exacerbated the
uptick in general price level.

To address this uptick in price level, the
Bank maintained a tight monetary
policy stance throughout the review
period,
adjusting
the
policy
rate
upwards at each of the three meetings
of the Monetary Policy Committee
(MPC).


Food Inflation
Core Inflation
Headline Inflation


CBN Monetary Policy Review

Figure 3.10
Major Components of Headline Inflation (Y-on-Y),
July – December 2022

Source: Nigerian National Bureau of Statistics
database

Month-on-month
headline
inflation,
however, declined to 1.71 per cent in
December 2022 from 1.82 per cent in
July.
The
primary
driver
of
this
moderation
was
Food
and
NonAlcoholic Beverages, which fell to 1.14
per cent in December 2022 from 1.23 per
cent in July. Transport, however, rose
marginally to 0.10 per cent in December
2022 from 0.09 per cent in July (Figure
3.5).


Figure 3.11
Major Components of Headline Inflation (M-on-M
July – December 2022
Source: Nigerian National Bureau of Statistics
database

3.2.1.2 Food Inflation
Food inflation (year-on-year) rose to
23.75 per cent in December 2022 from
22.02 per cent in July. The main driver
was processed food prices, which
increased
to
12.51
per
cent
in
December from 12.00 per cent in July.
The increase in the price of processed
food resulted from the rise in prices of
Meat, Fish & Seafood, and Oil & Fats by
0.09, 0.28, and 0.31 percentage points,
respectively. Farm produce prices also
rose to 11.25 per cent in December 2022
from 10.02 per cent in July, mainly
attributed to the incidences of flooding
and insecurity, especially in the food
producing belt of the country.


15.00
25.00
35.00
Jul '22 Aug '22 Sept.
'22
Oct. '22 Nov.
'22
Dec '22
Miscellaneous Goods & Services
Restaurant & Hotels
Education
Recreation & culture

Jul '22
AUG
'22
Sept.
'22
Oct. '22 Nov.
'22
Dec '22
Miscellaneous Goods & Services
Restaurant & Hotels
Education


CBN Monetary Policy Review

Figure 3.12: Major Components of Food Inflation
(Y-on-Y), July - December 2022

Source: Nigerian National Bureau of Statistics
database

On a month-on-month basis, however,
food inflation declined to 1.89 per cent
in December 2022 from 2.04 per cent in
July. This was due to the drop in the price
of processed food to 0.85 per cent in
December 2022 from 1.32 per cent in
July. The key drivers of the decrease in
the price of processed food category
were Fish & Seafood and Oils & Fats,
which fell by 0.02 percentage points
apiece. Farm produce, however, rose to
1.04 per cent in December from 0.72 per
cent in July.


Figure 3.13: Major Components of Food Inflation
July - December 2021

Source: Nigerian National Bureau of Statistics
database

3.2.1.3 Core Inflation
Core inflation (year-on-year) rose to
18.49 per cent in December 2022 from
16.26 per cent in July, driven mainly by
processed food which accounted for
1.29 percentage points of the increase.
Other contributory components include:
Housing, Water, Electricity, Gas, & Other
Fuels (0.27 percentage point); Clothing
& Footwear (0.22 percentage point);
Education (0.16 percentage point), and
Health
(0.10
percentage
point).
Communication,
however,
declined
marginally by 0.01 percentage point
(Figure
3.14).
Some
of
the
key
developments which led to the uptick in
core inflation include: the persistent rise
in energy prices especially PMS, AGO,
and Liquified Petroleum Gas (LPG);

Jul

Aug

Sep

Oct

Nov

Dec

Yam, Potatoes & other tubers
Vegatables
Fruits
Farm Produce
Sugar, Jam, Honey, etc.
Oil & Fats
Milk, Cheese & Eggs

Jul

Aug

Sep

Oct

Nov

Dec

FOOD
Processed Food
Meat
Fish & Sea Food
Milk, Cheese & Eggs
Oil & Fats
Sugar, Jam, Honey, etc.
Farm Produce
Fruits
Vegatables
Yam, Potatoes & other tubers


CBN Monetary Policy Review

elevated
prices
of
goods;
and
exchange rate pressures. In addition, the
spill-over effect from the Russia-Ukraine
war contributed to higher commodity
prices.

Figure 3.14: Major Components of Core Inflation
(Y-on-Y), July – December 2022

Source: National Bureau of Statistics

Core
inflation
(month-on-month)
decreased to 1.33 per cent in December
2022 from 1.75 per cent in July. The key
drivers of the decline were: Processed
food (0.01 percentage point); housing,
water, electricity, gas & other fuels (0.09
percentage
point);
and
furnishings,
household equipment, & household
maintenance (0.06 percentage point)
(Figure 3.15).


Figure 3.15
Major Components of Core Inflation (M-on-M),
July – December 2022

Source: National Bureau of Statistics

3.2.2
Seasonally Adjusted Inflation
The actual and seasonally adjusted
measures of headline inflation both
trended upwards in the review period,
with actual headline inflation trending
above the seasonally-adjusted (SA)
measure.
Actual
headline
inflation
increased
to
21.34
per
cent
in
December 2022 from 19.64 per cent in
July,
while
the
Seasonally-Adjusted
measure also rose to 18.85 per cent in
December 2022 from 16.75 per cent in
July (Table 3.3 and Figure 3.16). The
upward trend in both measures was
attributed to incidences of flooding,
impact of lingering insecurity in farming
communities, and the persistent shock to
energy prices which fed into rising cost
of
production
and
logistics.
The
increased spending towards the 2023
general elections also contributed to the
uptrend.

Processed
Food
Housing,
Water,
Elect.Gas
& Other
Fuel
Clothing &
footwear
Transport
Furnishing
s,
Household
Equip & HH
Maint.

Core
Processed
Food
Housing,
Water, Elect
Gas & Other
Fuel
Clothing &
footwear
Transport
Furnishings
, Household
Equip & HH
Maint
Education


CBN Monetary Policy Review

Table 3.3
Actual and Seasonally Adjusted Headline
Inflation, July – December 2022
Year
Headline
Inflation
Seasonally
Adjusted
Inflation
Jul-22
19.64
16.75
Aug-22
20.52
17.07
Sep-22
20.77
17.43
Oct-22
21.09
17.86
Nov-22
21.47
18.37
Dec-22
21.34
18.85
Source: National Bureau of Statistics and CBN

Figure 3.16: Actual and Seasonally Adjusted
Headline Inflation, July – December 2022

Source: National Bureau of Statistics and CBN

3.2.3
Key
Factors
that
Influenced
Domestic Prices
During the review period, the net effect
of
cost-push,
demand-pull,
and
moderating factors generally influenced
the trend in inflation. Major factors which
contributed to the uptrend include: the
fluctuation in supply of PMS, uptick in
energy prices, food supply shortages
and perisistent insecuirty. Others include
the liquidity effects of capital releases
from the budget, impact of festive and
pre-general
election
spending,
the
continued pressure on the exchange
rate, as well as the impact of the RussiaUkraine war.

3.2.3.1 Demand-side Factors
The uptrend in headline inflation in the
review period was influenced by several
demand-side factors. These include
Government
capital
releases
for
infrastructural projects and settlement of
contractual
obligations,
continued
intervention
in
the
real
sector
to
strengthen output recovery, residual
effect of COVID-19 interventions as well
as the demand pressure in the foreign
exchange market with pass-through to
domestic prices. The net effect of these
factors was a sustained increase in
inflationary pressure.

3.2.3.2. Supply-side Factors
The supply-side factors that intensified
headline inflation during the review
period include the shortage of food
supply as a result of incidences of
flooding and security challenges across
the country, perennial scarcity of PMS
and legacy infrastructural deficits as well
as the impact of the Russia-Ukraine
conflict on global supply. In addition, the
lockdown in major industrial cities in
China as a result of the resurgence of the
COVID-19 Pandemic contributed to the
disruption in global supplies. The
cumulative impact of these factors
hampered supplies in the review period.

3.2.3.3 Moderating Factors
The uptrend in inflation in the review
period was moderated by a number of

Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22
Headline Inflation
Seasonally Adjusted Inflation


CBN Monetary Policy Review

factors. These include: the sustained
implementation of the Bank’s initiative to
boost foreign exchange supplies such as
the RT200 and Naira-4-Dollar policies,
which helped moderate exchange rate
pressure; the Bank’s intervention in the
real sector to boost agriculture and
manufacturing
output
and
Government’s
continued
implementation of the policy to improve
the ease of doing business. In addition,
the Bank maintained a tight policy
stance
throughout
the
period
to
moderate the rise in inflation.

3.3
Monetary
Policy
and
Liquidity
Management
In the second half of 2022, monetary
policy
was
influenced
by
various
developments
in
the
global
and
domestic
economic
and
financial
environments.
On
the
global
scene,
the
key
developments were the persistence of
the war between Russia and Ukraine as
well as lockdowns in major Chinese
industrial
cities
to
combat
the
resurgence of the COVID-19 Pandemic,
both of which intensified the disruptions
to the global supply chain. This was
characterized by a sharp rise in food and
energy prices across several economies.
In addition, the lagged impact of the
substantial liquidity injections to ease the
downside
risks
of
the
COVID-19
pandemic continued to put upward
pressure on price levels across several
economies.
Consequently,
several
Advanced
Economy
central
banks
sustained their earlier thrust towards
monetary policy normalization, resulting
in a broad tightening of global financial
conditions and capital flow reversals as
well as exchange rate pressures in
Emerging
Markets
and
Developing
Economies.

On the domestic front, the economy
maintained a moderate but steady
recovery in the face of new and legacy
headwinds. Key amongst these were the
incidences
of
flooding
in
various
communities causing acute shortages to
food
supply;
unabating
security
challenges disrupting business activities
especially in the farming communities;
perennial scarcity of PMS and high cost
of other energy sources which disrupted
productive activities; oil theft in the Niger
Delta;
as
well
as
exchange
rate
pressures. Other legacy infrastructural
deficits such as poor road networks and
epileptic power supply also adversely
impacted
production
and
logistics
across the country. During the review
period, there was a significant reduction
in open market operations by the Bank,
partly as a result of shortage of liquidity
in the banking system as well as the
resolve of the Bank to cut the cost of
liquidity management.

3.3.1 Monetary Policy Response to
Evolving Economic Conditions
During the second half of 2022,
monetary
policy
formulation
and
implementation focused on alleviating
the impact of the various global and
domestic
shocks
on
the
domestic
economy. Some of these shocks were
the persistent increase in energy prices,
heightened food prices, rising inflation,


CBN Monetary Policy Review

supply chain bottlenecks, and sharp
increase
in
interest
rates
which
dovetailed
to
tightening
external
financial conditions. Oil price volatility
resulting from the various policies by
OPEC+ and the US Government, also
created considerable instability in the
market which led to further uncertainties
in the global economy. Accordingly, the
International
Monetary
Fund
(IMF)
downgraded global growth for 2022 to
3.2 per cent.

The domestic economy continued to
face uncertainties arising from persisting
insecurity; rising cost of debt and debt
servicing; deteriorating fiscal balances;
increased spending towards the 2023
general
elections;
and
continued
uptrend in inflationary pressure. Data
from the National Bureau of Statistics
(NBS), however, showed that real Gross
Domestic Product (GDP) grew by 3.54
per cent (year-on-year) in the second
quarter of 2022 and 5.01 per cent in the
corresponding period of 2021. This
marked
the
seventh
consecutive
quarter of growth, following the exit from
recession
in
2020.
The
consistent
expansion was driven largely by growth
in the non-oil sector, particularly in the
services and agricultural sub-sectors.

Headline inflation (year-on-year) rose for
the ninth consecutive month to 21.09 per
cent in October 2022 from 20.77 per cent
in the previous month, an increase of
0.32 percentage point. On a month-onmonth basis, however, headline inflation
decelerated to 1.24 per cent in October
2022 from 1.36 per cent in the previous
month,
an
indication
that
price
development was responding to the
Bank’s policy rate hikes.

Broad money supply (M3) grew by 13.80
per cent in October 2022, (year-to-date)
compared with 11.00 per cent in
September, driven largely by increased
claims on ‘Other Sectors’ (other financial
corporations,
public
non-financial
corporations, and private sector).

In the equities market, the All-Share
Index (ASI) and Market Capitalization
(MC) decreased to 43,839.08 and
N23.88 trillion on October 31, 2022, from
49,836.51
and
N26.88
trillion,
respectively, on August 31, 2022. The
decrease reflected profit taking and
sustained
sell-off
by
investors
to
rebalance their portfolios in favour of
higher yield fixed income securities.
Other
contributory
factors
include
inflationary and exchange rate pressures
as well as tightening external financial
conditions.

In the financial markets, money market
rates oscillated below and within the
asymmetric corridor of the discount
facilities window, in tandem with liquidity
conditions
in
the
banking
system.
Consequently, the monthly weighted
average Open Buy Back (OBB) rate
increased to 15.91 per cent in October
2022 from 11.49 per cent in September
2022.

These challenges and the desire to
achieve the Bank’s objective of price
stability conducive to economic growth,
were the key considerations that shaped
monetary policy in the second half of
2022. Consequently, the Monetary Policy


CBN Monetary Policy Review

Committee raised the MPR to 16.5 per
cent; retained the asymmetric corridor
of +100/-700 basis points around the
MPR; raised the CRR to 32.5 per cent and
retained the Liquidity Ratio at 30 per
cent.

Furthermore, the Bank continued with its
intervention programmes to support the
recovery
of
output
growth,
lower
unemployment,
ease
supply
chain
challenges, and drive down prices. The
Bank’s interventions primarily covered
manufacturing/industries,
agriculture,
energy/infrastructure, healthcare and
Micro, Small and Medium Enterprises
(MSMEs)1.

3.3.2
Monetary
Policy
Committee
Meetings
The Monetary Policy Committee (MPC)
met three times in July, September, and
November 2022 during the second half
of 2022. At its July meeting, the
Committee assessed the impact of
emerging external shocks and legacy
issues
on
price
and
output
developments in the short to medium
term. In the opinion of Members, the
major external shocks to the economy
remained those associated with the
supply constraints arising from the RussiaUkraine war and the backlash from
sanctions imposed on Russia. Others
were the residual impact of the COVID19 pandemic and tightening external
financial conditions, following continued

1 Details of the interventions in the review period
are contain in sections 3.1.2.2 and 3.2.2.2
monetary policy normalization by some
advanced economy central banks.

Members noted the rising demand for
money,
associated
with
election
spending and the impact on month-onmonth inflation between May and June
2022. The Committee also assessed the
impact of persisting insecurity and
upward pressure on energy prices on the
general price level. It noted that the
current upsurge in price levels remained
a primary concern to monetary policy.
The Committee clearly identified both
demand and supply-side factors as key
drivers of inflationary pressure, which
should be addressed using different
policy approaches. In the Committee’s
view, the demand-side factors were
being broadly addressed by the Bank,
using the relevant direct and indirect
instruments. On the supply side, the Bank
has continued to provide the necessary
support,
through
its
development
finance initiatives in the real sector, to
ease supply constraints. The Committee,
therefore,
called
on
the
Federal
Government to prioritize efforts to curb
the menace of insecurity to enable
farming and other business activities
return to normalcy. Members also noted
the impact of the prolonged scarcity of
Premium Motor Spirit (PMS) on price
developments
and
called
on
the
Federal Government to seek a long-term
and viable solution to strike a balance
between its pricing and supply.


CBN Monetary Policy Review

The Committee noted the continued
recovery of output growth despite the
headwinds and urged the Bank and the
Federal government to sustain the
recent economic gains.

The MPC appreciated the Bank’s efforts
toward ensuring exchange rate stability,
in the face of external shocks, and
applauded
the
RT200
and
other
initiatives targeted at improving foreign
exchange inflows and accretion to
reserves.

Similarly, the Committee noted the
stability in the banking system, given the
continued decline in Non-Performing
Loans (NPLs) and enjoined the Bank to
sustain
its
surveillance
to
ensure
continued resilience of the banking
sector.

Given the foregoing developments and
the
upside
risks
to
inflation,
the
Committee decided to raise the MPR by
100 basis points to 14.0 per cent; retain
the asymmetric corridor at +100/-700
basis points around the MPR; CRR at 27.5
per cent; and liquidity ratio at 30.0 per
cent.

During the September 2022 meeting, the
MPC expressed concerns about the high
level of global inflation, and its adverse
impact on the recovery of both the
Advanced
and
Emerging
Market
Economies. Members further noted the
downside risks associated with other
headwinds
confronting
the
global
economy.

In Nigeria, output growth was sustained
by the combination of development
finance interventions by the Bank and
fiscal
stimulus
by
the
Federal
Government. Members noted that in
the last 3 years, the Bank invested over
N9 trillion in its intervention programmes.
While the Committee believed that
these interventions helped the recovery
significantly, Members were of the view
that the current spike in inflation would
be detrimental to growth.

On the financial market, the MPC noted
the moderate downturn in the equities
market, attributing it to the continued
outflow of portfolio capital as investors
re-assigned their portfolios to higher yield
US dollar-denominated fixed income
securities. The Committee, thus, called
on the Federal Government to continue
to improve the ease of doing business in
Nigeria and sustain investor confidence
in the economy.

The MPC applauded the Bank for its
continued stringent regulatory measures
over the banking system, noting the
progressive
decline
in
the
NonPerforming Loans (NPLs) ratio of the
banking system despite the heightened
macroeconomic uncertainties.

On inflation, the MPC was concerned
about the considerable rise in inflation in
the past four months to 20.52 per cent in
August 2022 from 17.71 per cent in May.
The Committee was thus, of the view
that given the primacy of its price and
monetary stability mandate, it was
expedient to focus on taming inflation.
Members, therefore, decided to: raise
the MPR by 150 basis points to 15.5 per
cent; raise the CRR by 500 basis points to
32.5 per cent; retain the asymmetric


CBN Monetary Policy Review

corridor and liquidity ratio at +100/-700
basis
points
and
30.0
per
cent,
respectively.

At the November 2022 meeting, the
MPC expressed concern about the
global inflationary pressures and the
tightening global financial conditions.
The Committee, however, observed that
domestic
inflation
(month-on-month)
decelerated as a result of its progressive
tight stance.

Members noted that domestic output
growth remained positive due to the
combined fiscal and monetary policy
support and thus, urged both authorities
to harmonize their various policies
towards accelerating output growth
and
achieving
a
stable
macroeconomic environment.

In reaching its decision, Members felt
that the economy was still confronted by
considerable headwinds arising from the
Russia-Ukraine
war,
supply
chain
disruptions, and rising inflation in the
advanced economies. In the opinion of
the Committee, with rising inflation,
loosening the stance of policy may lead
to a more aggressive rise in inflation and
thus, erode the gains already achieved.
The MPC also noted that in view of the
approaching
festive
season
and
ongoing election spending, ‘a hold’
policy was not an option as it could
jeopardise the gains of previous policy
rate hikes.

Consequently, the MPC decided to
tighten further, but at a moderate pace,
in order to narrow the negative real
effective
interest
rate
margin
and
improve
investor
confidence.
The
Committee thus voted to raise the MPR
to 16.5 per cent; and retain the:
asymmetric corridor of +100/-700 basis
points around the MPR; CRR at 32.5 per
cent; and Liquidity Ratio at 30 per cent.
The communiques of the MPC meetings
are reproduced in the appendix.

3.3.3
Instruments
of
Liquidity
Management
The Bank continued to deploy its
monetary policy instruments to achieve
the objective of price and monetary
stability. The instruments deployed were:
the Monetary Policy Rate (MPR); the
Cash Reserve Ratio (CRR); Liquidity
Ratio; Open Market Operations (OMO);
and Discount Window Operations. These
were occasionally complemented with
interventions in the foreign exchange
market.

3.3.3.1 Monetary Policy Rate (MPR)
The
Monetary
Policy
Rate
(MPR)
remained the Bank’s key instrument for
monetary policy management in the
review period. The MPR was raised thrice
by 100 basis points (bp), 150 bp and 100
bp in July, September, and November
2022, respectively, to 16.5 per cent from
13.0 per cent. The asymmetric corridor
was however, retained at +100/-700
basis points around the MPR during the
period. The tight policy stance was
adopted to rein-in inflation and reduce
the negative real effective interest rate
margin.


CBN Monetary Policy Review

3.3.3.2 Open Market Operations (OMO)
In the second half of 2022, the Bank
maintained the use of Open Market
Operations (OMO) as its primary tool for
liquidity management. Total OMO sales
decreased significantly by 86.07 per
cent to N95.84 billion in the second half
of 2022 from N688.12 billion in the
preceding
half
of
2022.
This
also
represented a decrease of 98.48 per
cent from N6,319.46 billion in the
corresponding half of 2021 (Table 3.9).
The
development
partly
reflected
shortage of liquidity in the banking
system as well as the Bank’s effort to
reduce
the
cost
of
liquidity
management.

Table 3.4: OMO Bills Auction (July – December
2022) (N’billion)

Source: CBN, Financial Market Department


Figure 3.17: OMO Bills Auction (July – December
2022)

Source: CBN, Financial Market Department

3.3.3.3 Reserve Requirements
In the second half of 2022, the Bank
deployed the Cash Reserves Ratio (CRR)
instrument to complement the MPR and
OMO
auctions
for
liquidity
management. The Monetary Policy
Committee thus increased the CRR to
32.5 per cent in September 2022 from
27.5 per cent to curb the excess liquidity
in the banking system and maintained
Liquidity Ratio at 30.0 per cent.

3.3.3.4 Standing Facilities
In the review period, Other Depository
Corporations
(ODCs)
continued
to
access
the
standing
facilities
(lending/deposit) window to meet their
daily liquidity requirements. The Bank
maintained the asymmetric corridor at
+100/-700 basis points around the MPR.
The
requests
for
Standing
Lending
Facility (SLF) increased significantly by
107.36 per cent to N9,372.01 billion in the
second half of 2022 from N4,519.68 billion
in the first half. This reflected a significant
decrease of 175.12 per cent from
Date

% Change
Jan
452.67 130.00
-71%
Feb
763.23 248.12
-67%
Mar
381.92 170.00
-55%
Apr
63.19 -
-100%
May
66.64 100.00
50%
Jun
65.60 40.00
-39%

st Half
1,793.25
688.12
-62%
Jul
151.26
0.00
-100%
Aug
1,411.89
5.84
-100%
Sep
1,398.60
70.00
-95%
Oct
772.66
0.00
-100%
Nov
884.22
20.00
-98%
Dec
1,700.83
0.00
-100%

nd Half
6,319.46
95.84
-98%
Cumulative Figure
8,112.71
783.96
-90%


CBN Monetary Policy Review

N3,406.46 billion in the corresponding
half of 2021 (Table 3.10).

At the Standing Deposit Facility (SDF)
segment, transactions decreased by
42.12 per cent to N1,224.96 billion in the
second half of 2022 from N2,116.52 billion
in the first half. Similarly, transactions
decreased marginally by 0.25 per cent
from N1,221.95 billion in comparison with
the corresponding half year (Table 3.10).
Transactions at the Window resulted in a
higher net lending of N8,147.05 billion in
the second half of 2022 compared with
N2,184.51 billion and N2,403.16 billion in
the corresponding and preceding half
years. This reflected the impact of the
tight monetary policy stance of the
Bank.

Table 3.5: CBN Standing Lending Facility (January
2021 – December 2022) (N’billion)

Source: CBN, Financial Market Department


Figure 3.18: Standing Lending Facility (July –
December 2022)

Source: CBN, Financial Market Department

Table 3.6: CBN Standing Deposit Facility (January
2021 – December 2022) (N’billion)

Source: CBN, Financial Market Department

Figure 3.19: Standing Deposit Facility (July -
December, 2022)

Source: CBN, Financial Market Department

3.3.3.5 Foreign Exchange Intervention
Pressure in the foreign exchange
market continued in the second half of
Date

% Change
Jan
395.77
227.23
Feb
552.66
253.44
Mar
886.51
328.09
Apr
2498.55
725.76
May
4818.91
712.99
Jun
589.44
2272.17

st Half
9,741.84
4,519.68
-53.61%
Jul
302.54
1,371.69
Aug
472.57
1,197.43
Sep
737.72
875.95
Oct
513.22
3,822.44
Nov
668.87
1,496.73
Dec
711.54
607.77
2nd Half
3,406.46
9,372.01
175.12%
Total
13,148.30
13,891.69
Date

% Change
Jan
528.33
293.79
Feb
441.51
293.79
Mar
420.36
595.69
Apr
145.52
324.89
May
123.89
368.21
Jun
170.29
240.15
1st Half
1,829.90
2,116.52
15.66%
Jul
218.06
71.06
Aug
207.58
208.02
Sep
200.35
257.43
Oct
128.10
99.41
Nov
237.64
270.51
Dec
230.22
318.54
2nd Half
1,221.95
1,224.96
0.25%
Total
3,051.85
3,341.48


CBN Monetary Policy Review

2022 due largely to the persistent decline
in foreign exchange inflows resulting in
low accretion to reserves. Total foreign
exchange supply thus decreased by
21.45 and 10.26 per cent to US$8,281.64
million in the second half of 2022,
compared with US$10,543.51 million and
US$9,228.81 million in the corresponding
and preceding periods (Table 3.12).

The
Bank,
however,
sustained
its
intervention in the FX market to boost
liquidity and stabilise the exchange rate.
To shore-up supply of foreign exchange,
the Bank sustained the implementation
of existing policies such as the Naira-4Dollar and RT200. It also directed
International Money Transfer Operators
(IMTOs) to pay diaspora remittances in
foreign
currency
to
encourage
remittance
flows
through
official
sources.

Table 3.7
Foreign Exchange Supply by the CBN (US$ Million)

Source: CBN, Financial Market Department


Figure 3.20: Total FX Supply (including Forward
Sales) (July – December, 2022)

Source: CBN, Financial Market Department

3.3.4 Developments
in
Monetary
Aggregates
Monetary aggregates in the review
period trended upwards compared with
their performance in the first half of 2022,
except for Net Foreign Assets (NFA)
which trended downwards. The growth
in broad money was largely attributed to
the spill-over of earlier interventions by
the Bank and fiscal authority to mitigate
the downside risks of the COVID-19
pandemic, increased spending towards
the 2023 general elections as well as
deficit financing by the Government.
The significant growth in Net Domestic
Assets (NDA) was driven largely by
growth in credit to government. Net
Foreign Asset (NFA), however, declined
relative to its level in the first half of 2022
due to low oil receipts, increased
demand
in
the
foreign
exchange
market and low accretion to foreign
reserves.

3.3.4.1 Broad Money (M3, M2)
Broad
money
(M3
&
M2)
grew
substantially
in
the
review
period
compared with the first half of 2022. M3
Date

%
Change
Total FX Supply
(including Forward Sales)
Total FX Supply
(including Forward Sales)
Jan
717.05
1,421.68
Feb
714.55
1,461.19
Mar
770.08
1,712.77
Apr
962.80
1,486.47
May
1,283.74
1,632.90
Jun
1,383.37
1,513.80

st Half
5,831.59
9,228.81
58.26%
Jul
1,764.80
1,290.25
Aug
1,641.32
1,508.34
Sep
1,405.29
1,244.75
Oct
2,133.54
1,220.79
Nov
1,717.77
1,212.68
Dec
1,880.79
1,804.82
2nd Half
10,543.51
8,281.64
-21.45%


CBN Monetary Policy Review

grew by 6.63 per cent to N52,140.94
billion at end-December 2022 from
N48,898.34 billion at end-June 2022.
Compared with the end-December
2021 level of
N44,443.97 billion, it
increased by 17.32 per cent. This
increase was above the 2022 provisional
indicative growth target of 14.94 per
cent.

Similarly, M2 grew by 5.83 per cent to
N51,747.30 billion at end-December
2022 from N48,897.45 billion at end-June
2022. Compared with N44,443.07 billion
in the corresponding period of 2021, it
increased by 16.44 per cent. This
increase was also above the 2022
indicative growth benchmark of 14.92
per cent.

Figure 3.21: Money Supply (M1), (M2) and (M3)
(July - December 2022)

Source: Statistics Department as at December

Figure 3.22: Growth in Money Supply (M1), (M2)
and (M3) (July - December 2022)

Source: CBN, Statistics Department

3.3.4.2 Narrow Money (M1)
Narrow
Money
(M1)
increased
marginally by 1.66 per cent to N20,686.48
billion at end-December 2022 from
N20,348.21 billion at the end-June 2022.
Compared
with
the
corresponding
period of 2021, it grew by 14.57 per cent.
This was slightly lower than the 2022
indicative growth benchmark of 15.48
per cent (Figures 3.21 and 3.22). The
moderation in M1 growth relative to its
target reflected the impact of the Naira
Redesign
and
cashless
policy
implementation.

3.3.4.3 Net Foreign Assets (NFA)
Net Foreign Assets (NFA) contracted by
30.38 per cent to N4,253.14 billion at
end-December 2022 from N6,109.03
billion at end-June 2022. Compared with
the corresponding period of 2021, NFA
fell by 54.52 per cent to N9,352.15 billion.
This was significantly below the 2022
provisional indicative growth target of
0.89 per cent. The under-performance of
NFA in the review period was attributed


CBN Monetary Policy Review

to the contraction in foreign asset
holdings of the Central Bank. Other
factors
responsible
for
the
weak
performance of NFA were the drop in
crude oil production owing to theft and
pipeline vandalism, as well as increased
utilization of foreign exchange to meet
external obligations.

3.3.4.4 Net Domestic Assets (NDA)
Net Domestic Assets (NDA) increased
by 11.92 per cent to N47,887.80 billion at
end-December 2022 from N42,789.31
billion at end-June 2022. Compared with
N35,091.83 billion at end-December
2021, NDA grew by 36.46 per cent. This
was significantly higher than the 2022
indicative benchmark of 1.79 per cent.
The growth in NDA was attributed to the
significant
increase
in
Credit
to
Government (NCg).

Net Domestic Credit (NDC) increased
year-on-year by 36.30 per cent, largely
driven by the growth in Credit to
Government (NCg) and Credit to Private
(CPs) of 78.15 and 19.71 per cent,
respectively. The growth in NDC at endDecember 2022 outperformed its annual
benchmark of 16.23 per cent.

Figure 3.23: Net Domestic Asset (NDA) (June -
December 2022)

Source: CBN, Statistics Department
Figure 3.24: NDA, NDC and Other Assets (Net)
(July – December 2022)

Source: CBN, Statistics Department

3.3.4.5 Credit to Government (Cg)
Net Credit to Government (NCg)
increased
by
35.36
per
cent
to
N24,656.23 billion at end-December
2022 from N18,214.63 billion at end-June
2022. Compared with N13,839.91 billion
in the corresponding period of 2021, it
grew by 78.15 per cent. This was
significantly
higher
than
the

indicative growth target of 12.26 per
cent. The developments during the
period reflected sustained borrowing by
government to finance the budget
deficit.

3.3.4.6 Credit to the Private Sector (Cp)
Credit to the private sector (CPs) grew
by 6.55 per cent to N41,802.19 billion at
end-December 2022 from N39,233.61
billion at end-June 2022. Compared with
N34,920.73 billion at end-December
2021, CPs grew by19.71 per cent. This
was higher than the 2022 provisional
indicative growth target of 17.73 per
cent.

The Bank’s sustained implementation of
its Loans-to-Deposit ratio (LDR) policy


CBN Monetary Policy Review

and real sector interventions were
largely responsible for the improved flow
of credit to the critical sectors of the
economy.

Figure 3.25: Domestic Credit to Private Sector (July
- December 2022)

Source: CBN, Statistics Department

3.3.4.7 Monetary Base (MB)
Monetary
Base
(MB)
increased
significantly by 15.67 per cent to
N16,032.05 billion at end-December
2022 from N13,860.27 billion at end-June
2022. Year-on-year, MB grew by 20.59
per cent compared with N13,295.15
billion at end-December 2021.


The growth in MB during the period was
largely associated with the spillover of
earlier interventions by the Bank to boost
economic activities in sectors affected
by
the
COVID-19
pandemic.
The
increased spending towards the 2023
general elections and deficit financing
by the Government also contributed to
the growth.

A summary of the major monetary
aggregates
and
their
provisional
outcomes as at end-December 2022 is
presented in Table 3.13.


CBN Monetary Policy Review

Table 3.8a: The Performance of Monetary Aggregates and their Implications
Variables
Actual
Actual
Actual
Benchmar
k
H2:2022
Deviation
from
Benchmar
k
Change
in H2,
2022 over
H2, 2021
H2
H1
H2

M3 (N'b)

M3 (%)

M2 (N'b)

M2 (%)

M1 (N'b)

M1 (%)

MB (N'b)

MB (%)

NDC
(N'b)

NDC (%)

Cg (N'b)

Cg (%)

Cp (N'b)

Cp (%)

NFA (N'b)

NFA (%)

NDA
(N'b)

NDA (%)

Source: CBN, Statistics Department


CBN Monetary Policy Review

Table 3.8b: The Performance of Monetary Aggregates and their Implications
/N
Monetary
Aggregates
Performance
Implication

Overall
Monetary
Aggregates
Upward
Performance
Most monetary aggregates trended
upwards
above
their
respective
indicative benchmarks. This translates to
growth in aggregate demand and
hence inflationary and exchange rate
pressures.

Broad
Money (M3,
M2)
Above
targets
This increase in money supply attributed
to growing credit to government has
implication for higher inflationary and
exchange rate pressures.

Narrow
Money (M1)
Slightly
below target
The performance of M1 below its target
was attributed to the reduction in COB
in the review period due to the impact
of the Naira Redesign. This could have a
dampening
effect
on
inflationary
pressure.

Net Foreign
Assets (NFA)
Below target
The downward performance of NFA
reflects rising external obligations with
implications on exchange rate stability.

Net
Domestic
Assets
(NDA)
Above
target
Credit to government was the major
driver of growth in NDA, implying
crowding out of the private sector and
rising inflationary pressure.

Net
Credit
to the Govt
(NCg)
Above
target
The rising credit to government implies
increased debt service burden, which
may further narrow the fiscal space.

Credit
to
the Private
Sector (CPs)
Above
target
The improved performance of CPs
demonstrates the increasing role of the
private sector in driving economic
activities. If sustained, this could strongly
lead to the creation of new jobs and
reduce unemployment.
Source: Staff Analysis

3.4
Domestic
Financial
Market
Developments
In the second half of 2022, the Nigerian
financial
market
remained
resilient
despite considerable headwinds from
the global and domestic environments.
With inflation remaining high in several
economies,
advanced
economy
central banks progressed with monetary
tightening, thus redirecting capital flows
from Emerging Market and Developing
Economies (EMDEs). The war in Ukraine


CBN Monetary Policy Review

also caused disruptions to the global
energy and commodities markets in
addition to supply chain pressures
associated with developments in China.
To maintain stability in the foreign
exchange market, the Bank sustained its
interventions
aimed
at
providing
adequate liquidity to ease demand
pressure. Despite shocks from the global
environment, investor confidence in the
Nigerian capital market was sustained
through the period as the All-Share Index
(ASI) and Market Capitalisation (MC)
moderated marginally. In the money
market, both the interbank call and OBB
rates
declined,
reflecting
liquidity
conditions in the banking system. The
collateralised OBB segment, however,
witnessed more activities compared
with the interbank call segment, which
had several non-trading days in the
review period.

3.4.1
The Money Market
Money market activities in the second
half of 2022 fluctuated moderately,
reflecting liquidity condition in the
banking system. The major sources of
banking system liquidity were: statutory
monthly disbursement of funds to the
three tiers of governments by the
Federation
Account
Allocation
Committee
(FAAC);
maturing
government securities; and the various
CBN interventions. The CBN, however,
maintained its Open Market Operations
to moderate liquidity levels in the
market. In addition, the Bank maintained
a tight monetary policy stance by hiking
the policy rate to tame inflationary
pressures. To this end, money market
rates oscillated within the standing
facilities corridor, indicating moderate
stability in the market.

In the period under review, the interbank
segment of the market witnessed lower
activities in terms of volume and active
days relative to the OBB segment. The
higher activities in the OBB segment
reflected preference
for lower risk
exposure as transactions in the segment
are collateralised.

The MPC raised the Monetary Policy
Rate three consecutive times in the
review period, maintained the Standing
Facilities corridor at +100/-700 basis
points around the MPR, and retained the
Cash Reserve Ratio (CRR) and Liquidity
Ratio (LR) were retained at 27.5 and 30.0
per cent, respectively during the period.

3.4.1.1 Short-term Interest Rate
Developments
Money market rates in the review
period were largely influenced by
liquidity
conditions
in
the
banking
system. The interbank call rate averaged
12.06 per cent in the period, declining to
12.08 per cent in December 2022 from
13.00 per cent in July 2022. The OBB rate
averaged 13.20 per cent in the period,
declining to 11.66 per cent in December
2022 from 14.15 per cent in July 2022. The
30-day Nigerian Interbank Offered Rate
(NIBOR), which mirrors the Nigerian
interbank short-term lending rates for
some selected banks, however, rose to
13.25 per cent in December 2022 from
11.01 per cent in July 2022, indicating a
mixed trend in the review period.


CBN Monetary Policy Review

Table 3.9: Weighted Average Monthly Money
Market Interest Rates (%) July-December, 2022
Period
Interban
k
OBB SDF MPR
SLF NIBOR-

Days
Jul-22

Aug-22

Sept-22

Oct-22
-


Nov-22

Dec-22

Averag

Source: CBN Statistical Database
Note: NIBOR figures daily averages

Figure 3.26: Average Weighted Monthly Money
Market Interest Rates (July-December, 2022)

Source: CBN Statistical Database

3.4.1.1.1
The Interbank Call Rate
In the second half of 2022, the
interbank
segment
recorded
lower
activities than the collaterized OBB
segment, an indication of preference for
lower risk transactions at the collaterized
segment. Consequently, there were
several non-trading days in the review
period.

The weighted average interbank call
rate declined to 12.08 per cent in
December 2022 from 13.00 per cent in
July 2022. While the highest rate of 15.00
per cent was recorded in August 2022,
there were however, no transactions in
September and October 2022. In
November 2022, the rate declined
significantly to 8.17 per cent before rising
to 12.08 per cent in December (Table
3.14). Key factors that influenced these
rate movement in the review period
include: adjustments to the Monetary
Policy Rate, OMO sales and maturities,
CRR debits, interventions in the real
sector, and fiscal disbursements.

The analysis of the daily interbank call
rate showed that for days where trading
activities took place in the review
period, the call rate ranged from 9.50
per cent on trading days to 16.75 per
cent between July and December 2022.
The peak of 16.75 per cent in December
was largely due to Bank’s mopping up
activities. In the second half of 2022, the
average interbank call rate rose to 12.21
per cent from an average of 9.92 and
9.38
per
cent
recorded
in
the
corresponding and preceding periods,
respectively.

Overall, the average interbank call rate
in the review period at 12.06 per cent
was 2.06 percentage points higher than
9.92 per cent in the second half of 2021
and 2.08 percentage points higher than
9.98 per cent in the first half of 2022.

MPR
SDF
SLF
Interb
ank


CBN Monetary Policy Review

Figure 3.27: Daily Interbank Call Rate (July – Dec
2022)

Source: CBN Statistical Database

3.4.1.1.2
The Open Buy Back (OBB)
Rate
The collateralised OBB segment of the
market recorded higher number of
transactions during the reviewed period,
compared
with
the
interbank
call
segment. The weighted average OBB
rate declined to 11.66 per cent in
December 2022 from 14.15 per cent in
July 2022. In August 2022, the rate fell to
13.21 per cent and fell further to 11.49
per
cent
in
September
but
rose
substantially to 16.14 per cent in October
2022. In November, the rate declined to
12.56 per cent and closed the year at
11.66 per cent in December 2022. The
general downtrend in the review period
reflected continued liquidity surfeit in the
banking system.

In the review period, the daily Open Buy
Back rate ranged from 7.08 per cent on
trading days to 17.01 per cent between
July and December 2022. The peak of
17.01 per cent in December trading was
largely due to tight liquidity conditions
associated with increased OMO sales.
The average OBB rate rose to 13.09 per
cent in the second half of 2022, from an
average of 11.81 and 8.23 per cent
recorded in the corresponding and
preceding periods, respectively.

Figure 3.28: Daily OBB Rate (July – Dec 2022)

Source: Financial Markets Department, CBN

3.4.1.1.3
The
Nigerian
Interbank
Offered Rate (NIBOR)
The Nigerian money market reference
rate, the NIBOR, fluctuated moderately
following the trend with other short-term
interest rates in the review period. The
weighted average 30-day NIBOR rose
from 11.01 per cent in July 2022 to 12.14
per
cent
in
August.
It
however,
moderated to 11.25 and 10.80 per cent
in
September
and
October,
respectively. In November, the rate rose
to 14.25 per cent and closed at 13.25 per
cent in December 2022. The weighted
average 30-day NIBOR for the second
-
9.00
18.00
1-Jul-22
16-Jul-22
31-Jul-22
15-Aug-22
30-Aug-22
14-Sep-22
29-Sep-22
14-Oct-22
29-Oct-22
13-Nov-22
28-Nov-22
13-Dec-22
28-Dec-22

1-Jul-22
16-Jul-22
31-Jul-22
15-Aug-22
30-Aug-22
14-Sep-22
29-Sep-22
14-Oct-22
29-Oct-22
13-Nov-22
28-Nov-22
13-Dec-22
28-Dec-22


CBN Monetary Policy Review

half of 2022 stood at 12.13 per cent
compared with 11.00 per cent in the
corresponding period and 8.77 per cent
in the preceding half year.

3.4.2
Foreign Exchange Market
In the period under review, the Nigerian
foreign exchange market was shaped
by
both
external
and
domestic
developments. At the external front,
advanced economies continued to be
confronted with rising inflation which
eroded real incomes. In response,
advanced economies central banks
progressed
with
monetary
policy
tightening, which aggravated capital
outflows from Emerging Market and
Developing
Economies
(EMDEs).
In
addition, the disruption to the global
supply chains owing to the RussiaUkraine war resulted in inflationary and
exchange rate pressures in the domestic
economy.

On the domestic scene, crude oil
production during the period recorded
low output owing to several factors
including oil theft, pipeline vandalism,
divestment by oil majors, among others.
These developments hindered Nigeria
from accessing the full benefits of the
relatively high oil price during the period
and, therefore, reduced accretion to
foreign
reserves.
In
addition,
the
country’s high dependence on imports
of refined petroleum products and the
sustenance
of
subsidy
regime
on
premium motor spirit (PMS) accentuated
the foreign exchange demand pressure.
In response to these developments, the
Bank sustained its interventions in the
foreign exchange market to ensure
adequate liquidity. The Investors’ and
Exporters’ (I&E) window remained the
default reference exchange rate for
official transactions which enhanced
transparency and market confidence in
the economy. In addition, the CBN
continued with the implementation of
the Naira-4-Dollar policy; and the RT200
policy
on
repatriation
of
export
proceeds. Other development finance
initiatives of the Bank were also sustained
to boost domestic production and
reduce
the
demand
for
foreign
exchange for imports.

Figure 3.29: Monthly Naira/US Dollar Exchange
Rate January 2022 – December 2022

Source: CBN Statistics Department

3.4.2.1 Average
and
End-Period
Exchange Rates
The average exchange rate at the I&E
window depreciated during the review
period. The average exchange rate
depreciated by 4.60 per cent to
N436.01/US$ in the second half of 2022
from N415.95US$ in the first half.

In the period under review, the monthly
exchange rate fell progressively from
₦414.00/US$
at
end-June

to

I&E (Monthly Average)


CBN Monetary Policy Review

₦460.00/US$ at end-December 2022.
The
end-period
monthly
average
exchange rate depreciated by 5.57 per
cent to ₦439.68/US$ in the second half of
2022 from ₦415.17/US$ in the first half of
2022. The weakening of the naira in the
review period was due to increased
demand pressures amidst supply.

3.4.2.2 Nominal
and
Real
Effective
Exchange Rates
The Nominal Effective Exchange Rate
(NEER) decreased by 1.56 per cent to an
average of 193.24 in the second half of
2022 from 196.26 in the first half of 2022.
Compared
with
200.57
in
the
corresponding period of 2021, the NEER
also decreased by 3.79 per cent. The fall
in the NEER indicates depreciation of the
local currency against the weighted
basket of currencies of Nigeria’s trading
partners.

The Real Effective Exchange Rate (REER)
decreased by 5.52 per cent to an
average of 62.65 in the second half of
2022 from 66.31 in the first half of 2022.
Compared with 69.23 in the second half
of 2021, the REER also decreased by 9.50
per cent in the second half of 2022. The
decrease in REER implies an increase in
trade competitiveness with Nigeria’s
trading partners as exports became
cheaper and imports become more
expensive (Table 3.17 and figure 3.30).


Table 3.10: Average Nominal and Real Effective
Exchange Rates Indices (July 2021 – December
2022)
Period
NEER
REER
2021: Jul
204.17
71.89
Aug
203.84
70.92
Sep
201.03
69.65
Oct
198.88
68.82
Nov
197.59
67.74
Dec
197.89
66.38
2021: H2
200.57
69.23
2022: Jan
197.81
68.18
Feb
200.86
68.6
Mar
200.41
68.18
Apr
193.07
65.16
May
194.82
65.00
Jun
190.61
62.73
2022: H1
196.26
66.31
Jul
191.18
62.42
Aug
190.14
61.02
Sep
186.48
59.07
Oct
188.26
59.29
Nov
195.91
60.81
Dec
206.75
63.29
2022: H2
193.24
62.65
Source: CBN Statistics Department

Figure: 3.30: Average Nominal and Real Effective
Exchange Rates Indices (January 2021 –
December 2022)

Source: CBN Statistics Department

Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
NEER
REER


CBN Monetary Policy Review

3.4.2.3 Foreign Exchange Flows through
the CBN
Foreign exchange inflows through the
CBN stood at US$13,487.72 million at the
end of the second half of 2022.
Compared
with
US$26,007.93
and
US$16,402.44
million,
in
the
corresponding and preceding periods,
inflows declined by 48.14 and 17.77 per
cent, respectively. Foreign exchange
outflows through the Bank also declined
by 13.50 and 4.95 per cent from
US$18,558.74 and US$16,888.19 million in
the
corresponding
and
preceding
periods, respectively, to US$16,052.63
million in the second half of 2022.

Accordingly, net outflow increased to
US$2,564.91
in
the
review
period
compared
with
US$485.75
in
the
preceding half year, in contrast to the
net
inflow
of
US$7,449.19
in
the
corresponding period of 2021. The
increase in net outflows was attributed
to a substantial reduction in inflows from
oil receipts, portfolio capital and other
non-oil sources.

Table 3.11: Monthly Foreign Exchange Flows
through the CBN (July 2021 – December 2022)
(Million US$)
US$ (Million)
Date
CBN
Inflow
CBN
Outflo
Net
Flow
Jul-21
3,314.4
2,655.7
658.70
Aug-21
5,427.6
2,888.6
2,538.
Sep-21
8,089.2
2,436.9
5,652.
Oct-21
3,247.7
3,547.6
-
Nov-21
3,048.9
3,852.5
-
Dec-21
2,879.8
3,177.1
-
2021 H2
26,007.
18,558.
7,449.
Jan-22
1,823.2
2,601.2
-
Feb-22
2,492.7
2,288.3
204.40
Mar-22
3,316.6
3,545.0
-
Apr-22
2,468.1
2,860.8
-
May-22
2,118.7
2,123.0
-4.29
Jun-22
4,182.8
3,469.7
713.14
2022 H1
16,402.
16,888.
-
Jul-22
2,267.6
3,152.0
-
Aug-22
3,230.2
2,892.3
337.93
Sep-22
1,781.2
2,498.3
-
Oct-22
1,608.5
2,188.0
-
Nov-22
1,999.5
2,376.1
-
Dec-22
2,600.4
2,945.6
-
2022 H2
13,487.
16,052.
-
Source: CBN Statistics Department

Figure 3.31: Monthly Foreign Exchange Flows
through the CBN (July 2021 – December 2022)
(US$’ Billion)

Source: CBN Statistics Department

3.4.2.4 Foreign Exchange Flow through
the Economy
Total foreign exchange inflows to the
economy in the review period dropped
substantially by 32.04 and 8.88 per cent
to US$34,512.80 million in the second half
of 2022, from US$50,785.23 million and
-4000
-2000


Inflow (CBN)
Outflow (CBN)
Net Flow (CBN)


CBN Monetary Policy Review

US$37,876.44 million in the corresponding
half of 2021 and the preceding half year,
respectively. Similarly, foreign exchange
outflows declined by 15.97 and 13.82 per
cent to US$18,974.45 million in the
second half of 2022, from US$22,581.43
million and US$22,017.63 million in the
corresponding half of 2021 and the
preceding half year, respectively.

Consequently, net foreign exchange
inflows to the economy at US$15,538.36
million in the review period, was lower
than
US$28,203.80
million
and
US$15,858.81 million in the corresponding
period of 2021 and the preceding half
year. The fall in net foreign exchange
flows in the economy was attributed to
the significant drop in foreign exchange
earnings from both oil and non-oil
sources.


Table 3.12: Monthly Foreign Exchange Flows through the Economy
(July 2021 – December 2022) (US$ Million)
Perio
d
Inflow
s
(CBN)
Inflows
(Autono
mous)
Total
Inflows
Outflo
ws
(CBN)
Outflows
(Autono
mous)
Total
Outflo
w
Net
Flow
Net
Flow
(CBN)
Net
Flow
(Auton
Jul-

3,314.

3,663.42
6,977.9

2,655.7

772.86
3,428.6

3,549.

658.70
2,890.5

Aug-

5,427.

4,421.94
9,849.5

2,888.6

652.08
3,540.7

6,308.

2,538.97
3,769.8

Sep-

8,089.

5,266.70
13,355.

2,436.9

818.26
3,255.2


Oct-

3,247.

3,806.18
7,053.9

3,547.6

760.32
4,307.9

2,745.

-299.93
3,045.8

Nov-

3,048.

3,586.16
6,635.1

3,852.5

602.23
4,454.7

2,180.

-803.53
2,983.9

Dec-

2,879.

4,032.91
6,912.7

3,177.1

416.94
3,594.0

3,318.

-297.27
3,615.9

H2
Total
26,007
.93
24,777.3

50,785.

18,558.

4,022.70
22,581.


Jan-

1,823.

2,607.82
4,431.0

2,601.2

763.03
3,364.2

1,066.

-778.00
1,844.7

Feb-

2,492.

3,558.85
6,051.6

2,288.3

880.21
3,168.5

2,883.

204.40
2,678.6

Mar-

3,316.

4,573.32
7,889.9

3,545.0

905.84
4,450.8

3,439.

-228.34
3,667.4

Apr-

2,468.

4,123.89
6,592.0

2,860.8

1,087.83
3,948.6

2,643.

-392.66
3,036.0

May-

2,118.

3,410.41
5,529.1

2,123.0

1,017.40 3,140.41
2,388.

-4.29
2,393.0

Jun-

4,182.

3,199.71
7,382.5

3,469.7

475.13
3,944.8

3,437.

713.14
2,724.5

CBN Monetary Policy Review

H1
Total
16,402
.44
21,474.0

37,876.

16,888.

5,129.44
22,017.


Jul-

2,267.

3,036.47
5,304.1

3,152.0

226.10
3,378.1

1,925.

-884.42
2,810.3

Aug-

3,230.

3,595.62
6,825.8

2,892.3

735.25
3,627.5

3,198.

337.93
2,860.3

Sep-

1,781.

3,022.04
4,803.2

2,498.3

424.88
2,923.2

1,880.

-717.16
2,597.1

Oct-

1,608.

2,600.38
4,208.9

2,188.0

278.02
2,466.0

1,742.

-579.50
2,322.3

Nov-

1,999.

3,007.51
5,007.1

2,376.1

613.24
2,989.3

2,017.

-376.52
2,394.2

Dec-

2,600.

5,763.06
8,363.5

2,945.6

644.33
3,590.0

4,773.

-345.24
5,118.7

H2
Total
13,487
.72
21,025.0

34,512.

16,052.

2,921.82
18,974.


Source: CBN Statistics Department


Figure 3.32: Monthly Foreign Exchange Flows
through the Economy
(July 2021 – December 2022) (US$ Billion)

Source: CBN Statistics Department

3.4.2.5 Balance of Payment Position
The
weakening
global
economic
conditions amidst growing risks, continue
to
weigh
on
the
external
sector
performance.
Consequently,
Nigeria
recorded a Balance of Payments (BOP)
deficit of –US$1.11 billion, representing –
0.85 per cent of the GDP In Q42022. The
current account, nonetheless, posted an
impressive surplus position of US$2.35
billion,
buoyed
by
positive
trade
performance and lower deficits in the
services and primary income accounts,
as well as sustained surplus in the
secondary
income
account.
The
financial account recorded a lower net
incurrence of financial liabilities of
US$0.85 billion, compared with US$2.69
billion in Q32022, reflecting tight global
monetary conditions.

3.4.3

The Capital Market
The All-Share Index (ASI) and Market
Capitalisation
(MC)
moderated
marginally, amidst several shocks from

Jul-21
Oct-21
2021 H2 Total
Mar-22
Jun-22
Aug-22
Nov-22
Total Inflows
Total Outflow
Net Flow


CBN Monetary Policy Review

the global and domestic environment
that confronted the Nigerian economy,
suggesting
continued
investor
confidence in the Nigerian bourse.
However, the real yields in the bond
market continued to be eroded as
inflationary pressures persisted during
the period.
3.4.3.1 Equities Market
The All-Share Index (ASI) decreased by
1.09 per cent to 51,251.06 at endDecember 2022 from 51,817.59 at end-
June 2022. This was, however, an
increase of 19.98 per cent compared
with 42,716.44 at end-December 2021.
Market capitalization (MC) decreased
by 0.07 per cent to N27.92 trillion at endDecember 2022 from N27.94 trillion at
end-June 2022. Market Capitalization,
however, increased by 25.20 per cent
compared with N22.30 trillion in the
corresponding period of 2021.

Table 3.13: NSE All-Share Index (ASI) and Market
Capitalization (MC) (December 2021 – December
2022)
Date
ASI
MC(Equities)
N’Trillion)
Dec-21
42,716.44
22.30
Jan-22
46,624.67
25.12
Feb-22
47,111.21
25.39
Mar-22
47,482.73
25.59
Apr-22
49,638.94
26.76
May-22
52,990.28
28.57
Jun-22
51,817.59
27.94
Jul-22
50,370.25
27.16
Aug-22
49,836.51
26.88
Sep-22
49,024.16
26.45
Oct-22
43,839.08
23.88
Nov-22
47,660.04
25.96
Dec-22
51,251.06
27.92
Source: NGX
Figure 3.33: NGX All Share Index (ASI) and Market
Capitalization (MC) (December 2021 - December
2022)

Source: NGX

3.4.3.1.2
Market Turnover
Aggregate stock market turnover in the
second half of 2022 stood at 24.45 billion
shares, valued at N332.57 billion in
449,233
deals.
This
represents
a
significant decline of 68.04 per cent
compared with 76.52 billion shares,
valued at N831.83 billion in 616,334 deals
in the first half of 2022. Compared with
the
corresponding
period,
it
also
decreased by 42.74 per cent year-onyear from 42.70 billion shares, valued at
N428.74 billion in 500,858 deals at endDecember 2021.

3.4.3.1.3
Sectoral Contribution to
Equity Market Capitalization
In
the
review
period,
the
'Telecommunication’ sector continued
its dominance in terms of contribution to
market capitalization. However, its share
of the market capitalization decreased
to 37.69 per cent at end-December 2022
from 41.45 per cent at end-June 2022.
This was attributed to the listing of other
non-telecommunication
companies


ASI
MC (Equities)(N Trillions)


CBN Monetary Policy Review

such as the 2.5 billion shares of Geregu
Power plc in October 2022. Other sectors
that contributed significantly to overall
market capitalization were Dangote
Cement, Building Materials, and Food &
Beverages, with market shares of 15.93,
13.40 and 11.93 per cent, respectively, at
end-December 2022 (Figure 3.35).

Figure 3.34: NSE Market Capitalization by Sector
as at End-December 2022

Source: NGX

3.4.3.2 Bond Market
Federal Government of Nigeria (FGN)
securities dominated activities in the
bond market in the second half of 2022.
There were some activities in the
State/Municipal bonds and corporate
bond segments of the market, with the
former recording the least share by
market volume.

3.4.3.2.1 FGN Bonds
Nigeria's 10-year dollar-denominated
bond yield decreased by 83 basis points
to 11.84 per cent at end-December
2022, from 12.67 per cent at end-June
2022. It was, however, an increase of 531
basis points compared with 6.53 per
cent at end-December 2021 (Figure
3.38).

Figure 3.35: 10-Year U.S. Dollar-denominated
Bond Yield for Nigeria (December 2021 –
December 2022)

Data Source: Bloomberg

The yield curve depicts the interest rates
on debt for a range of maturities for endDecember 2021, end-June 2022, and
end-December 2022. The graph displays
bond yields on the vertical axis and timeto-maturity across the horizontal axis.
Interest rates for longer terms are often
higher than those for shorter terms. As
duration lengthens, the yield curve
typically slopes upward.

During the review period, the average
yields on the federal government (FGN)
bonds exhibited an upward trend. The
yield curve for end-December 2022
increased at both the short and long
ends, in comparison to the preceding
periods of end-June 2022 and endDecember 2021.

The upward sloping (normal-shaped)
yield curve implies a positive outlook for
the Nigerian economy, suggestive of a
continuous growth trajectory.


NGX Market Capitalization by Sector as at December 30, 2022
Rest of Food and Beverages
Construction
Banking
Insurance
Breweries
Conglomerates
Oil and Gas
industrial goods
Dangote Cement
Dangote Sugar
NASCON (Dangote Salt)
Rest of Building Materials
Agriculture
Personal Household products
Services
Telecommunication
Other Sectors

Nigeria 10-Years US Denominated
Bond Yield


CBN Monetary Policy Review

Figure 3:36: FGN Bond Yield Curves: December 29,
2022 & June 29, 2022 Vs December 31st 2021.

Data Source: FMDQ

3.4.3.2.2 State/Local Government Bonds
The
sub-national
bond
market
continued to record low activities during
the review period. The total value of
outstanding State/Local Government
bonds remained unchanged at endDecember 2022 from its end-June 2022
value of N148.91 billion. It was, however,
a decrease of 28.26 per cent compared
with
the
N207.56
billion
at
endDecember 2021.

3.4.3.2.3 Corporate Bonds
Activities
in
the
corporate
bond
segment increased in the review period.
The value of outstanding corporate
bonds rose by 43.23 per cent to N1.06
trillion at end-December 2022, from
N739.01
billion
at
end-June
2022.
Compared with N718.30 billion in the
corresponding
period
of
2021,
it
increased by 47.57 per cent. The rising
trend reflects continued attractiveness
of fixed income securities as bond prices
declined
with
rising
inflation,
thus
improving their yields.

3.4.3.3 Overall Analysis of the Nigerian
Capital Market
The value of FGN bonds increased by
3.14 per cent from N21.34 trillion at endJune 2022 to N22.01 trillion at endDecember 2022, and by 16.95 per cent,
compared with N18.82 trillion at endDecember 2021. FGN bonds accounted
for 42.99 per cent of aggregate market
capitalization at end-December 2022.
The value of state/municipal bonds and
corporate bonds were N148.91 billion
and N1.06 trillion, accounting for 0.29
and 2.07 per cent of aggregate market
capitalization, respectively. In general,
the equities market contributed 45.30
per
cent
of
aggregate
market
capitalization at end-December 2022,
while the bonds market accounted for
the balance of 54.70 per cent (Figure
3.40).

Figure 3.37: Structure of the Nigerian Capital
Market (December 2022)

Source: Nigerian Exchange Group


Yield (%)
Time to maturity
29 Dec 2021
29 Jun 2022
31 Dec 2022

MARKET CAPITALISATION (N'
MILLIONS)
FGN Bonds


CBN Monetary Policy Review

CBN Monetary Policy Review

CHAPTER FOUR
ECONOMIC OUTLOOK AND RISKS

4.1
Outlook for Global Output
lobal
output
growth
was
projected to slow to 2.9 per
cent in 2023, from 3.4 per cent
in 2022 (IMF WEO, January 2023). This
estimate
was
premised
on
the
anticipated impact of new shocks on
the
global
economy
that
was
recovering from the downsides of the
COVID-19 pandemic. These shocks,
which were primarily supply-side related,
include the war in Ukraine and lockdown
measures in China to stem the renewed
spread of the Coronavirus, resulting in a
hike in commodity and energy prices.
Consequently,
major
central
banks
responded
by
adopting
a
tight
monetary policy stance to rein in
inflation, though, with dampening effect
on global output.

In the advanced economies, growth
was forecast to moderate to 1.2 and 1.4
per cent in 2023 and 2024, respectively
from
2.7
per
cent
in
2022.
The
downgrade was predicated on the
impact of accelerated interest rate hike
by central banks to curb the rising
inflation which has reduced real income
with adverse impact on spending and
investment. In addition, the Russian
invasion of Ukraine continued to impact
commodity
and
energy
prices.
Consequently, growth in the United
States was forecast to slow to 1.4 and 1.0
per cent in 2023 and 2024, respectively,
from 2.0 in 2022. In the euro area, growth
was projected to slow to 0.7 and 1.6 per
cent in 2023 and 2024, respectively, from
3.5 per cent in 2022. In the United
Kingdom, output growth was estimated
to contract by -0.6 per cent in 2023
before recovering to 0.9 per cent in
2024, from 4.1 per cent in 2022. Output
growth in Canada was forecast to
moderate to 1.5 per cent apiece in 2023
and 2024 from 3.5 per cent in 2022. In
Japan, however, growth was projected
to improve to 1.8 per cent in 2023 from
1.4 per cent in 2022 but expected to
decline to 0.9 per cent in 2024.

In the emerging Market and developing
economies, growth was projected to
expand to 4.0 and 4.2 per cent in 2023
and 2024, respectively, from 3.9 per cent
in 2022. In the emerging and developing
Asia, growth was forecast to improve to
5.3 and 5.2 per cent in 2023 and 2024,
respectively, from 4.3 per cent in 2022.
The emergence of China out of the zero
COVID-19 restrictions and easing supply
chains was expected to drive growth in
this group. In China, growth was,
therefore, projected to increase to 5.2
per cent in 2023 from 3.0 per cent in
2022. It is, however, expected to slow to
4.5 per cent in 2024, owing largely to
slow structural reforms. In India, growth
was projected to moderate to 6.1 per
cent in 2023 from 6.8 per cent in 2022
before rising to 6.8 per cent in 2024.

In Latin America and the Caribbean,
growth was forecast to moderate to 1.8
and 2.1 per cent in 2023 and 2024,
respectively, from 3.9 per cent in 2022,
on account of tightening financial
conditions and lower export demand.
Growth in Brazil is expected to moderate
to 1.2 and 1.5 per cent in 2023 and 2024,
respectively, from 3.1 per cent in 2022. In
G


CBN Monetary Policy Review

Mexico, output growth was forecast to
fall to 1.7 and 1.6 per cent in 2023 and
2024, respectively, from 3.1 per cent in
2022.

In sub-Saharan Africa, growth was
projected at 3.8 in 2023 unchanged from
2022, before improving to 4.1 per cent in
2024, owing to improved outlook for
Nigeria, a major economy in the region.
In Nigeria, output growth was estimated
to rise to 3.2 per cent in 2023 from 3.0 per
cent in 2022, due to anticipated
increase in oil output resulting from
improved security in the Niger Delta
region. It was, however, forecast to
moderate to 2.9 per cent in 2024. The
South African economy was forecasted
to decline substantially to 1.2 and 1.3 per
cent in 2023 and 2024, respectively, from
2.6
per
cent
in
2022,
due
to
infrastructural challenges, and weaker
export demand.

Table 4.1 Global Output and Inflation Outlook

2022*
2023*

A. World Output


World Output

Advanced
Economies

USA

Euro Area

Japan

UK

Canada

Other
Advanced
Economies

Emerging &
Developing
Economies

Latin America
and the
Caribbean

Middle East and
Central Asia

Sub-Saharan
Africa

B. Commodity
Prices (US
Dollars)


Oil

Non-fuel

C. Consumer
Prices

Advanced
Economies

Emerging &
Developing
Economies

Source: IMF WEO, January 2023 Updates
*Forecast

4.2
Outlook for Global Inflation
Global inflation is forecast to moderate
to 6.6 per cent in 2023 from 8.8 per cent
in 2022. This is expected to be driven by
declining cost of energy, weaker global
demand, and dampening impact of
policy rate hikes on core inflation. In the
advanced
economies,
inflation
is
projected to decelerate to 4.4 per cent
in 2023 compared with 7.2 per cent in
2022, due to easing supply constraints,
declining prices of energy and base
effect. In the US, inflation is expected to
decelerate to 3.5 per cent in 2023 from
8.1 per cent in 2022. In the euro area,
inflation is forecast to decelerate to 5.7
per cent in 2023 from 8.3 per cent in
2022. Similarly, inflation in the UK is
forecast to decline to 9.0 per cent in
2023, compared with 9.1 per cent in
2022. Inflation in Japan is also forecast to
fall to 1.4 per cent in 2023, compared
with 2.0 per cent in 2022.

In the emerging market and developing
economies
(EMDEs),
inflation
is
projected to decline to 8.1 per cent in
2023, compared with 9.9 per cent in
2022, driven by the impact of tight
monetary policy and easing global
supply chains. In China, inflation is
forecast to remain unchanged at 2.2 per
cent in 2023 from the level in 2022.


CBN Monetary Policy Review

Inflation in India is forecast to decline to
5.1 per cent in 2023, compared with 6.9
per cent in 2022. Brazil’s inflation is also
expected to fall to 4.7 per cent in 2023,
compared with 9.4 per cent in 2022.
Similarly, inflation in Mexico is projected
to decelerate to 6.3 per cent in 2023,
compared with 8.0 per cent in 2022.

In
sub-Saharan
Africa,
inflation
is
projected to decline to 11.9 per cent in
2023 from 14.4 per cent in 2022. In
Nigeria, inflation is forecast to fall to 17.3
per cent in 2023 from 18.9 per cent in
2022. Inflation in South Africa is projected
to fall to 5.1 per cent in 2023 from 6.7 per
cent in 2022.

Table 4.2 Global Inflation Outlook (Average)

2*

3*


Advanced Economies
3.1
7.2
4.4
USA
4.7
8.1
3.5
Euro Area
2.6
8.3
5.7
Japan

Emerging & Developing
Economies
5.9
9.9
8.1
China
0.9
2.2
2.2
Russia
6.7
13.8
5.0
India
5.5
6.9
5.1
Sub-Saharan Africa
11.

14.4
11.9
Nigeria
17.

18.9
17.3
Ghana
10.

27.2
20.9
Angola
25.

21.7
11.8
LIC
13.

14.2
12.0
Ethiopia
26.

33.6
28.6
Source: IMF WEO, October 2022
*Forecast
4.3 Outlook for Domestic Output Growth
Output
growth
in
the
domestic
economy is expected to be sustained in
2023. This is predicated on improved
prospects
in
the
non-oil
sector,
especially services and agriculture. In
addition, the effective implementation
of the National Development Plan
(NDP);
expansion
in
manufacturing
activities;
positive
impact
of
CBN
interventions
on
growth-enhancing
sectors;
improvement
in
business
confidence; and recovery in oil price are
expected to drive growth in 2023.

On
the
downside,
supply
chain
disruptions
mainly
from
intermittent
shortage of PMS and the rising cost of
energy could affect economic activities.
Other factors that pose significant
headwinds
to
the
growth
outlook
include legacy challenges associated
with
epileptic
power
supply,
poor
transport infrastructure and lingering
insecurity.

Consequently,
the
International
Monetary Fund (IMF) forecast Nigeria’s
growth for 2023 at 3.2 per cent, while the
World Bank estimated the growth of 2.8
per cent. The Central Bank of Nigeria
(CBN) Staff projection forecasts real GDP
growth at 3.09 per cent.

4.4 Outlook for Domestic Inflation
Headline inflation is expected to
accelerate to 21.43 per cent in January
2023, from 21.34 per cent at endDecember 2022 (CBN Staff estimates).
However, it is estimated to decelerate to
21.32 and 21.26 per cent, in February


CBN Monetary Policy Review

and March, respectively, and ease
further to 20.92 per cent in June 2023. This
projection
is
premised
on
the
anticipated dampening impact of tight
monetary policy and implementation of
the Naira Redesign Policy on price levels.
In addition, the sustained intervention by
the Bank in the Agriculture sector is
expected to increase food output and
moderate prices. Inflationary pressures in
the short to medium-term will thus be
monitored to ensure that the downside
risks to inflation are minimized.

Figure 4.1: Fan Chart of Inflation Forecast

Source: CBN Staff Estimates

Figure 4.2: Inflation Forecast

Source: CBN Staff Estimates


4.5
Outlook for Monetary Policy in
The First Half of 2023
The Bank’s Monetary Policy formulation
and implementation in the first half of
2023 will continue to be guided by the
Medium-Term Expenditure Framework
(MTEF) of the Federal Government of
Nigeria. Monetary Policy would sustain its
ultimate objective of price and financial
system stability towards achieving an
inclusive growth. This would entail the
effective management of expectations;
provision of time-consistent policies to
respond
to
emerging
shocks;
strengthening growth recovery; and
maintaining
external
and
internal
balance in the economy.

The Bank will continue to monitor global
developments and their likely impact on
the Nigerian economy. According to the
International
Monetary
Fund
(IMF),
global growth is projected at 3.4 and 2.9
per cent for 2022 and 2023, respectively,
from 6.2 per cent in 2021 (WEO, January
2022).
The
downgrade
in
growth
forecast is largely driven by various
headwinds including the war in Ukraine
which has significantly disrupted the
global supply chain resulting in rising
food and energy prices. In addition, the
re-introduction of restrictions in major
industrial cities in China due to the
resurgence of the COVID-19 Pandemic,
has imposed a drag on the global supply
chain. Similarly, the continued hike in
monetary policy rate by advanced
economy central banks to rein in
inflation have led to tightened financial
condition,
with
adverse
effect
on
growth.
A
combination
of
these

de
c
ja
n
fe
b
m
ar
ap
r
m
ay
ju
n jul au
g
se
p
oc
t
no
v
de
c
ja
n
fe
b
m
ar

Actual
16 16 16 16 17 18 19 20 21 21 21 21 21
Inflation
forecast 15 16 15 16 16 16 18 19 20 21 21 21 22 21 21 21

Per cent (%)


CBN Monetary Policy Review

uncertainties portends a bleak outlook
for global economic recovery in 2023.
These developments have exacerbated
policy trade-offs between growth and
price stability. While most central banks
in both the advanced and emerging
market economies continue to prioritize
price
stability
by
adopting
tight
monetary policy stance, fiscal policy
continues to be expansionary to sustain
economic recovery.

In the domestic economy, downside risks
facing monetary policy include rising
inflationary pressures, lingering insecurity
especially in farming and oil-producing
communities, rising domestic debt stock,
exchange rate pressure, uncertainty
around the removal of the fuel subsidy,
rising energy prices, and other structural
bottlenecks.

Consequently,
monetary
policy
response will have to maintain a close
watch on emerging developments in
order to strike a balance between price
stability and inclusive growth in order to
contain these challenges and achieve
price and financial system stability
conducive for economic growth.

4.6 Major Risks to the Outlook

4.6.1 Risks to Global Output and Inflation
The major downside risk that could
undermine global growth outlook is the
escalating war in Ukraine, which has
caused monumental disruption to the
supply chain. In addition, China’s slow
growth recovery accentuated by the
zero COVID-19 policy and the property
market crisis could put a drag on global
growth. Also, the rising inflationary
pressure which has raised inflation
above the long-run target of most
central banks is likely to elicit further
contractionary
monetary
policy
response, and hence tighten global
financial conditions. Other risks include:
rising public debt and the likelihood of
debt distress in several countries, thus,
further constraining fiscal space; rising
geopolitical tension and its implication
on global trade and investment; as well
as the adverse effect of climate change
on agricultural systems as compliance to
the Paris Agreement remains weak.

4.6.2 Risks to Domestic Output and
Inflation
Output growth trajectory is expected to
remain positive over the medium-term,
but will however, be confronted with
several headwinds from both external
and domestic sources. According to the
International Monetary Fund, Nigeria’s
GDP growth is projected to improve
marginally to 3.2 per cent in 2023 from
3.0 per cent in 2022 (IMF WEO, January
2023).

At the external front, downside risks to
the outlook include supply disruptions
due to the war in Ukraine; and monetary
policy
tightening
by
advanced
economy central banks which will
aggravate capital outflow and foreign
exchange pressures, among others.

Domestic downside risks include the
legacy
infrastructural
challenges,
especially power and transportation;
rising public debt stock and tight fiscal
space; as well as lingering insecurity such


CBN Monetary Policy Review

as armed banditry, kidnapping, and
herders-farmers clashes. Also, several
challenges confronting the oil sector
including the aging and inefficient
infrastructure; oil theft and pipeline
vandalisation, as well as divestments by
International Oil Companies (IOCs) from
Nigeria, poses considerable risk to
growth in the medium-term.

However, sustained efforts by the federal
government to improve security in the
Niger-Delta and food-producing regions
will boost commodity output and export.
Similarly, the planned oil subsidy removal
will avail government of more resources
to finance infrastructural projects and
other public investments.

Headline inflation remained above the
upper band of the Bank’s implicit
inflation target range of 6.0 - 9.0 per cent
in the review period. However, staff
forecasts suggest that headline inflation
would moderate in the near-term. The
major risks that could shape inflation
outlook include continued exchange
rate
pressure,
resulting
from
low
accretion
to
reserves;
impact
of
anticipated subsidy removal on price
level; rising fiscal deficit; and adverse
effect of climate change resulting in
severe flooding and desertification with
implication on food output. In addition,
spending towards the 2023 general
elections is expected to exert further
pressure on prices.


Table 1: Nigeria’s GDP Growth Outlook Scenarios
Period
Indicator
Pessimi
stic
Baseli
ne
Optimi
stic
2021Q2
5.01
5.01
5.01
2021Q3
4.03
4.03
4.03
2021Q4
3.98
3.98
3.98

3.38
3.38
3.38
2022Q1
3.11
3.11
3.11
2022Q2
3.54
3.54
3.54
2022Q3
2.25
2.25
2.25
2022Q4f
-0.22
2.61
3.85
2022f
2.17
2.88
3.19
2023f
2.92
3.09
3.70
Crude oil
price
$60/b
$100/
b
$120/
b
Crude oil
productio
n
0.7mb
pd
1.2m
bpd
1.5mb
pd
Govt
Expenditur
e
10%
lower
than
budget
MTEF
(₦17.

trillion
)
5%
higher
than
budge
t
Economic
Activity

index
point
declin
e in
PMI

index
point
incre
ase in
PMI

index
points
increa
se in
PMI
Source: CBN Staff Estimates


CBN Monetary Policy Review

Table 2: Inflation Forecast
YEAR-ON-YEAR INFLATION RATE
12-MMA INFLATION RATE
Status
Month
Headline
inflation
Food
inflation
Core
inflation
Status
Month
Headline
inflation
Food
inflation
Core
inflation
Actual
Jul-

19.64
22.02
16.26
Actual
Jul-

1.82
2.04
1.75
Aug-

20.52
23.12
17.20
Aug-

1.77
1.98
1.59
Sep-

20.77
23.34
17.60
Sep-

1.36
1.43
1.59
Oct-

21.09
23.72
17.76
Oct-

1.24
1.23
0.93
Nov-

21.47
24.13
18.24
Nov-

1.39
1.40
1.67
Dec-

21.34
23.75
18.49
Dec-

1.71
1.89
1.33
Forecast
Jan-

21.43
23.82
18.57
Forecast
Jan-

1.54
1.68
1.32
Feb-

21.32
23.80
18.60
Feb-

1.54
1.85
1.36
Mar-

21.26
23.80
18.57
Mar-

1.69
1.98
0.96
Apr-

21.14
23.79
18.54
Apr-

1.66
1.99
1.19
May-

21.04
23.78
18.51
May-

1.70
2.01
1.85
Jun-

20.92
23.77
18.49
Jun-

1.71
2.04
1.54


CBN Monetary Policy Review

CBN Monetary Policy Review

APPENDICES

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ
NO.

OF
THE
MONETARY POLICY COMMITTEE MEETING
HELD ON MONDAY 18th AND TUESDAY 19th
July 2022

1.0
Background
The Monetary Policy Committee (MPC)
met on the 18th and 19th of July 2022,
confronted
with
heightened
macroeconomic uncertainties, broad
based inflation across countries, and
weakening global recovery associated
with the ongoing Russian-Ukraine war, as
well as backlash from a wide range of
sanctions
imposed
on
Russia.
The
Committee reviewed developments in
the global and domestic economies in
the second quarter of 2022 and the
outlook for the rest of the year. Majorly,
these
developments
include
the
unabated rise in global inflation, driven
by the disruptions to the global supply
chain;
tightening
global
financial
conditions
as
several
advanced
economies pursue an aggressive regime
of
monetary
policy
normalization;
declining global trade; and growing risks
to financial stability, associated with the
burgeoning global private and public
debt profile.

Eleven (11) members of the Committee
attended this meeting.

Global Economic Developments
The Committee noted with concern,
the downtrend in global recovery,
aggravated by supply chain disruptions
as a result of the Russia-Ukraine conflict
and the spillbacks and spillovers from
sanctions imposed on Russia by the US
and its allies. This has resulted in an
unprecedented rise and widespread
global inflation which is exacerbating
downward pressure on the fragile
recovery of the global economy. In
addition,
lingering
headwinds
associated
with
the
COVID-19
pandemic are constraining the smooth
functioning of the global supply chain.
The rising risk of tightening global
financial
conditions,
implies
that
developing economies now face the
risk of constrained access to global
capital which would further depress
growth in this group of economies. This
is expected to result in increased
financial vulnerabilities due to the huge
volume of corporate and public debt
accumulated in the wake of the sharp
downturn driven by the COVID-19
lockdown.
In
the
light
of
these
developments, the key risk confronting
the global economy is that of a
recession which may crystalize as
second quarter growth figures for major
advanced and developing economies
begin to emerge. Consequently, the
International Monetary Fund (IMF) in its
April 2022 World Economic Outlook
(WEO), downgraded its global output
growth forecast for 2022 and 2023 to 3.6
per cent apiece from 4.4 and 3.8 per
cent, respectively, with the likelihood of
a
further
downgrade,
given
the
continued
deterioration
in
output
growth.

Inflation
in
several
advanced
economies pushed higher and further


CBN Monetary Policy Review

away from the long-run objectives of
their
central
banks,
reflecting
the
sustained increase in the price of food,
energy, and other commodities due to
the harsh combination of persisting
supply chain disruptions and pent-up
demand. In the Emerging Markets and
Developing Economies (EMDEs), inflation
is also on the rise, compounded by
legacy structural challenges as well as
heightened exchange rate pressures,
driven by rising capital flow reversals in
addition to the outlined shocks from the
global economy.

In the financial markets, available data
suggests
that
investors
are
now
rebalancing their portfolios away from
gold and equities to fixed income
securities, to take advantage of rising
yields in the advanced economies as
major central banks progress with
interest rate hike. Consequently, the
tightening of global financial conditions
is expected to heighten investment and
debt default risks, leading to the
likelihood
of
a
broad
economic
slowdown.

Domestic Economic Developments
According to the National Bureau of
Statistics (NBS), Real Gross Domestic
Product (GDP) grew by 3.11 per cent
(year-on-year) in the first quarter of
2022, compared with 3.98 per cent in
the fourth quarter of 2021 and 0.51 per
cent in the corresponding period of
2021. The economy has thus grown for
six consecutive quarters, following its
exit
from
recession
in
2020.
This
consistent positive performance was
driven largely by the continuous growth
in the non-oil sector, specifically, in the
services and agriculture subsectors;
ongoing policy support post-COVID
lockdown; and the base effect from the
corresponding period.

Staff
projection
showed
that
the
economy is expected to remain on a
path of sustained positive growth
observed in the last few quarters. The
Committee also noted that both the
Manufacturing
and
NonManufacturing Purchasing Managers’
Indices (PMIs) increased above the 50index point benchmark to 51.1 and 50.3
index points in June 2022, compared
with
48.9
and
49.9
index
points,
respectively, in May 2022. This reflects
the continued rebound in economic
activities due to improvements in
supplier delivery time; raw materials
inventory; employment levels as well as
expansion in some sectors such as
agriculture,
accommodation,
electricity, amongst others.

The Committee noted with concern the
persisting uptick in headline inflation
(year-on-year) to 18.60 per cent in June
2022 from 17.71 per cent in May 2022, an
89-basis point increase in just one month.
This continued increase in inflation was
driven by increases in both the core and
food components to 15.75 and 20.60 per
cent in June 2022. The considerable rise
in core inflation resulted largely from the
rising cost of production due to high
energy prices associated with the
persistent disruptions to power supply,
hike
in
electricity
tariff,
continued
scarcity of Premium Motor Spirit (PMS),
and rising price of Automotive Gas Oil
(AGO). The increase in the food


CBN Monetary Policy Review

component was, however, driven by
shocks to food prices associated with
continued insecurity in food producing
areas and along major access routes
across the country; the continued
impact of the war in Ukraine on the
supply of fertilizer inputs, wheat and
other grains; exchange rate pressures;
and the impact of monetary policy
normalization on capital flows away
from emerging markets. The Committee,
however, expressed confidence in the
Bank’s
sustained
intervention
programmes, noting that inflation is
expected to abate as food supply
improves and the fiscal authority sustain
its efforts to tame the legacy structural
challenges which put upward pressure
on domestic price levels. Members,
therefore, urged the fiscal authority to
expand and sustain its support for all the
recently deployed stimuli to the real
sector of the economy.

The MPC noted that broad money
supply (M3) rose significantly to 11.52
per cent in June 2022, compared with
10.86 per cent in May 2022. This was
largely driven by the growth in Net
Domestic Assets (NDA) of 18.02 per cent
in June 2022, compared with 17.37 per
cent in the previous month. The
sustained growth in Net Domestic Assets
(NDA) was attributed to the increase in
claims on the Federal Government and
other
sectors
(public
nonfinancial
corporations, private sector, and state
and local governments).

Money market rates oscillated within the
asymmetric
corridor,
reflecting
prevailing liquidity conditions in the
banking
system.
Consequently,
the
monthly weighted average Open Buy
Back (OBB) and Inter-bank Call rates
increased in June 2022 to 10.89 and
11.10 per cent, from 9.39 and 8.38 per
cent in May, respectively. The increase in
both the Open Buy Back (OBB) and
Inter-bank Call rates reflected the tight
liquidity
conditions
in
the
banking
system.

The Capital Adequacy Ratio (CAR) and
the Liquidity Ratio (LR) both remained
above their prudential limits at 14.1 and
42.6 per cent, respectively in June 2022.
The Committee, noted the reduction in
the Non-Performing Loans (NPLs) ratio to
4.95 per cent in June 2022, compared
with 5.7 per cent in June 2021. The MPC,
thus, urged the Bank to sustain its tight
prudential regime to ensure that the
NPLs ratio is brought well below its
prudential benchmark.

The MPC noted the very moderate
decline in the performance of the
equities market in the review period, as
the All-Share Index (ASI) and Market
Capitalization
(MC)
moderated
to
51,817.59 and N27.94 trillion on June 30,
2022, from 52,990.78 and N28.56 trillion
on May 31, 2022, respectively. The
market,
however,
remains
resilient,
reflecting continued confidence in the
Nigerian
economy,
as
both
the
monetary and fiscal authorities work
assiduously to improve macroeconomic
fundamentals in Nigeria.

The Committee noted the marginal
increase of 1.61 per cent in the level of
external reserves to US$39.22 billion at
end-June 2022 from US$38.60 billion at


CBN Monetary Policy Review

end-May 2022 due to the increase in
inflows from non-oil sources.

The
Committee
reviewed
the
performance of the Bank’s intervention
programmes targeted at stimulating
productivity
in
agriculture,
manufacturing/industries,
energy/
infrastructure, healthcare, exports and
micro, small & medium enterprises
(MSMEs). Between May and June 2022,
under
the
Anchor
Borrowers’
Programme (ABP), the Bank released
the sum of N3.62 billion, as disbursements
to 12 projects for the cultivation of rice,
wheat,
and
maize,
bringing
the
cumulative disbursement under the
Programme to N1.01 trillion, to over 4.21
million smallholder farmers cultivating 21
commodities across the country. The
Bank also disbursed N3.72 billion to
finance three (3) large-scale agricultural
projects
under
the
Commercial
Agriculture
Credit
Scheme
(CACS).
These
disbursements
brought
the
cumulative disbursements under this
Scheme to N744.32 billion for 678
projects in agro-production and agroprocessing.

As part of its effort to support the
manufacturing
sector,
the
CBN
disbursed the sum of N113.08 billion to 19
new projects under the Real Sector
Facility. The funds were utilized for both
greenfield
and
brownfield
projects
under the COVID-19 Intervention for the
Manufacturing Sector (CIMS) and the
Real
Sector
Support
Facility
from
Differentiated
Cash
Reserve
Requirement (RSSF-DCRR). Cumulative
disbursements under the Real Sector
Facility currently stands at N2.183 trillion
for the financing of 414 real sector
projects across the country. Furthermore,
under the 100 for 100 Policy on
Production and Productivity, the Bank
has released N9.98 billion for five (5)
projects,
bringing
the
cumulative
disbursements under the intervention to
N68.13 billion for 48 projects, comprising
twenty-six
(26)
in
manufacturing,
seventeen (17) in agriculture, three (3) in
healthcare and two (2) in the services
sector.

In the healthcare sector, the Bank
disbursed N4.44 billion to three (3)
healthcare
projects
under
the
Healthcare Sector Intervention Facility
(HSIF),
bringing
the
cumulative
disbursements to N133.42 billion for 129
projects, comprising seventy-six (76)
hospitals,
thirty-two
(32)
pharmaceuticals and twenty-one (21)
other healthcare services. To further
expand the nation’s non-oil export
basket under the Export Facilitation
Initiative (EFI), the Bank released the sum
of N36.00 billion for five (5) projects in
domestic production and value addition
of cocoa and sesame seeds towards
improving
non-oil
foreign
currency
revenue.

To improve electricity supply in order to
lower the overall cost of production in
the real sector, the Bank also intervened
in the power sector to facilitate the
deployment of enabling infrastructure.
Summarily, the sum of N2.53 billion was
disbursed to Distribution Companies
(DisCos)
for
their
Operational
Expenditure
(OpEx)
and
Capital
Expenditure (CapEx), under the Nigeria
Electricity Market Stabilization Facility –


CBN Monetary Policy Review

Phase

(NEMSF-2).
Cumulative
disbursement
under
the
NEMSF-2
currently stands at N254.46 billion. Under
the National Mass Metering Programme
(NMMP), the Bank disbursed N47.82
billion
for
the
procurement
and
installation of 865,956 meters across the
country.

Outlook
The broad outlook for both the global
and
domestic
economies
in
the
medium-term
remain
clouded
with
uncertainties
associated
with
headwinds, such as the substantial
disruptions to the supply chain, the
Russian-Ukraine war and the lingering
impact of the COVID-19 pandemic.
Others
include
the
rising
level
of
corporate and public debt in the
Advanced Economies and Emerging
Market and Developing Economies; as
well as the broad shocks to foreign
capital flows driven by the aggressive
normalization of monetary policy in
some of the Advanced Economies.

On the domestic front, available data
on
key
macroeconomic
variables
indicate the likelihood of a subdued
output growth for the Nigerian economy
in 2022. This is hinged on ongoing and
expected
shocks
from
the
global
economy,
particularly
from
supply
blockages of essential exports from both
Russia and Ukraine; the impact of high
crude oil prices, given Nigeria’s position
as an oil exporter and importer of refined
petroleum products; and the aggressive
normalization
by
some
Advanced
Economies. Accordingly, the Nigerian
economy is forecast to grow in 2022 by
3.33 per cent (CBN), 4.20 per cent (FGN)
and 3.40 per cent (IMF).

The Committee’s Considerations
The Committee assessed the impact
of
emerging
external
shocks
and
legacy issues on price development
and the recovery of output growth in
the short to medium term. Members
further noted the continued effort by
both the monetary and fiscal authorities
to dampen price pressures and sustain
the recovery of output growth.

In the opinion of Members, the major
external
shocks
to
the
economy
remained those associated with the
supply constraints arising from the
Russia-Ukraine war and backlash from
sanctions imposed on Russia; residual
impact of the COVID-19 pandemic;
and
tightening
external
financial
conditions, following the aggressive
normalization of monetary policy by
some advanced economy central
banks.
On
the
domestic
scene,
Members assessed the impact of the
continued upsurge in money supply
resulting from the increased demand
for money, associated with election
spending and increase in month-onmonth inflation between May and June
2022. In addition, the Committee
assessed the continued impact of rising
insecurity, the rising cost of Automotive
Gas Oil (AGO), and the persisting
upward pressure on other energy prices
on the general price level.

The MPC noted that the current
upsurge in price levels remains a
primary concern to monetary policy as


CBN Monetary Policy Review

Members focused on the optimal policy
approach required to address this
development
while
protecting the
fragile recovery. The Committee clearly
identified that inflationary pressure was
being driven by both demand and
supply-side factors, which should be
addressed
using
different
policy
approaches. In the Committee’s view,
the demand-side factors were being
broadly addressed by the Bank, using
the
relevant
direct
and
indirect
instruments. On the supply side, the
Bank has continued to provide the
necessary
support,
through
its
development finance initiatives in the
real sector, to ease supply constraints.
The Committee called on the Federal
Government to prioritize efforts to curb
the menace of insecurity to enable
farming and other business activities
return to normalcy. The MPC thus called
on the Bank to continue its support to
increase food supply in a bid to
addressing food inflation. Members also
noted the upward price pressure,
particularly on transportation, resulting
from the prolonged scarcity of Premium
Motor Spirit (PMS) and called on the
Federal Government to seek a longterm and viable solution to strike a
balance between the pricing and
supply of PMS in Nigeria.

The
Committee
appraised
the
continued recovery of output growth,
noting that despite the obvious external
and internal headwinds, the recovery
has remained resilient with hopes of a
stronger medium-term recovery. This is
however, hinged on the continued
support by the Bank and the Federal
government to ensure that recent
economic gains are sustained.

The
MPC
welcomed
the
Bank’s
concerted efforts towards ensuring
exchange rate stability, noting the
current
difficulties
associated
with
managing the stream of external
shocks impacting the economy. The
Committee
applauded
the
performance of the RT200 and similar
initiatives
targeted
at
improving
accretion to reserves and stabilizing the
exchange rate. The MPC noted that
foreign exchange inflow through the
RT200 FX Programme in Q1 and Q2,
2022, had increased substantially to
approximately US$600 million as at June
2022. Members also noted the increase
in Diaspora remittances as a result of
the Naira for Dollar incentive and urged
the Bank not to relent in its efforts to
encourage foreign exchange inflow to
the economy.

The Committee noted the Federal
Government’s increasing debt profile
and expressed concerns over debt
sustainability
given
that
global
uncertainties remain elevated. The
MPC thus reiterated its call to the
Federal
Government
to
urgently
diversify its revenue sources through
various
initiatives,
such
as,
the
development of a viable tax framework
for the extractive and mineral export
industries, to strengthen its fiscal buffers.
Despite
the
apparent
headwinds
confronting the economy, the MPC
noted
that
the
banking
system
remained robust given the continued
decline in NPLs below the prudential
threshold and enjoined the Bank to


CBN Monetary Policy Review

sustain the trend by maintaining its
vigorous
surveillance
to
ensure
continued resilience of the banking
industry.

The Committee’s Decision
The MPC noted with concern the
continued aggressive movement in
inflation, even after the rate hike at its
last
meeting,
and
expressed
its
unrelenting resolve to restore price
stability while providing the necessary
support
to
strengthen
the
fragile
recovery.

As regards the decision as to whether to
tighten, loose or hold, Members were
unanimous and so did not consider
both loosening and retaining rates at
existing levels at this meeting. This is
because on loosening, the MPC felt it
could worsen the existing liquidity
condition in the economy and further
dampen money market rate, necessary
to stimulate savings and investment.
Members also felt that loosening would
trigger the weakening of the exchange
rate which could pass through to
domestic prices.

The MPC did not also consider retaining
the policy rate because a hold stance
may suggest that the Bank is not
responding sufficiently, to both the
global
and
domestic
price
development, as inflation numbers
continue
to
trend
aggressively
upwards.

As regards tightening policy stance,
Members were unanimous that given
the aggressive increase in inflation,
coupled with the resultant negative
consequences,
particularly
on
the
purchasing power of the poor, as well
as retarding growth, there is the need to
continue to tighten. However, the
policy dilemma was hinged around the
level of tightening needed to rein-in
inflation,
without
dampening
manufacturing output, which could
result from the higher cost of borrowing.
Aside from narrowing the negative real
interest rate gap, Members were also of
the view that tightening would signal a
strong determination of the Bank to
aggressively address its price stability
mandate
and
portray
the
MPC’s
sensitivity to the impact of inflation on
vulnerable households and the need to
improve their disposable income.

Members also noted that the 150 basis
points hike by the Committee in May
2022, had not permeated enough in
the economy to halt the rising trend in
inflation and noted that the month-onmonth percentage point increase in
headline inflation rose sharply in June
2022 compared with May 2022. The
MPC
also
noted
that
other
complementary
administrative
measures deployed by the Bank to
address the growth in money supply did
not moderate the inflationary trend.

Addressing the balance of policy
objectives and developments in the
global and domestic environment, the
Committee resolved that the most
rational policy option would be to
further strengthen its tightening stance
in order to effectively curtail the
unabated rising trend of inflation.
Members were conscious of the fact


CBN Monetary Policy Review

that output growth remained fragile,
however, not curtailing inflation now
could erode the moderate gains
achieved
in
improving
consumer
purchasing power and thus worsen
poverty
level
for
the
vulnerable
populace. To ensure that output still
remains in focus, the MPC advised the
Bank’s Management to continue to use
its
development
finance
tools
to
support
the
agricultural
and
manufacturing sectors.

The Committee thus voted unanimously
to raise the Monetary Policy Rate (MPR).
One member voted to increase the
MPR by 150 basis points, six members by
100 basis points, one member by 75
basis points and three members by 50
basis
points.
Consequently,
the
Committee resolved to increase the
MPR by 100 basis points from 13.0 per
cent to 14.0 per cent.

In summary, the MPC voted to:
I.
Increase the MPR from 13.0 to
14.0 per cent;
II.
Retain the asymmetric corridor
at +100/-700 basis points around
the MPR;
III.
Retain the CRR at 27.5 per cent;
and
IV.
Retain the Liquidity Ratio at 30
per cent.

I thank you for your attention.

Godwin I. Emefiele
Governor, Central Bank of Nigeria
19th July, 2022


CBN Monetary Policy Review

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ
NO.

OF
THE
MONETARY
POLICY
COMMITTEE
MEETING HELD ON MONDAY 26th AND
TUESDAY 27th SEPTEMBER, 2022

The Monetary Policy Committee (MPC)
met on the 26th and 27th of September
2022, amidst continued weakening of
the global economy due largely to the
lingering disruptions to the global
supply chain as a result of the RussiaUkraine
war,
persisting
global
inflationary pressure, and lockdowns in
China.
Other
contributing
factors
include
tightening
global
financial
conditions, declining global trade, and
increasing risks of a financial meltdown
owing to the burgeoning global private
and
public
debt
portfolios.
The
Committee reviewed these and other
developments
in
the
global
and
domestic
economies
in
the
third
quarter of 2022 as well as the outlook for
the rest of the year.

All (12) members of the Committee
attended this meeting.

Global Economic Developments
The Committee expressed concern
over the heightened risk of spillovers
associated with the broadly weakening
global recovery. These have been
further exacerbated by uncertainties
emanating from lingering supply chain
bottlenecks, due to the Russia-Ukraine
war and continued COVID-19 lockdown
in China. Consequently, global trade
maintained a steady decline while
inflation remained unabating despite
aggressive rate hikes by several central
banks. The risk of yet another global
recession
would
be
extremely
damaging for fragile economies still
confronted with the lag impact of the
2020 recession, especially for emerging
market and developing economies
currently confronted with huge capital
flow reversals and tightening global
financial conditions.

Consequently,
the
International
Monetary Fund (IMF), in its July 2022
growth forecast, further downgraded
global output growth for 2022 and 2023
to 3.2 and 2.9 per cent, respectively,
from 3.6 per cent apiece.

In the Advanced Economies, inflation
remains high and considerably above
the long-run objectives of several central
banks’ threshold despite progressive
rate hikes, due largely to persistent
increase in the prices of food and
energy. In major Emerging Market and
Developing Economies (EMDEs), the
uptrend in inflation is expected to
continue in the medium term, driven by
legacy
structural
issues,
elevated
exchange rate pressures, rising capital
flow reversals, in addition to the outlined
shocks from the global economy.

In global financial markets, investors
have continued to rebalance their
portfolios as yields on fixed income
securities improve with the ongoing
policy rate increases. Gold price is thus
gradually declining, as investors move
steadily towards the fixed income
market. In addition, risk-averse portfolio
investors
have
continued
with
reassignment of their portfolios from
perceived
risky
emerging
market


CBN Monetary Policy Review

securities
to
less
risky
advanced
economy securities.

Domestic Economic Developments
According to the National Bureau of
Statistics (NBS), Real Gross Domestic
Product (GDP) grew by 3.54 per cent
(year-on-year) in the second quarter of
2022, compared with 3.11 per cent in the
first quarter of 2022 and 5.01 per cent in
the corresponding quarter of 2021. The
economy
has
thus
maintained
continuous
growth
for
seven
consecutive quarters, following its exit
from recession in 2020. This consistent
positive performance was driven largely
by the sustained growth in the non-oil
sector,
particularly
services
and
agricultural sub-sectors, supported by
continued policy interventions, as well as
credit expansion to the private sector.

While output growth remains positive,
the Committee, was concerned about
the contraction in economic activities,
as
indicated
by
the
Composite
Purchasing
Managers’
Index
(PMI),
which fell to 47.2 index points in August
2022,
below
the
50-index
point
benchmark, compared with 50.4 and
51.9 index points in July and June 2022,
respectively, an indication of weakening
output growth. The contraction was
attributed to a decline in production
levels, new orders, inventory levels,
employment levels and persisting shocks
from the global economy associated
with both the Russia-Ukraine war and the
unabating Pandemic, as well as other
domestic
shocks.
The
Committee,
however, expressed optimism on the
economy’s recovery in the short to
medium term in view of the unwavering
support by both the monetary and fiscal
authorities in Nigeria.

The Committee noted the continued
uptrend in inflation for the seven
consecutive
months,
with
headline
inflation (year-on-year) rising to 20.52 per
cent in August 2022, from 19.64 per cent
in July. Both the food and core
components rose to 23.12 and 17.20 per
cent in August 2022, from 22.02 and
16.26 per cent in July 2022, respectively.
The hike in energy prices, such as rising
price of Automotive Gas Oil (AGO), hike
in electricity tariff, as well as the
perennial scarcity of Premium Motor
Spirit (PMS) contributed significantly to
the
building
of
expectations,
thus
pushing up the cost of transportation
and production.
Other contributory
factors
include:
the
broad-based
insecurity across the country, which
continue
to
dampen
production
activities; legacy structural factors such
as the inadequate state of critical
infrastructure; high cost of importation of
essential grains, such as wheat; and
increased
demand
for
money
associated
with
the
forthcoming
electoral
campaign
season.
The
ongoing monetary policy tightening by
the US Federal Reserve Bank is also
putting
upward
pressure
on
local
currencies across the world, with passthrough to domestic prices, as investors
exit these economies to seek higher
yields in US dollar denominated fixed
income securities.

The
Committee
noted
that
broad
money supply (M3) grew by 11.05 per
cent in August 2022, compared with 8.66


CBN Monetary Policy Review

per cent in July. This was driven largely
by the growth in Net Domestic Assets
(NDA) of 26.19 per cent in July 2022,
compared with 22.78 per cent in the
preceding month. The sustained growth
in Net Domestic Assets (NDA) was driven
largely by increased claims on the
Federal government and other financial
corporations and the private sector.

Money
market
rates
continued
to
fluctuate, reflecting liquidity conditions
in the banking system. Consequently,
the monthly weighted average Open
Buyback (OBB) rate declined to 13.21
per cent in August 2022, from 14.15 per
cent in July, while the Inter-bank Call
rate increased to 15.00 per cent in
August 2022, from 13.00 per cent in July.
The Capital Adequacy Ratio (CAR) and
the Liquidity Ratio (LR) remained above
their prudential limits at 13.4 and 40.1 per
cent, respectively, in August 2022. The
Committee,
applauded
the
improvement in the Non-Performing
Loans (NPLs) ratio to 4.8 per cent in
August 2022, compared with 5.0 per
cent in June 2022, reiterating its call on
the Bank to sustain its tight prudential
regime, to ensure that the NPL ratio is
kept below its 5 0 per cent prudential
benchmark.

The MPC noted the development in the
equities market in the review period, as
the All-Share Index (ASI) decreased to
49,836.51 index points on August 31,
2022, from 51,817.59 index points on
June 30, 2022. Market Capitalization
(MC) also decreased to ₦26.88 trillion,
from ₦27.94 trillion in the same period.
The
bearish
performance
reflected
sustained profit taking and sell-off by
investors rebalancing their portfolios in
favour of higher yields in the fixed
income market.

The Committee noted the marginal
increase of 0.39 per cent in the level of
external reserves to US$38.46 billion at
end-August 2022 from US$38.31 billion at
end-July

despite
continued
demand pressure. With crude oil price
forecast to continue to moderate in the
short to medium term, Members urged
the Bank not to relent on the various
policies put in place to support non-oil
exports to shore up external reserves.

Under the Real Sector Facility, the Bank
released the sum of ₦66.99 billion to 12
additional projects in manufacturing
and
agriculture.
Cumulative
disbursements under the Real Sector
Support Facility (RSSF) currently stood at
₦2.10 trillion disbursed to 426 projects
across the country.

Furthermore, under the 100 for 100 Policy
on Production and Productivity (PPP),
the Bank disbursed the sum of ₦20.17
billion to 14 projects in healthcare,
manufacturing, and services, bringing
the cumulative disbursement under the
facility to ₦93.39 billion to 62 projects. In
the healthcare sector, ₦4.00 billion was
disbursed to two (2) healthcare projects
under
the
Healthcare
Sector
Intervention Facility (HSIF), bringing the
cumulative disbursement to ₦130.54
billion for 131 projects, comprising of 32
pharmaceuticals, 60 hospitals and 39
other
services.
Under
the
Export
Facilitation Initiative (EFI), the Bank
funded several commodity projects in
the non-oil export segment for value-


CBN Monetary Policy Review

addition and production to the tune of
₦3.24 billion, aside the ₦50.00 billion
disbursed through the Nigerian Export
Import Bank (NEXIM).

In
the
Micro,
Small
and
Medium
Enterprise (MSME) sector, the Bank
supported
entrepreneurship
development with the sum of ₦39.26
million under the Tertiary Institutions
Entrepreneurship Scheme (TIES), bringing
the
total
disbursement
under
this
intervention to ₦332.43 million. Under the
Intervention Facility for the National Gas
Expansion Programme (IFNGEP), the
Bank disbursed ₦1.00 billion to support
the adoption of Compressed Natural
Gas (CNG) as the preferred fuel for
transportation and Liquefied Petroleum
Gas (LPG) as the preferred cooking fuel.

Outlook
The broad outlook of the global and
domestic economies in the mediumterm remains clouded by uncertainties
associated with lingering headwinds
from the Russia-Ukraine war and the
residual
impact
of
the
COVID-19
pandemic. Others include tightening
global financial conditions with elevated
shocks to foreign capital flows, as some
Advanced
Economies
continue
to
pursue aggressive policy rate hikes; the
high level of corporate and public debt
with heightened risk of another global
financial meltdown; and the high level of
inflation across several economies.

On the domestic front, available data on
key macroeconomic variables indicate
that output growth will continue for the
rest of 2022, however, at a muchsubdued pace. Some of these domestic
shocks
include:
the
high
level
of
insecurity currently disrupting the free
flow of economic activities; heightened
sovereign risk as the 2023 general
elections approach; continued upward
pressure
on
inflation,
driven
by
exchange rate pressures amongst other
domestic factors. In addition, domestic
price development is expected to
maintain the current upward trend in
light of the build-up of increased
spending and demand for money, as
the 2023 general elections approach.
Accordingly, the Nigerian economy is
forecast to grow in 2022 by 3.52 per cent
(CBN), 4.20 per cent (FGN) and 3.40 per
cent (IMF).

The Committee’s Considerations
At this meeting the focus of the MPC
was on the aggressive acceleration of
inflation globally and how this had
begun
to
retard
growth
in
both
Advanced
and
Emerging
Market
Economies. Members noted that though
the global economy was progressively
weakening
due
to
the
various
headwinds confronting the recovery. In
Nigeria,
output
growth
had
been
sustained as a result of the combination
of development finance interventions by
the Bank and fiscal stimulus by the
Federal Government. Members noted
that in the last 3 years, the CBN has
injected
over
N9
trillion
into
the
economy, in addition to offering 2- year
moratorium for 10-year long-term loan
facilities. The Committee believe that
these interventions have significantly
helped engendered growth. However,
in light of the persisting pressures on


CBN Monetary Policy Review

inflation, the Committee encouraged
the Bank maintain a close watch on the
inflationary
implications
of
the
interventions.

The MPC noted the moderate downturn
in the equities market, attributing it to a
continued outflow of portfolio capital as
investors re-assign their portfolios to more
attractive US dollar denominated fixed
income
securities.
The
Committee,
however, also called on the Federal
Government to continue to improve the
ease of doing business in Nigeria to
retain the current patronage of foreign
investors
through
sustained
investor
confidence in the Nigerian economy.
The MPC applauded the Bank for its
continued stringent regulatory measures
over the banking system, noting the
progressive
decline
in
the
NonPerforming Loans (NPLs) ratio of the
banking system despite the heightened
macroeconomic uncertainties.

The MPC was concerned that within a
four-month
period,
inflation
had
accelerated aggressively by 280 basis
point from 17.71 per cent in May 2022 to
20.52 per cent in August 2022. The
Committee was thus, of the view that
given the primacy of its price and
monetary stability mandate, it was
expedient that significant focus must be
given to taming inflation.

The Committee was therefore of the
view that a hold or loosen option was not
in consideration at this meeting. This is
also because a loosening will further
widen the negative real interest rate
gap and worsen the financial market
conditions, as savings mobilization and
investment inflows would decline further.
It was also of the view that with the
aggressive
policy
normalization
in
Advance economies, loosening the
stance of policy would result in a sharp
depreciation of exchange rate, leading
to further hike in capital outflows.

As regards a hold decision, this would
mean a continuous deterioration in real
earnings of fixed income earners and
the livelihood of middle- and lowincome households.

The MPC noted that a tight policy stance
would help consolidate the impact of
the last two policy rate hikes, which is
already reflecting in the slowing growth
rate of money supply in the economy. It
also felt that an aggressive rate hike
would slow capital outflows and likely
attract capital inflows and appreciate
the naira.

The Committee’s Decision
Members deliberated on the impact of
the widening margin between the
current policy rate of 14 per cent and
the inflation rate of 20.52 per cent. At this
Meeting, the option to loosen the policy
rate was not considered as this would be
gravely
detrimental
to
reining-in
inflation. The Committee thus, agreed
unanimously to raise the policy rate to
narrow the negative real interest rate
gap and rein-in inflation.

The Committee thus voted unanimously
to raise the Monetary Policy Rate (MPR)
and the Cash Reserve Requirement
(CRR). Ten members voted to raise the
MPR by 150 basis points, one member by


CBN Monetary Policy Review

100 basis points, and another member
by 50 basis points. Ten Members voted to
increase the CRR by 500 basis points,
while two Members voted to increase
CRR by 750 basis points.
In summary, the MPC voted to:
I.
Raise the MPR to 15.5 per cent;
II.
Retain the asymmetric corridor of
+100/-700 basis points around
the MPR;
III.
Increase the CRR to a minimum
of 32.5 per cent; and
IV.
Retain the Liquidity Ratio at 30.0
per cent.

Thank you.

Godwin I. Emefiele
Governor, Central Bank of Nigeria
27th September, 2022


CBN Monetary Policy Review

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ
NO.

OF
THE
MONETARY POLICY COMMITTEE MEETING
HELD ON MONDAY 21st AND TUESDAY
22nd NOVEMBER 2022

The Monetary Policy Committee (MPC)
met on the 21st and 22nd of November
2022, confronted with the continued
weakening of the global economy due
primarily to the persistent increase in
energy prices, supply chain bottlenecks,
rising inflation, looming food crisis, and
sharp increase in interest rates leading to
tightening external financial conditions.
The volatility of the oil market, driven by
policy stance by OPEC+ and the US
Government,
is
also
creating
considerable uncertainty in the market,
thus
making
the
overall
direction
relatively unclear. Moreover, global
trade has dwindled significantly in 2022,
with the outlook for 2023 looking rather
weak. Global private and public debt
portfolios remain high and, in some
cases, expanding as several countries
around the globe acquire debt to stay
afloat. The Committee appraised these
and other developments in the global
and domestic economies, as well as the
outlook for the rest of the year and into
the first quarter of 2023.

Eleven (11) members of the Committee
attended this meeting.

Global Economic Developments
Global
output
growth
remained
weighed down by familiar headwinds
arising from the war in Ukraine, China’s
zero-COVID policy and the ongoing
normalization of monetary policy in the
advanced
economies.
These
have
collectively resulted in an energy price
shock, historically high levels of price
development across several economies
and dwindling investment in capital
markets of emerging market economies.
With the war in Ukraine showing no signs
of
abating
in
the
near-term,
the
disruptions to energy and commodity
markets associated with it are more than
likely to persist well into 2023.

While
the
pandemic
has
mostly
dissipated in most parts of the world,
China’s zero-COVID policy is keeping its
impact very significant as the frequent
lockdowns in major industrial cities,
continue
to
derail
the
smooth
functioning of the global supply chain.
Consequently,
the
resulting
macroeconomic
uncertainties
and
associated
shock
spillovers,
remain
heightened, thus increasing the risk of a
global recession which would severely
retard the recovery of several fragile
economies. Those to be most affected
would
be
Emerging
Markets
and
Developing
Economies
(EMDEs)
still
confronted with the lag impact of the
2020 recession. The ongoing capital flow
reversal from perceived higher risk
emerging market securities to US dollar
denominated securities with improved
yields, is also further hindering orderly
global
recovery
to
pre-COVID-19
pandemic levels.

The International Monetary Fund (IMF),
having downgraded for 2022 and 2023
several times, retained global output
growth at 3.2 per cent for 2022, but
further downgraded the 2023 forecast to


CBN Monetary Policy Review

2.7 per cent compared with 2.9 per cent
in its July 2022 forecast.

Inflation
across
several
Advanced
Economies
is
expected
to
remain
elevated in 2022, despite progressive
rate hikes by several central banks in
these economies. This is predicated on
sustained high energy prices associated
with the Ukraine war and continued
disruptions to the global supply chain. In
the Emerging Market and Developing
Economies
(EMDES),
inflation
is
expected to remain high for other
reasons including, the persistence of
exchange rate pressures, dwindling
capital inflows and a host of legacy
structural issues.

In the global financial markets, activities
in several equity markets have gradually
declined as investors take advantage of
improved fixed-income yields in the
Advanced
Economies,
with
the
progressive hike of policy rates. Global
financial conditions are thus, expected
to continue to tighten in the near term,
as risk-averse investors reassign their
portfolios.

In
general,
therefore,
the
global
economy and financial markets, are
confronted with significant risks in the
short to medium-term. The huge build-up
of both private and public debt and the
rising risk of default associated with the
current trend of rising interest rates,
disruptions to the energy market and
poorly functioning supply chains may tip
several fragile economies into a new era
of recession.


Domestic Economic Developments
Data from National Bureau of Statistics
(NBS) on Real Gross Domestic Product
(GDP) showed that it grew by 3.54 per
cent (year-on-year) in the second
quarter of 2022 and 5.01 per cent in the
corresponding period of 2021. The
economy has thus, sustained positive
output growth for seven consecutive
quarters,
following
the
exit
from
recession in 2020. The consistent positive
performance
recorded
was
driven
largely by the positive growth in the nonoil sector, particularly in the services and
agricultural sub-sectors, complemented
by continued policy support by the
Bank.

CBN Staff projections showed that the
economy is expected to remain on a
path of sustained positive growth, given
the expected strong performance in the
fourth quarter of 2022 and steady
rebound in economic activities.

Members noted with concern, the
persisting uptick in inflation for the ninth
consecutive
month
with
headline
inflation (year-on-year) rising to 21.09 per
cent in October 2022 from 20.77 per cent
in September 2022, an increase of 0.32
percentage point. On month-on-month
basis,
however,
headline
inflation
decelerated to 1.24 per cent in October
2022 from 1.36 per cent in the preceding
month,
an
indication
that
price
development is responding to the Bank’s
recent policy rate hikes.

The persisting uptrend in energy prices
and the prolonged period of scarcity of
Premium Motor Spirit (PMS), contributed


CBN Monetary Policy Review

to a sharp rise in transportation, logistics
and manufacturing costs, which fed
through to consumer prices. Other
contributory legacy factors include the
lingering insecurity across the country;
perennial
flooding
in
major
food
producing states; critical deficit of
infrastructure in the country; and poor
road networks amongst others.

The
Committee
noted
that
broad
money supply (M3) grew further by 13.80
per cent in October 2022, (year-to-date)
compared with 11.00 per cent in
September, 2022. This growth was driven
by increased claims on ‘Other Sectors’
(other financial corporations, public
non-financial corporations, and private
sector).

In the financial markets, money market
rates oscillated below and within the
asymmetric corridor of the discount
window
facilities,
in
tandem
with
fluctuating liquidity conditions in the
banking
system.
Consequently,
the
monthly weighted average Open Buy
Back (OBB) rate increased to 15.91 per
cent in October 2022 from 11.49 per cent
in September 2022.

The Capital Adequacy Ratio (CAR) of
the banking system declined in October
2022 to 13.4 but remained within its
prudential limit of 10.0 -15.0 per cent. At
40.1 per cent, the Liquidity Ratio (LR) was
above its prudential limit of 30.0 per
cent. The Non-Performing Loans (NPLs)
ratio also improved to 4.8 per cent in
October 2022 from 4.9 per cent in the
previous
month,
staying
below
its
prudential benchmark of 5.0 per cent.
The MPC thus, called on the Bank to
continue to maintain its tight surveillance
over the banking system to ensure that
the NPLs ratio remains below the
prudential benchmark.

The MPC noted with concern the
continuing bearish performance of the
equities market in the review period. The
All-Share
Index
(ASI)
and
Market
Capitalization
(MC)
decreased
to
43,839.08 and N23.88 trillion on October
31, 2022, from 49,836.51 and N26.88
trillion respectively, on August 31, 2022.
This decrease reflected the sustained
sell-off and profit taking by investors
rebalancing their portfolios to benefit
from higher yields in the fixed income
market.
Other
contributory
factors
include inflationary and exchange rate
pressures,
and
tightening
external
financial conditions.

The Committee observed the decline in
the external reserves position, as gross
external reserves decreased by 1.34 per
cent at end-October 2022 to US$36.87
billion, from US$37.39 billion at endSeptember 2022. With indications of
lower crude oil prices in the futures
market, Members urged the Bank to
sustain its current policies to boost nonoil exports in order to shore up the
external reserves.

Between September and October 2022,
under
the
Anchor
Borrowers’
Programme (ABP), the Bank disbursed
N41.02 billion to several agricultural
projects,
bringing
the
cumulative
disbursement under the Programme to
₦1,067.29 billion to over 4.6 million
smallholder
farmers
cultivating

commodities across the country. The


CBN Monetary Policy Review

Bank also disbursed N0.30 billion to
finance large-scale agricultural projects
under
the
Commercial
Agriculture
Credit Scheme (CACS). Consequently,
the
total
disbursement
under
the
Scheme for agro-production and agroprocessing stands at ₦745.31 billion for
680 projects.

In addition, the Bank released the sum of
₦48.30 billion under the ₦1.0 trillion Real
Sector Facility to seven (7) new real
sector
projects
in
agriculture,
manufacturing,
and
services.
Cumulative disbursement under this
Facility currently stands at ₦2.15 trillion to

projects
across
the
country,
comprising projects in manufacturing
(240), agriculture (91), services (93) and
mining sector (13). Furthermore, under
the 100 for 100 Policy on Production and
Productivity (PPP), the Bank disbursed
the sum of ₦20.78 billion to nine (9)
projects in healthcare, manufacturing,
and
services.
The
cumulative
disbursement
under
the
Facility
therefore, amounted to ₦114.17 billion in

projects.
Moreover,
the
Bank
disbursed
₦4.00
billion
under
the
Intervention Facility for the National Gas
Expansion
Programme
(IFNGEP)
to
promote the adoption of compressed
natural gas (CNG) for transportation and
liquefied
petroleum
gas
(LPG)
for
cooking.

In support of the resilience of the
healthcare
sector,
the
Bank
also
disbursed ₦5.02 billion to four
(4)
healthcare
projects
under
the
Healthcare Sector Intervention Facility
(HSIF),
bringing
the
cumulative
disbursement to ₦135.56 billion for 135
projects
in
pharmaceuticals
(33),
hospitals (60) and other services (42).
Under the Micro, Small and Medium
Enterprises (MSME) sector, the Bank
provided support for entrepreneurship
development with the disbursement of
N1.33 billion and N10.00 million under the
Agribusiness/Small
and
Medium
Enterprise Investment Scheme (AgSMEIS)
and Micro, Small, and Medium Enterprise
Development
Fund
(MSMEDF),
respectively.
Hence,
the
total
disbursement under these interventions
amounted to N150.22 billion and N96.08
billion, respectively. Under the Export
Facilitation Initiative (EFI), the Bank
provided support for export-oriented
projects to the tune of N5.34 billion, such
that the cumulative disbursement under
this intervention stands at N44.58 billion.

Outlook
The overall medium-term outlook for
both
the
global
and
domestic
economies
remain
clouded
by
uncertainties associated with the RussiaUkraine
war,
lingering
COVID-19
pandemic and continued lockdown of
major industrial cities in China. The
persistent tightening of global financial
conditions and slowing global trade are
also significant pointers to a weakening
global economy.

On the domestic front, available data on
key macroeconomic indicators suggest
rebound in output growth for the rest of
2022, which may occur at a muchslower pace than earlier anticipated, in
the light of unfolding domestic and
external shocks to the economy. The
domestic shocks originate from the


CBN Monetary Policy Review

persisting insecurity inhibiting economic
agents; rising cost of debt and debt
servicing; deteriorating fiscal balances;
increased spending as the 2023 general
elections approach; and continued
uptrend
in
inflationary
pressure.
Accordingly, the Nigerian economy is
forecast to grow in 2022 by 3.30 per cent
(CBN), 3.20 per cent (IMF) and 4.20 per
cent (FGN).

The Committee’s Considerations
At
this
meeting,
the
MPC
was
concerned that the global inflationary
pressures have continued to trend
higher and financial markets were also
facing challenges. It observed that this
was indeed the trend in Nigeria, with
inflation attaining 21.09 per cent in
October,
2022.
The
Committee,
however, seized the opportunity to
appraise the efficacy of its decisions at
the last couple of meetings, and came
up with the conclusion that the decisions
were beginning to yield the desired
results, given that the rate of increase in
inflation was beginning to moderate , in
view
of
the
month-on-month
deceleration in prices presented by the
Consumer Price Index.

Members noted that though the global
economy was progressively weakening
due to the various headwinds derailing
the recovery, domestic output growth
remained positive as a result of the
combined support from fiscal and
monetary policy. The MPC, therefore,
urged both authorities to continue to
harmonize their various policies to
achieve the desired objectives of stable
prices and steady growth.
In reaching the decision of whether to
loosen, hold or tighten the stance of
policy, Committee felt that, given that all
the causative factors, such as the RussiaUkraine war, supply chain disruptions,
slowdown in China, rising inflation in
advanced
economies
and
other
headwinds were still dominant, a loosen
option was not desirable at this meeting.
The Committee also felt that, with the
rising inflation, loosening the stance of
policy would lead to a more aggressive
rise in inflation and erode the gains
already achieved through tightening.

As regards whether to hold, MPC was of
the view that a hold stance at a period
close to December festive season and
expected heavy spending during the
2023 general election at a time of high
inflation would greatly jeopadise the
gains of the previous policy rates hikes
and plunge the economy deeper into
the inflation trap.

The MPC therefore decided to continue
to tighten, but at a somewhat lower rate,
noting that tightening the stance of
policy would narrow the negative real
effective
interest
margin
and
thus
improve market sentiment and further
restore investor confidence. MPC also
felt that recent developments in terms of
observed
month-on-month
deceleration in the rate of increase in
inflation, suggests that the previous
tightening policies were yielding the
expected outcome. It therefore felt that
sustaining the tightening would further
consolidate the decline in inflation,
albeit more significantly.


CBN Monetary Policy Review

The Committee’s Decision
The MPC noted that inflation has
continued an uptrend, even though at a
decelerating rate, despite its last three
consecutive sizeable policy rate hikes.
The Committee’s choices were on
whether to further hike rates or pause for
the impact of the last three rate hikes to
continue to feed through the economy.
At this MPC, therefore, the options
considered were primarily to hold or
further tighten the policy rate. The option
to loosen was not considered as this
would gravely undermine the gains of
the last three rate hikes.

The Committee thus voted unanimous to
raise the Monetary Policy Rate (MPR).
Nine (9) members voted to raise the MPR
by 100 basis points and 2 members
voted to raise the MPR by 50 basis points.

In summary, the MPC voted to:
I.
Raise the MPR to 16.5 per cent;
II.
Retain the asymmetric corridor of
+100/-700 basis points around
the MPR;
III.
Retain the CRR at 32.5 per cent;
and
IV.
Retain the Liquidity Ratio at 30
per cent.

Thank you.

Godwin I. Emefiele
Governor, Central Bank of Nigeria
22nd November 2022