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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 144 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 Russia-Ukraine
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.

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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 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 subsectors, supported by continued policy interventions, as well as credit
expansion to the private sector.

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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 pass-through
to domestic prices, as investors exit these economies to seek higher yields in US
dollar denominated fixed income securities.

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

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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-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 medium-term
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

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

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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 Non-Performing
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 low-income
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

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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 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

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
The global economy continues to reel under the combined weight of the war in
Ukraine, coronavirus resurgence in some countries and severe inflationary
pressure. These conditions have dampened activity prospects in many countries,
prompting yet another downward revision of the world output growth by the
International Monetary Fund (IMF) in July 2022 to 3.2 per cent from 3.6 per cent in
April. The global economy is experiencing its steepest slowdown in recent years,
a situation that appears not likely to reverse anytime soon. Attempts at disinflation
have seen little success around the world. Despite rate hikes and rollback of
monetary easing, prices have maintained upward track in most geographies.
Meanwhile, renewed COVID-19 outbreaks and lockdowns could only worsen the
already precarious situation in affected countries, as we have seen in China
where output growth continues to slow due to the zero COVID policy. In the face
of these developments, central banks are mostly trending in the same direction
– rate hikes. Tightening financial condition comes with reals costs – to output,
employment and financial stability. Doing the opposite may even be costlier –
further acceleration in inflation leading to more rapid erosion of living standards
and might not even help output.
Effectively, the September 2022 Monetary Policy Committee (MPC) meeting held
against the backdrop of a largely uncertain global economic environment. In
the domestic economy, price stability continues to be manifestly threatened.
However, the outlook for real output remains positive following seven quarters of
successive growth. This represents an important departure from previous episodes
of high inflation and attests to the effectiveness of the Bank’s interventions and
other policies aimed at stimulating economic activity in the last two years.
Among others, I see a strong influence of demand and expectation in the price
pressures the economy currently faces. Underpinned by both factors, consumer

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price inflation and exchange rate pressures have seemingly become mutually
reinforcing. As I indicated in my July statement, there continues to be the need
to clearly demonstrate commitment to disinflation to better anchor price
expectation. I reckoned nonetheless that, that alone would be insufficient in the
face of a significant liquidity surfeit. I, therefore, voted at the September 2022
meeting of the MPC to bring onboard the cash reserve requirement (CRR) to
complement a further hike in the monetary policy rate (MPR). Details of my
considerations are as follows:
First, the headline inflation continued to drift upwards through August 2022 into
the region considered inimical to growth. At 20.52 per cent, it leaves a negative
spread of about 6.5 percentage points after the two previous increases in the
policy rate. This spread could act as a constraint on savings and the economy’s
competitiveness and therefore called for further upward adjustment in the policy
rate.
Second, the synchronicity of monetary policy tightening by central banks in the
advanced economies has led to a tightening of the global financial condition.
Yields have improved significantly in these countries in the last one year. The
United States (US) dollar, for example, continues to appreciate as the Federal
Reserve (Fed) tightens its monetary policy stance. Consequently, emerging
market and developing economies (EMDEs) are facing increased prospects of
capital flow reversal. Anything contrary to the global trend could increase the
vulnerability of the domestic economy to adverse spillovers including, but not
limited to, increased pace of capital flight and exchange rate instability.
Third, the pressure on consumer prices and the naira exchange rate had gained
significant impetus from the expansion in money and credit following the COVID19 pandemic. Both domestic asset (net) and claims on the Federal Government
had surpassed their programmed levels for the year in annualized terms at endAugust. I was concerned that continued expansion in the monetary aggregates
at the pace recorded in the first nine (9) months of the year could aggravate
monetary and price instability. Meanwhile, foreign asset (net) had remained on

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the path of contraction, thereby limiting the scope for sterilizing the expansion in
domestic asset through foreign exchange sale. On the other hand, the sale of
financial securities alone for the purpose of reining-in excess liquidity may not be
sufficient in view of the likely surge in spending in the rest of year as political
campaigns gather momentum towards the general election. The unfavourable
short-term outlook for system liquidity boosted my inclination towards deploying
multiple instruments.
Fourth, the evidence from staff analysis of the factors at work in the current
inflation process indicates a dominant influence of increased expectation of
inflation. Inflation expectation has been fingered as a major factor in the present
episode of global inflation. Monetary policy works in part by anchoring
expectation. I saw the need therefore to be a bit aggressive in tightening to
regain control of expectation as a proximate path to restoring price stability.
Adjusting the MPR and the CRR amply demonstrates commitment to monetary
and price stability being the primary goal of the Bank’s monetary policy.
Lastly, the positive outlook for growth as suggested by current projections offers
some buffer for a more decisive anti-inflation stance. The IMF currently projects
3.4 per cent growth for Nigeria in 2022, while in-house growth forecast for the year
is 3.52 per cent. Barring any shock, these projections should be realised despite
the prospective tightening of domestic monetary condition owing to continued
effect of previous policy support in the real sector of the economy. In this
connection, the economy should benefit from sustained effort of government
towards improving infrastructure and security. I see further improvement in oil
GDP in Q3 and Q4, 2022, as government implements new measures aimed at
curbing leakages.
In conclusion, I should emphasise that the risk to domestic economic growth and
financial stability of a hawkish stance at this time appears moderate and
tolerable. Very much like the outlook for growth, financial stability prospects are
evidently strong. At end-August 2022, all the major soundness indicators of the
banking industry were within their prudential limits. At 13.4 per cent industry

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capital adequacy ratio (CAR) exceeded its benchmark by 3.4 percentage
points. Similarly, at 4.8 per cent, the non-performing loans (NPLs) ratio was less
than the prescribed 5.0 per cent (prudential) threshold. Meanwhile, industry
liquidity ratio stood at 40.4 per cent in August compared to the benchmark of
30.0 per cent. I am of the view, based on these indicators, that the banking
system is resilient and able to provide liquidity to sustain economic activity in a
modestly constrained financial environment. I, therefore, voted to:
1. Raise the MPR by 150 basis points to 15.5 per cent.
2. Retain the asymmetric corridor at +100/-700 basis points.
3. Raise the CRR by 500 basis points to 32.5 per cent.
4. Retain the Liquidity Ratio at 30 per cent.


2. ADENIKINJU, ADEOLA FESTUS
International Economic Developments
The headwind against the global economy remains strong in September.
Inflation is not decelerating as expected, and currently exceeds the
benchmark rates in both the Advanced and Emerging Economies. Also, the
Russian Ukrainian war is unabated, global trade is still constrained by supply
chain bottlenecks, inflationary pressures continue to persist, recurring interest
rate hikes, and slow-down of economic growth. On the bases of the sustained
headwind, Global output is expected to decelerate from 6.1% in 2021, to 3.2%
in 2022, and 2.9% in 2023. Global trade growth is expected to slow down from
10.1% in 2021, to 4.1% and 3.2% in 2022 and 2023, respectively. There is
increasing likelihood that many economies may fall into recession by Q1 2023.

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The near syncronisation of rates increase across central banks may throw global
economy into recession. Public debt/GDP ratio is at all times high. Commodity
prices remain elevated. There is turmoil in financial and capital markets. The
strong dollar and the interest rate normalization in the US are causing capital
flow reversal in emerging and developing economies. Headwinds to FDI growth
include
high
geo-political
tensions
and
uncertain
macroeconomic
environment. Climate change is causing flooding in many parts of the world.
Nigeria is not unaffected by these global trends.
Domestic Economic Developments
The Economic Report presented by the Staff of the Bank showed a mixed
picture of the economy. Real GDP in 2022Q2 rose to 3.54% from 3.11% in
2022Q1. The growth was broad based, but mainly driven by non-oil sectors:
services, agriculture, and manufacturing activities. However, the industrial
sector contracted by 2.3%. The Oil-GDP contracted by 11.1% in 2022Q2. The
poor performance of the Oil-GDP sector is due to a slowdown in oil price and
decline in oil production and exports. The shortfall in oil production was driven
by pipeline vandalism, oil theft and dilapidated oil infrastructure.
However, broad measures of inflation: headline, food, and core, all rose in
August 2023. Headline inflation rose from 19.64% to 20.52% between July and
August 2022. Food price inflation rose from 22.02% in July 2022 to 23.12% in
August 2022; while core inflation increased to 17.20% in August 2022, from
16.26% in July 2022. Headline inflation in August 2022 was the highest in the past
17 years. The increase in prices were due to higher energy prices and cost of
logistics, and lingering security challenges in farming communities. The volatile
food inflation also rose because of increase in the prices of processed foods,
farm produce, bread and cereals. Incidentally, a state-wide breakdown of the
inflation figures in August 2022 showed that in August 2022, low food inflation
persisted in North-East and North- West, while states like Rivers, Lagos and Kwara
experienced high food inflation.

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Data showed that broad money supply increased by 11.05% in August 2022
compared to 8.66% in July 2022.The rise in money supply was driven by increase
in domestic claims and net claims on Central Government. The growth in broad
money was below the 15.21% provisional benchmark for 2022.
The NSE All Share Index declined from 51,339.01 index points in July 2022 to
49,190.34 index points in September 2022. The decline is attributed to fall in
investor sentiments, upward inflationary pressure and profit taking activities by
investors.
Despite the successive raising of the MPR by the MPC at its last two meetings,
the lending rates by the banks are not reflecting these signals from the CBN.
Hence, between July and August 2022, prime lending rate rose marginally from
15.53% in July 2022 to 16.44% in August 2022. Maximum lending rate remained
flat at 26.86%, while average savings rate rose from 1.07% in July 2022 to 1.79%
in August 2022. Time deposits rose to 5.59% in August 2022 from 4.69% in July
2022.
The Balance of Payment’s (BOP) position recorded an overall surplus of 0.08%
of the GDP in 2022Q2.This was driven by improvement in current account and
decrease in NFA. Goods account improved to US$5,702.74 million in 2022Q2
from US$3,496.18 million in 2022Q1, due to increase in oil export receipt as well
as increase in non-oil and electricity exports receipts. The current account was
also buoyed by net inflow of remittances of US$4,952.70 million.
Gross external reserves increased by 0.39% to US$38.46 billion at end-August
2022, from US$38.31 billion at end-July 2022. The increase was accounted for by
rise in FX swap transactions, monetisation of MDA FX assets and decrease in
total outflows in August 2022. The external reserves at end-August 2022 could
provide 6.61 months cover of imports of goods and services.
The Fiscal Sector remains weak. FGN revenue for the first six months
underperformed by 49.84%. The underperformance of the FGN revenue was
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Transfer from Special Levies account (56.57%), FGN Share of Federation
account (54.48%), Operating Surplus (82.28%) and Education Tax (89.84%).
As was the norm, capital expenditure underperformed by 47.51%, while
recurrent expenditure overshot the budget by 3.27%. Total debt service
exceeded the budget by 4.35%. Interest on Ways and Means Advances
accounted for N714.74 billion.
The Banking System Stability Review Report showed that the banking system
remain safe, sound, and resilient. Capital Adequacy Ratio declined from 14.1%
in June 2022 to 13.4% in August 2022, but still lies within the prudential
requirements. Non-Performing Loans Ratios declined from in 5.0% in June 2022
to 4.8% in August 2022. Liquidity Ratio stood at 40.4% in August 2022, which was
higher than the 30% prudential requirement. Both Returns on Equity and Returns
on Assets rose between June 2022 and August 2022. Interest margins to total
operating income rose between June 2022 and August 2022, however, total
operating costs to total operating income declined from 76.5% in June 2022 to
74.7% in August 2022, though still way above the values for comparator
countries: Turkey, 34.1%, South Africa, 61.5% and Malaysia, 37.9%. The report also
showed increase in the aggregate banking system deposits, assets, and credit
over the period.
My Concern
An econometric study conducted by the Bank showed that inflation
expectation was by far the most significant driver of actual inflation in Nigeria.
Inflation expectations rose in August to 25.82%, 5.30% higher than the 20.52%
actualised inflation rate. Inflation expectations were driven by high costs of
transportation and logistics services and exchange rate pressures. Another
study also showed that there is about 4 months lag in the transmission
mechanism between changes in the MPR and headline inflation.
Oil subsidy has been a perennial problem of the Nigerian economy. It has
gotten to a level where it is a danger to our fiscal sustainability. Between

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January and July 2022, Nigeria paid N1.9 trillion on subsidy that benefitted
mainly the rich Nigerians, and the citizens and governments of neighbouring
countries. Comparatively, capital expenditure in 2022Q1 was N961.67 billion.
The report on the higher repayments on Development Finance Department
interventions between July 2022 and August 2022 is quite hearty. As of August
2022, N3.44 trillion out of the total disbursements of N8.89 trillion has been paid.
The development finance has been targeted at critical sectors of the economy
to drive aggregate supply to the economy and create jobs. These
disbursements have played important roles in Nigeria’s recovery from the 2020
recessions.
We expect that broad money supply is most likely to increase in the next coming
months as we enter the election cycle, and also along the efforts of the current
government to complete ongoing projects as it winds down the remaining
months of its existence. The continuous borrowing by the Federal Government
is also likely to weigh much on money supply, inflation rate and availability of
credit to the private sector and monetary policy transmission.
The inability of the retail rates by the deposit money banks to reflect the
increase in the MPR suggest either the weakness of the MPR as an effective
instrument to target credit creation process by the commercial banks, or the
rate increase by the MPC is not sufficient to reduce the liquidity held by the
banks.
Fiscal deficit as at the first six months stood at N4,169.64 billion. This was 59%
higher than the budget estimates of N2,621.41 billion for 2022. The rise in fiscal
deficit also translates into increase in Public Debt which stood at N42.8 trillion as
at June 2022. We should be concerned about debt sustainability. There is a
genuine fear that Nigeria may be moving towards a debt trap.
We need to get inflation under control as it has the potential to reduce the
production capacity of the economy, slow economic growth rate, increase
unemployment and reduce investment. The forecast by Bank Staff shows that

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inflation in September may further rise to 20.94% from 20.52% in August 2022 is
an indication that we cannot lower our guard.
My Vote
In consideration of the worsening inflation, the MPC needs to sustain the tight
monetary policy stance to dampen inflationary pressures and moderate
negative real interest rate on long term securities to encourage capital inflows.
I cast my vote to increase the MPR by 150 basis points, raise CRR by 500 basis
points, while retaining other monetary parameters at their extant values.
Hence, I vote to:
1) Raise MPR by 150 basis points to 15.5%
2) Raise CRR by 500 basis points to 32.5%
3) Retain LR at 30%
4) Maintain asymmetry corridor around the MPR at +100/-700 basis points.

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3. AHMAD, AISHAH N.
Rising inflation, slow growth and heightened uncertainty dampen global
economic prospects
Global economic prospects have deteriorated considerably through 2022
reflected in high and persistent inflation, aggressive monetary tightening,
heightened uncertainties from the Russia – Ukraine war and lingering effects of
the Pandemic. Rising commodity and energy prices are triggering an inflation
crisis globally – the worst in many decades, and weakening output, particularly
in the world’s three largest economies (the United States, China and the
European Union), with significant spillovers to other countries. At the same time,
huge public debts, exchange rate pressures and large capital outflows
especially
from
emerging
markets
and
developing
economies,
are
exacerbating fiscal and balance of payments pressures in these countries with
heightened possibility of a financial crisis and global recession.
Against this backdrop, global output is projected to grow at 3.2 per cent in 2022
by the International Monetary Fund (IMF) in its July 2022 World Economic
Outlook - a substantial downgrade from previous forecasts. Further downgrade
in global growth forecasts is expected, as risks remain overwhelmingly tilted to
the downside.
Domestic growth has, thus far remained resilient notwithstanding strong
headwinds.
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

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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
sustained growth in the non-oil sector, particularly services and agricultural
subsectors, supported by continued policy interventions and credit expansion
to the private sector.
While output growth remains positive, the seeming contraction in economic
activities, as indicated by a drop in the Composite Purchasing Managers’ Index
(PMI), to 47.2 index points in August 2022, below the 50-index point benchmark,
from 50.4 and 51.9 index points in July and June 2022, respectively, raises some
concern. According to staff reports, the contraction was attributed to a decline
in production, new orders, inventory, and employment levels alongside
persisting shocks associated with the Russia-Ukraine war, the pandemic and
domestic vulnerabilities. Although evidence is still sketchy given the lag of
monetary policy, the aggressive monetary policy tightening to curb inflation,
may also impact adversely on output via high borrowing costs. However, there
is optimism that ongoing monetary and fiscal interventions in critical growth
enhancing sectors will help strengthen output recovery.
Of greater concern is the upward trend in domestic prices which persisted for
the seventh consecutive month, with headline inflation (year-on-year) spiking
to 20.52 per cent in August 2022, from 19.64 per cent in July. Both 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), increase in electricity tariff and intermittent
scarcity of Premium Motor Spirit (PMS) contributed significantly to rising inflation
expectations, thus pushing up transportation and production costs across the
country. The need to better anchor inflation expectations has become
apparent, in view of its significant role in driving inflation – rising faster than
actual inflation in August 2022 and projected to maintain an upward trajectory
in the short-term by staff estimates.

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Other contributory factors include: the broad-based insecurity across the
country, legacy structural factors such as the weak state of critical
infrastructure; high cost of importation of essential commodities; and increased
demand for money associated with the upcoming electoral campaigns. The
ongoing monetary policy tightening by the US Federal Reserve Bank is also
exerting 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.
Indeed, the evolution of consumer prices in recent months and its unstable
outlook are important grounds for decisive and comprehensive policy actions.
While ongoing initiatives to boost food production and drive down food prices
are crucial, coordinated efforts at curbing long standing structural challenges,
especially with infrastructure are critical in mitigating core inflation challenges.
Effective liquidity management tools also remain relevant in the broad
disinflation process.
Effective regulatory oversight and innovations in the financial system have
supported the banking sector resilience with positive implications for output
performance.
The banking industry continued to post strong growth with total assets
increasing by N10.72 trillion or 19.13 per cent between end-August 2021 and
end-August 2022. Financial Soundness Indicators were also robust and met
minimum regulatory requirements - non-performing loans (NPLs) ratio declined
further to 4.8 per cent in August 2022, 20 basis points (bps) lower than the rate
recorded in June 2022, while capital adequacy and liquidity ratios remained
robust at 13.4 per cent and 40.4 per cent, respectively, in August 2022.
Increased credit to growth enhancing sectors of the economy such as
agriculture, manufacturing and general commerce helped support output
recovery recorded in the domestic economy. Total credit increased by N5.50
trillion from N22.62 trillion to N28.12 trillion between end-August 2021 and endAugust 2022 due largely to increase in the level of funding and CBN’s Loans to

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Deposit Ratio (LDR) policy. The increase recorded in lending rates between
June and August 2022 can be partly attributed to the tight monetary policy
stance and requires vigilance by the banks to forestall defaults and preserve
asset quality. Sustained implementation of the policy on Global Standing
Instruction and effective credit risk management policies by banks are useful in
that regard, while innovations, especially with payment systems infrastructure,
are expected to deepen the financial sector and enhance resilience.
Notwithstanding the strong financial system fundamentals and satisfactory
stress test results, the Bank must remain vigilant and proactively manage
operational, asset quality and other risks to financial system stability, especially
with the challenging global economic environment.
Difficult but necessary policy decision
The Russia-Ukraine war remains the biggest setback to global output recovery
after the pandemic induced meltdown in 2020. The attendant spike in
commodity and energy prices combined with weakening output (stagflation)
has complicated monetary policy responses globally. In the circumstance, the
outlook for monetary policy remains uncertain in the short- to-medium term
especially in typically low-inflation advanced economies with implications for
the rest of the world, given the strong interconnectedness of economies.
While stagflation is an unusual economic challenge, some African economies,
including Nigeria, have recent experiences of such conditions and have
designed homegrown policies to manage the situation. These policies,
particularly the targeted interventions to critical growth enhancing sectors,
have been useful in supporting output performance and building domestic
economic resilience despite significant global shocks.
For Nigeria, output performance has maintained a positive trajectory since exit
from recession in the fourth quarter of 2020, a development that gives the
monetary authority latitude to focus on its price and monetary stability
mandate which is currently challenged. Indeed, it is worrisome that within a

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four-month period, inflation had accelerated aggressively by 280 basis points
from 17.71 per cent in May 2022 to 20.52 per cent in August 2022. Given the
primacy of the price and monetary stability mandate, it is expedient that
significant focus must be given to taming inflation. More importantly, high
inflation is very damaging to every fabric of the economy - increases
unemployment, erodes real income, thereby entrenching poverty and
inequality, dampens investor sentiments, and can reverse the output gains
recorded so far, if it persists.
In the last two MPC meetings, I have voted to raise the Monetary Policy Rate by
a cumulative of 200 bps. The conditions that prompted the policy choice
remain germane, given that inflation has worsened over the course of the
months, with inflation expectations rising faster than actual inflation numbers,
as reflected by staff estimates.
At this meeting, I remain convinced that an aggressive policy rate hike is
appropriate to better anchor inflation expectations, narrow the negative real
interest rate, manage system liquidity surfeit, and drive down prices over time.
Beyond the policy rate hike, an upward review of the Cash Reserve Ratio (CRR)
is expected to further dampen the effects of anticipated liquidity surge from
build up to the 2023 general elections and end of year/festive season spending.
Granted, a rate hike would trigger higher borrowing costs, especially by the
private sector which has downside risks to output performance. Thankfully, the
Bank’s interventions in the real sector have supported economic activities via
credit growth – injecting over N9 trillion into the economy, in addition to offering
2-year moratorium for 10-year long-term loan facilities. However, considering
persisting pressures on domestic prices, the Committee encouraged the Bank
to note the inflationary implications of the interventions.
I, therefore, vote to increase the policy rate by 150bps from 14% to 15.5%, retain
the asymmetric corridor of +700 and -100 around the MPR; increase CRR by 500

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basis points from 27.5% to 32% and retain Liquidity ratio at 30%. Rising inflation,
slow growth and heightened uncertainty dampen global economic prospects
Global economic prospects have deteriorated considerably through 2022
reflected in high and persistent inflation, aggressive monetary tightening,
heightened uncertainties from the Russia – Ukraine war and lingering effects of
the Pandemic. Rising commodity and energy prices are triggering an inflation
crisis globally – the worst in many decades, and weakening output, particularly
in the world’s three largest economies (the United States, China and the
European Union), with significant spillovers to other countries. At the same time,
huge public debts, exchange rate pressures and large capital outflows
especially
from
emerging
markets
and
developing
economies,
are
exacerbating fiscal and balance of payments pressures in these countries with
heightened possibility of a financial crisis and global recession.
Against this backdrop, global output is projected to grow at 3.2 per cent in 2022
by the International Monetary Fund (IMF) in its July 2022 World Economic
Outlook - a substantial downgrade from previous forecasts. Further downgrade
in global growth forecasts is expected, as risks remain overwhelmingly tilted to
the downside.
Domestic growth has, thus far remained resilient notwithstanding strong
headwinds.
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
sustained growth in the non-oil sector, particularly services and agricultural
subsectors, supported by continued policy interventions and credit expansion
to the private sector.

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While output growth remains positive, the seeming contraction in economic
activities, as indicated by a drop in the Composite Purchasing Managers’ Index
(PMI), to 47.2 index points in August 2022, below the 50-index point benchmark,
from 50.4 and 51.9 index points in July and June 2022, respectively, raises some
concern. According to staff reports, the contraction was attributed to a decline
in production, new orders, inventory, and employment levels alongside
persisting shocks associated with the Russia-Ukraine war, the pandemic and
domestic vulnerabilities. Although evidence is still sketchy given the lag of
monetary policy, the aggressive monetary policy tightening to curb inflation,
may also impact adversely on output via high borrowing costs. However, there
is optimism that ongoing monetary and fiscal interventions in critical growth
enhancing sectors will help strengthen output recovery.
Of greater concern is the upward trend in domestic prices which persisted for
the seventh consecutive month, with headline inflation (year-on-year) spiking
to 20.52 per cent in August 2022, from 19.64 per cent in July. Both 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), increase in electricity tariff and intermittent
scarcity of Premium Motor Spirit (PMS) contributed significantly to rising inflation
expectations, thus pushing up transportation and production costs across the
country. The need to better anchor inflation expectations has become
apparent, in view of its significant role in driving inflation – rising faster than
actual inflation in August 2022 and projected to maintain an upward trajectory
in the short-term by staff estimates.
Other contributory factors include: the broad-based insecurity across the
country, legacy structural factors such as the weak state of critical
infrastructure; high cost of importation of essential commodities; and increased
demand for money associated with the upcoming electoral campaigns. The
ongoing monetary policy tightening by the US Federal Reserve Bank is also
exerting upward pressure on local currencies across the world, with pass-

Classified as
Classified as
through to domestic prices, as investors exit these economies, to seek higher
yields in US dollar denominated fixed income securities.
Indeed, the evolution of consumer prices in recent months and its unstable
outlook are important grounds for decisive and comprehensive policy actions.
While ongoing initiatives to boost food production and drive down food prices
are crucial, coordinated efforts at curbing long standing structural challenges,
especially with infrastructure are critical in mitigating core inflation challenges.
Effective liquidity management tools also remain relevant in the broad
disinflation process.
Effective regulatory oversight and innovations in the financial system have
supported the banking sector resilience with positive implications for output
performance.
The banking industry continued to post strong growth with total assets
increasing by N10.72 trillion or 19.13 per cent between end-August 2021 and
end-August 2022. Financial Soundness Indicators were also robust and met
minimum regulatory requirements - non-performing loans (NPLs) ratio declined
further to 4.8 per cent in August 2022, 20 basis points (bps) lower than the rate
recorded in June 2022, while capital adequacy and liquidity ratios remained
robust at 13.4 per cent and 40.4 per cent, respectively, in August 2022.
Increased credit to growth enhancing sectors of the economy such as
agriculture, manufacturing and general commerce helped support output
recovery recorded in the domestic economy. Total credit increased by N5.50
trillion from N22.62 trillion to N28.12 trillion between end-August 2021 and endAugust 2022 due largely to increase in the level of funding and CBN’s Loans to
Deposit Ratio (LDR) policy. The increase recorded in lending rates between
June and August 2022 can be partly attributed to the tight monetary policy
stance and requires vigilance by the banks to forestall defaults and preserve
asset quality. Sustained implementation of the policy on Global Standing
Instruction and effective credit risk management policies by banks are useful in

Classified as
Classified as
that regard, while innovations, especially with payment systems infrastructure,
are expected to deepen the financial sector and enhance resilience.
Notwithstanding the strong financial system fundamentals and satisfactory
stress test results, the Bank must remain vigilant and proactively manage
operational, asset quality and other risks to financial system stability, especially
with the challenging global economic environment.
Difficult but necessary policy decision
The Russia-Ukraine war remains the biggest setback to global output recovery
after the pandemic induced meltdown in 2020. The attendant spike in
commodity and energy prices combined with weakening output (stagflation)
has complicated monetary policy responses globally. In the circumstance, the
outlook for monetary policy remains uncertain in the short- to-medium term
especially in typically low-inflation advanced economies with implications for
the rest of the world, given the strong interconnectedness of economies.
While stagflation is an unusual economic challenge, some African economies,
including Nigeria, have recent experiences of such conditions and have
designed homegrown policies to manage the situation. These policies,
particularly the targeted interventions to critical growth enhancing sectors,
have been useful in supporting output performance and building domestic
economic resilience despite significant global shocks.
For Nigeria, output performance has maintained a positive trajectory since exit
from recession in the fourth quarter of 2020, a development that gives the
monetary authority latitude to focus on its price and monetary stability
mandate which is currently challenged. Indeed, it is worrisome that within a
four-month period, inflation had accelerated aggressively by 280 basis points
from 17.71 per cent in May 2022 to 20.52 per cent in August 2022. Given the
primacy of the price and monetary stability mandate, it is expedient that
significant focus must be given to taming inflation. More importantly, high
inflation is very damaging to every fabric of the economy - increases

Classified as
Classified as
unemployment, erodes real income, thereby entrenching poverty and
inequality, dampens investor sentiments, and can reverse the output gains
recorded so far, if it persists.
In the last two MPC meetings, I have voted to raise the Monetary Policy Rate by
a cumulative of 200 bps. The conditions that prompted the policy choice
remain germane, given that inflation has worsened over the course of the
months, with inflation expectations rising faster than actual inflation numbers,
as reflected by staff estimates.
At this meeting, I remain convinced that an aggressive policy rate hike is
appropriate to better anchor inflation expectations, narrow the negative real
interest rate, manage system liquidity surfeit, and drive down prices over time.
Beyond the policy rate hike, an upward review of the Cash Reserve Ratio (CRR)
is expected to further dampen the effects of anticipated liquidity surge from
build up to the 2023 general elections and end of year/festive season spending.
Granted, a rate hike would trigger higher borrowing costs, especially by the
private sector which has downside risks to output performance. Thankfully, the
Bank’s interventions in the real sector have supported economic activities via
credit growth – injecting over N9 trillion into the economy, in addition to offering
2-year moratorium for 10-year long-term loan facilities. However, considering
persisting pressures on domestic prices, the Committee encouraged the Bank
to note the inflationary implications of the interventions.
I, therefore, vote to increase the policy rate by 150bps from 14% to 15.5%, retain
the asymmetric corridor of +700 and -100 around the MPR; increase CRR by 500
basis points from 27.5% to 32% and retain Liquidity ratio at 30%.

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4. ALIYU, AHMED
The global economy has lost some strength, following prolonged tepid growth
and persistent upward inflationary pressure. The Covid-19 pandemic in China
and the war in Ukraine continue to put downward pressure on the global supply
chain, with resultant escalation in energy and food prices. Monetary policy
tightening to address inflationary pressure, particularly in the Advanced
Economies, continue to undermine global growth. The combination of
declining growth and rising inflation has heightened the risk of economic
recession
in
major
Advanced
Economies,
with
apparent
negative
consequences for Emerging Markets and Developing Economies (EMDEs).
Consequently, the IMF in its October 2022 World Economic Outlook (WEO),
revised global growth forecast from 6.0 percent in 2021 to 3.2 percent in 2022,
with further moderation to 2.7 percent in 2023. Specifically, growth in the
Advanced Economies is forecast to moderate from 5.2 percent in 2021 to 2.4

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percent in 2022 and further to 1.1 percent in 2023, while in the EMDEs, growth is
projected to slow from 6.8 percent in 2021 to 3.7 percent in 2022 and remain
unchanged through 2023.
On price developments, headline inflation for many Advanced Economies, has
soared to a record high, well above their 2 percent targets. This prompted the
monetary authorities of those countries to respond with aggressive tightening
of monetary policy. Recently, the US Federal Reserve Bank increased policy rate
by 0.75 basis point, while the Bank of England hiked policy rate by 50 basis
points. Similarly, the European Central Bank responded with a 0.75 basis point
increase in interest rate. These central banks have signalled more aggressive
rate increases to anchor inflation expectations. Global inflation is forecast by
the IMF in the October 2022 WEO, to rise from 4.7 percent in 2021 to 8.8 percent
in 2022 but to decline to 6.5 percent in 2023.
The aggressive push towards monetary policy normalization has amplified the
risk of tightened global financial conditions. This, expectedly, has started to
cause huge capital outflows from EMDEs. Likewise, many Advanced
Economies, including the UK, as well as EMDEs are witnessing the weakening of
their currencies against the US dollar.
Global trade continued its deceleration, from 10.1 percent in 2021 to an
estimated 4.3 percent in 2022 and 2.5 percent in 2023. The development is due
largely to the supply chain disruptions occasioned by the lingering COVID-19
pandemic in China and the war between Russia and Ukraine.
THE DOMESTIC ECONOMY
The Nigerian economy witnessed sustained recovery for the sixth consecutive
quarter, as measured by growth in real Gross Domestic Product (GDP). The
economy grew by 3.54 percent (year-on-year) in Q2 2022, which was a 0.44
percentage point increase from the 3.11 percent recorded in Q1 2022.
However, on quarter-on-quarter basis, real GDP grew by -0.37 percent in Q2
2022, due to lower economic activities. This is validated by the gradual

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slowdown in the monthly composite Purchasing Manager’s Index (PMI) which
fell to 47.2 index points in August 2022 from 51.6 index points in July 2022,
indicating a contraction in business activities.
The non-oil sector remains the major driver of economic growth in the period
under review. The sector contributed 93.67 percent to the nation’s GDP in Q2
2022, relative to the 93.37 percent, recorded in Q1 2022, indicating significant
resilience. Agriculture contributed 23.24 percent, industry (19.40 percent) and
services (57.35 percent) to real GDP. Conversely, the Oil sector contracted for
the 9th consecutive quarter with a 6.33 percent contribution to real GDP in Q2
2022.
The sectoral growth outcomes are attributed to the Government’s effective
implementation of its economic and fiscal sustainability measures designed to
mitigate the negative impacts of the COVID-19 pandemic and the RussianUkraine war. Tailwinds to growth could have been the current recovery in
international oil prices. However, domestic production challenges in the oil
sector as well as other economic and structural factors, remain major downside
risks. Consequently, the output gap remained negative at -7.2 percent in Q2
2022 and is forecast to improve marginally to -6.2 percent in Q3 2022.
Recent price developments point to persistent upward pressure in headline
inflation, which increased by 0.88 percentage point to 20.52 percent in August
2022. This was mainly on account of increasing energy and food prices, and
other domestic macroeconomic conditions which contributed to heightening
negative sentiments, thus, driving inflation expectations in the short term.
Food and core inflation increased by 1.10 and 0.94 percentage points,
respectively. Whilst high food inflation remains a matter of concern, the rapid
increase in core inflation is worrisome and requires urgent measures. Month-onmonth inflation trend indicated that prices may be declining, as headline
inflation month-on-month declined by 0.05 percentage point to 1.77 percent in
August 2022.

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Monetary aggregates indicate high level of liquidity in the system, even though
broad money supply (M3) was -4.16 percentage points below the 2022
provisional benchmark of 15.21 percent. Interest rates fluctuated in the review
period, reflecting liquidity conditions in the banking system.
It is heart-warming to note that, the banking system remain safe, sound and
resilient, showing robust performance in key financial soundness indicators and
strong capacity to intermediate funds. Capital Adequacy Ratio (CAR) at 13.4
percent at end-August 2022, is above the 10 percent regulatory minimum, while
Non-Performing Loans (NPLs) improved to 4.8 percent at end-August 2022,
below the 5.0 percent supervisory threshold. It is noteworthy that gross credit
has been on an upward trajectory since 2019 due largely to increased industry
funding base and CBN’s directive on Loan to Deposit Ratio (LDR).
On the external sector, gross external reserves increased by 0.39 percent to
US$38.46 billion at end-August 2022 and could cover 6.61 months of import of
goods and services and 8.55 months of import of goods only.
CONSIDERATION FOR VOTING
In deciding on the appropriate policy choice, I considered the various
competing objectives of monetary policy, which include price stability, output
growth and exchange rate stability. In view of the aggressive increase in
headline inflation, I believe that it has become necessary to take urgent steps
to address the current inflation threat.
Whilst the negative implication of monetary tightening on credit creation,
investment and economic growth is well known, growth as it were, has shown
a lot of resilience, on account of the Bank’s targeted interventions on the
economy. Indeed, Staff forecasts indicate that output growth will continue on
a positive direction for the rest of the year, albeit, at a slow pace. As at this
meeting, 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).

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Domestic price development is envisaged to sustain the current upward
trajectory for the rest of the year. Upside risks to inflation, includes exchange
rate pressures, the looming electioneering campaign spending and high
energy costs, as well as shocks to food, petrol and other consumable supplies,
occasioned by floods in some parts of the country.
It is noteworthy that several Advanced Economies and EMDEs facing rising price
level have commenced the tightening of monetary policy, through policy
normalization. On our part, not taking a bold and decisive action to tame
inflation at this stage could result in negative consequences for households,
businesses and investments.
In my view, a tightened policy stance has the efficacy to address the already
high negative real interest rates and adjust sentiments and inflationary
expectations. It will also retain foreign capital seeking better yields in other
jurisdictions, whilst restoring stability in the foreign exchange market, through
increased accretion to reserves.
There is no doubt that developmental interventions have contributed
significantly to keeping the economy afloat. To address the current inflationary
pressure, it will be counter intuitive to inject funds into the economy on the one
hand and raise interest rates on the other. Therefore, development interventions
should now be aligned with a tight monetary policy stance by channelling
resources to critical output inducing and employment generating activities,
with large potentials to narrow the output gap and increase the foreign
exchange earnings capacity of the economy. There is also an urgent need to
improve productivity by addressing structural impediments to the supply chain
in order to aid the fight against inflation.
In light of tightened financial conditions globally, there is need to intensify
demand management measures particularly to reduce the propensity for
consumption of foreign goods, complemented with supply management
policies, to achieve a stable exchange rate. At this point, therefore, policies
that encourage import substitution which will lead to export-oriented

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industrialization and less dependence on crude oil is invaluable. Noteworthy,
are the CBN’s incentives to boost remittances and other complementary
measures to promote non-oil exports and improve foreign exchange inflows.
In the light of the foregoing, I voted to increase the Monetary Policy Rate by
150 basis points and the Cash Reserve Requirement by 50.0 basis points, whilst
leaving other policy parameters unchanged as follows:

MPR at 15.5 per cent

The asymmetric corridor at +100/-700 basis points around the MPR

Liquidity ratio at 30.0 per cent

CRR at 32.5 per cent

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5. ASOGWA, ROBERT CHIKWENDU
Policy Decision:
On the basis of the global and domestic macroeconomic outlook especially
the persisting inflationary pressures and the balance of risks, I will prefer a
continuation of the process of monetary tightening and the gradual withdrawal
of existing accommodative stances. While an aggressive monetary tightening
will look realistic so as to bring demand more in line with supply, the fact that
demand-side inflationary pressures appear to be limited in Nigeria, means that
a moderate tightening will somewhat be sufficient in stoking the inflationary
concerns. Going forward, a regular balancing act will be key to ensure that
future policy rate changes are able to address price jumps without necessarily
jeopardizing the growth recovery process. In this circumstance, I will therefore
vote to:
Raise the MPR from 14.0 percent to 14.5 percent,
Raise the CRR from 27.5 percent to 32.5 percent,
Retain the Asymmetric Corridor at +100/-700 basis points,
Retain the Liquidity Ratio at 30.0 percent.
The highlights of the assessments, and outlook of risks are presented below.
Global Economic Context:
Global GDP growth has been hit by the protracted conflict in Ukraine and the
aggressive policy rate hikes in major advanced economies with risks now

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shifting from inflation towards growth. As at the second quarter of 2022, growth
performance has been mixed across countries. CBN staff report shows that
while output in the second quarter of 2022 contracted in the US, UK and China,
it however expanded in the Euro Area, Japan, India and Brazil at the same
period. Specifically, for the USA, there are now two consecutive quarters of
negative GDP growth, -1.6 percent for 2022 quarter 1 and -0.9 percent for 2022
quarter 2. In China, output contracted by 0.1 percent in the second quarter of
2022, compared with a growth of 0.8 percent in the preceding period.
Looking ahead for the third and fourth quarters of 2022, leading indications are
pointing to an extended period of subdued growth with strong predictions for
possible recession in a number of countries. The global manufacturing PMI fell
to a 26-month low of 50.3 points in August from 51.1 points in July. In the USA,
manufacturing PMI dropped to 51.3 points in August from 52.2 points in July,
while in the Eurozone, PMI dropped to 48.9 points in August from 49.9 points in
July. In Japan also, PMI had its worst performance in August, dropping to 48.9
points from 50.2 index points recorded in July. In addition, third quarter
production losses have been recorded in such countries as the USA, Eurozone,
Japan and indeed several other strong economies, all pointing to the likelihood
of further GDP decelerations in the remaining part of 2022. Revised forecasts
for global growth by the World Bank suggest a slowdown from 5.7 percent
growth in 2021 to 2.9 percent in 2022 which is significantly lower than the 4.1
percent anticipated earlier in January, while the IMF in a revised forecast also
predicts a slower global GDP growth rate of 3.2 percent in 2022 before
dropping further to 2.9 percent in 2023.
On global inflation, there are expectations of even additional increases over
the remaining months of 2022 due to the trend of commodity prices and the
persistence of supply constraints to production arising from the ongoing Russia-
Ukraine war. Recent data however show marginal inflation slowdowns in a few
countries by August 2022, but a key concern was that in many other countries,
price increases were becoming broad based with huge jumps in the core
component. CBN staff report shows that year-on-year inflation in the Euro Area

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accelerated to 9.1 percent in August from 8.9 percent in July, while in India,
year-on-year measures rose to 7.0 percent in August from 6.7 percent in July.
The August marginal inflation declines were noticeable in the US, UK, China and
Brazil. In the US for instance, the year-on-year inflation rate eased for a second
straight month in August to 8.3 percent from 8.5 percent in July and 9.1 percent
in June 2022. In the UK also, year-on-year inflation rate also eased to 9.9 percent
in August from 10.1 percent in July, while in China, it declined to 2.5 percent in
August from 2.7 percent in July.
Global central banks have adopted somewhat similar responses to the
persisting high inflation rates with more focus on aggressive normalization of
policy rates, thus further tightening global financial conditions. CBN staff report
shows that besides the Central Bank of Russia and the Peoples Bank of China
that lowered their policy rates recently because of growth concerns, most other
central banks across the globe raised policy rates, but with different intensities.
The US Federal Reserve pushed its policy rate further by 75 basis points in July,
while the Bank of England, the European Central Bank, the Reserve Bank of
South Africa, the Reserve Bank of India and the Bank of Indonesia all raised rates
by 50, 75, 75, 50 25 basis points, respectively, between July and early
September 2022.
With regards to the global financial markets, a higher-than-normal volatility has
been witnessed in recent times partly because of the sporadic policy rate
adjustments across several countries. The observed retrenchment of capital
flows from emerging and developing markets appears to have triggered the
surges of volatility in the global equity and bond markets with major stock
market indices on the declining trend since February 2022. Bond yields are now
faced with increased surges of volatility, somewhat unprecedented. There are
also waves of currency depreciations across the globe partly because of the
aggressive adjustments in the US interest rates which have led to a rather strong
US dollar, almost to a 20-year high as of August 2022. Consequently, most
currencies in emerging and developing markets as well as some advanced

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markets have since July witnessed varied currency depreciations in favour of
the US dollar.
Domestic Economic Context:
The Nigerian economy continues to expand, albeit at a much slower pace,
weighed down by persisting supply side disruptions. Recently released 2022
second quarter GDP growth rate stood at 3.54 percent (year-on-year), up from
3.11 percent in the first quarter of 2022, marking seven consecutive quarters of
real GDP growth. Strong monetary policy measures underpinned by credit
expansion to the private sector contributed to the good domestic growth
performance. On a quarter-on-quarter basis, real GDP contracted by -0.37
percent in the second quarter of 2022 when compared with a contraction of -
14.66 percent recorded in the first quarter of 2022. In terms of the growth
outlook for the third and fourth quarters of 2022, modest declines are expected
given the recent moderation in the pace of domestic economic activity. Most
demand indications seem to have softened since July 2022. CBN staff report
shows that the composite Purchasing Managers Index (PMI) stood at 47.2 index
points in August 2022 compared with 50.4 index points and 51.9 index points in
July and June, respectively. Recent large-scale flooding in several Nigerian
states, especially the food producing regions creates additional bottlenecks for
agricultural production in the remainder of 2022. With uncertainties associated
with domestic oil production and externally driven supply side disruptions,
growth downturns in the second half of the 2022 is clearly inevitable.
Inflation rates in Nigeria remained high in July and August 2022 on a year-toyear basis but has commenced a deceleration process on a month-on-month
basis, partly because of the statistical base effect. Headline inflation on a yearon-year basis increased from 18.60 percent in June 2022 to 19.64 percent in July
and further to 20.52 percent in August, 2022. There were increases in both core
and food inflation on a year-on-year basis, but on a month-on-month basis,
headline rates remained stable at 1.82 percent in June and July 2022, but
declined to 1.77 percent in August 2022. The month-on-month deceleration for

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both core and food inflation may be driven partly by the subdued aggregate
demand pressures resulting from the tight monetary and fiscal conditions.
Looking ahead, it is expected that inflationary pressures will rise further between
September and December 2020, but at a moderated pace and driven mainly
by direct and indirect effects of oil prices, domestic agricultural supply shocks
and some existing rural and urban market price formations, sometimes not fully
supported by economic fundamentals.
The Nigerian financial sector remains resilient eventhough there are volatility
concerns in the capital market, perhaps arising from global financial market
movements. The banking sector is strong with increasing total assets and stable
profitability indicators, despite the slight reduction in capital adequacy ratio by
August 2022. The non-performing loans ratio declined further to 4.8 percent
which is a historic level, while the increases in both total deposits and total credit
in the banking industry as compared with the position at the last MPC meeting
further demonstrates the capacity of the banking industry. The sector upside
risks are mainly in the equity market where sustained sell-off activities have
continued since the last MPC meeting thus heightening market volatility. Based
on the CBN staff report, market capitalization and the All-Share index have
declined consistently since July with both the number of deals and value of
traded shares declining on a daily basis. The naira exchange rate to the US
dollar at the officially recognised I&E window depreciated marginally by 0.94
percent between end-July and end-August 2022, partly due to the recent
strengthening of the US dollar, but it is still in line with currencies within the African
region. A related concern is the growth of money supply. CBN staff report shows
that broad money (M3) grew by 11.05 percent in August 2002, compared with
8.66 percent in July 2022, which although below the provisional benchmark of
15.21 percent for 2022, may pose additional barriers to combating the existing
inflationary pressures.
Finally, on the fiscal risk which remains elevated on the back of worsening
government debt scenario with poor fiscal revenues similar to the situation at
the last two MPC meetings. CBN staff half year economic review for 2022 shows

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a significant rise in government expenditure and an underperformance in
revenue generation which increased the size of deficits and total debt stock.
As oil revenues decline further because of the increasing oil thefts in the Niger
Delta region and with non- oil tax revenues still exhibiting sluggish growth
patterns, the fiscal outlook becomes even more scary. For now, a transparent
expenditure rationalization strategy is imperative, while aiming for a prudent
debt level. This will also be socially preferable rather than attempts to either
broaden the tax base or impose additional burden on those already in the tax
net.

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6. OBADAN, MIKE IDIAHI
INTRODUCTION
The Monetary Policy Committee met on September 26 – 27, 2022, at a time of
continuing global uncertainties, and the outlook for the global economy
continues to be clouded as the prospects of complete elimination of the
COVID-19 pandemic and ending soon the Russia-Ukraine war remains dim. As
the Russia-Ukraine war progresses, geo-political tensions are becoming
persistent and widespread. The COVID-19 pandemic has continued to exert a
downward pressure on the global supply chain and upward pressure on prices
as new infection rates rose significantly with the spread of new strains of the
Omicron variant particularly in China. Similarly, the un-abating Russia-Ukraine
war has continued to exert upward pressure on inflation through high prices of
energy and food especially in countries heavily dependent on imports of these
commodities. Against the backdrop of Nigeria’s heavy dependence on food
and energy importation, its inflation rate has worsened significantly due to
imported inflation.
CURRENT FEATURES OF THE GLOBAL ECONOMY
As at now, the two major shocks to the global economy are the lingering
COVID-19 pandemic and the effects of the Russia-Ukraine war. There is also the
policy shock from the monetary policy normalisation by the Advanced
Economies (AEs) and some Emerging Market Economies (EMDEs).
In light of the shocks, the global economy is now slowing with several key
economies having recorded at least one contraction; the US economy has
experienced contractions in the first two quarters of 2022, described as

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technical recession. Consequently, global output growth forecast for 2022 and
2023 has been downgraded further by the IMF to 3.2 and 2.9 percent,
respectively.
Persistently rising inflation across the economies to historically high levels is
another very worrisome development in the global economy arising from the
above shocks. Individual country inflation figures (e.g., US, 8.3% and U.K, 9.9%)
have remained worrisomely above their central bank long-run objectives.
Global central banks are now confronted with the difficulty which the Nigerian
economy has faced for some time, namely, attempting to combat inflation
which has both supply and demand dimensions. Pressures from both the supply
and demand sides complicate efforts to tame inflation.
As central banks attempt to tame this rise in inflation with tight monetary
policies, the fragile recovery of output growth is increasingly hampered and
truncated. Thus, Central Banks across the globe are confronted with a tradeoff between dealing with rising inflation, avoiding a near to medium term
recession and preventing a global debt crisis.
Global trade has not fared better. Its growth is expected to continue to slow in
2022 and only recover moderately into 2023 and 2024. The decline in trade is
forecast to be driven by the continued disruptions to the supply chain, arising
from the Russia-Ukraine war and the lingering COVID-19 pandemic causing
epileptic lockdowns in China.
While the prices of some major commodities declined in the review period,
energy and food prices in general have remained high. However, oil prices
have shown weakness. They declined from US$101.44 per barrel at end-July and
US$102.82 per barrel at end -June 2022 to US$95.64 per barrel at end-August,
due to growing concerns about the slowdown in global growth.
Even the declining oil prices are still high. But unfortunately, the impact of the
high regime of oil prices in the global market on the Nigerian economy as an
oil exporter has not been favourable. This is due to the country’s net oil importer

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status. The country not only exports crude oil, it is also a heavy importer of
refined petroleum products. This status undermines the gains arising from export
revenues at a time most other oil exporting countries are enjoying revenue
windfall.
MAJOR DEVELOPMENTS IN THE DOMESTIC ECONOMY
Recent developments in the Nigerian economy point to a serious economic
crisis or threat of crisis. Although the growth rate of the economy has remained
in the positive terrain, there are indications that it could slow down just as there
are fears that most economies could go into recession. Nigeria’s real GDP grew
by 3.54 per cent (year-on-year) in the second quarter of 2022 from 3.11 per cent
in Q1 2022, showing seven quarters of consistent growth. The growth in output
was due to the sustained growth in the services and agricultural sub-sectors,
supported by continued policy interventions, and credit expansion to the
private sector. Growth however, contracted quarter-on-quarter by -0.37 per
cent in Q2 compared with - 14.66 percent recorded in Q1 2022. However, the
growth achieved is still fragile, considering the several downside risks and array
of policy responses to the rising inflation.
The overriding challenge at present is the escalating inflation. It is the major
downside risk to growth, investment and living standards in the country. From
15.7 percent in February 2022, headline inflation consistently increased to 18.6
percent in June to 20.52 percent in August, 2022, the highest in 20 years. Core
inflation, and food inflation have similarly trended upwards causing strong
concerns. Although, there are the legacy causal factors of inflation in the
country, recent global shocks have played prominent roles, for example,
increased energy and food prices in the world market consequent upon postrecovery increased demand in the AEs and the supply chain disruptions of the
Ukraine-Russian war. In the context of globalisation and Nigeria’s heavy
dependence on imports, imported inflation has played a major role in the
country’s inflation acceleration. The domestic triggers of inflation include: food
shortages caused by insecurity in the food producing areas of the country;

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increasing cost of logistics; monetary expansion in relation to the need to
support growth; domestic increases in energy prices; depreciating exchange
rate arising from foreign exchange shortage in the market; and government’s
weak fiscal position resulting in money supply increases and unsustainable
public debt. Appropriate domestic policies to address the domestic factors can
also help to mitigate the impact of exogenous shocks.
Two other challenges of the economy relate to ballooning fiscal deficit and the
associated unsustainable public debt (internal and external) and foreign
exchange market crisis. The performance of the Federal government’s budget
for some time now elicits deep concerns. It showed a significant rise in
government expenditure and underperformance in revenue generation, which
increased total debt stock and fiscal deficit. As at the end of the first half of
2022, the realised revenue of the government was N2,260.34 billion, which was
50.1 per cent of the budgeted revenue for the same period, while N6,429.98
billion was spent. Hence, fiscal deficit for the first half of the year rose by 59.1
per cent from the projected N2,621.41 billion to N4,169.64 billion. Consequently,
in the first half of 2022, Nigeria's total public debt stock expanded year-to-date
by 8.2 per cent to N42.85 trillion (US$103.3 billion), from N39.56 trillion (US$95.80
billion) recorded in December 2021. Total debt service is also ballooning to
unsustainable levels, from N1.433 trillion in the first half of 2021 to N1.883 trillion in
the first half of 2022. What seems to be clear is that the country is facing high
fiscal sustainability risks from low revenues, rising debt servicing costs and
crowding-out of capital expenditure.
Finally, is the crisis in the foreign exchange market which is due, not to the CBN’s
poor management, as claimed by some critics, but to the undiversified nature
of the economy, low productivity, exogenous shocks and brazen activities of
unpatriotic citizens and enterprises. Against the backdrop of serious supply –
demand imbalances, foreign exchange scarcity has persisted in the foreign
exchange market while the naira exchange rate has experienced serious
depreciation in recent times.

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The gross external reserves position is not comfortable. At US$ 38.46 billion as at
end-August, 2022, the foreign reserves could cover 8.55 months of import of
goods and 6.61 months of import of goods and services. Although these may
be said to be higher than international thresholds, they do not provide the
flexibility for the country to use more reserves to support the exchange rate.
Signs of economic crisis not heeded
There are obvious signs of economic crisis that has enveloped the country for
quite some time. The crisis has manifested in the country’s consistent living
beyond its means and the associated issues: persistent and escalating fiscal
deficits, rising public debt and debt servicing, the latter taking the lion’s share
of government revenue, inability of the country to earn adequate foreign
exchange to support the exchange rate, excessive foreign exchange demand,
hence the persistent depreciation of the naira in the foreign exchange market;
growth rate concerns and escalating inflation; and macroeconomic instability,
among others. All these complicate monetary policy decision-making.
Even with the presence of this situation in the country, there seems to be no due
recognition by stakeholders of the real problem – consuming more than the
country earns, in both naira and foreign exchange. Political and economic
managers do not seem to appreciate this and so engage in unproductive
spending in the face of limited revenue and foreign exchange. Thus, there is a
strong need to recognise the economic crisis in the country and embrace
strong reforms – stabilisation and adjustment measures – of course, with a
human face.
To actualise this, the fiscal authority needs to complement the measures that
the CBN has put in place by reviewing the structure of public spending to bring
down expenditure on non-essential goods and services at this point in time; it is
highly desirable to do so. Some measures to be considered are as follows:
Suspension of establishment of new government institutions; many of the
existing institutions and even the new ones being established duplicate
the existing ones;

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Develop the political will to implement the recommendations of the
Oronsaye Committee set up by Government some time ago on the
rationalisation of Government enterprises and institutions;
Effect a drastic cut in the emoluments of political office holders including
members of the legislatures;
Consider deregulation of petroleum product prices (premium motor spirit)
to free the nation from the payment of fictitious subsidies and associated
corruption, and save money for welfare programmes;
Suspend all unnecessary foreign travels which put pressure on the nation’s
highly limited foreign reserves and the naira exchange rate;
Similarly, review the merchandise imports structure to ensure that only
imports of merchandise that cannot be produced in the country benefit
from official foreign exchange;
Provide political support to the CBN to review access to foreign exchange
for invisibles; to this end, official foreign exchange should be suspended
for school fees for new students while foreign exchange access for existing
students should continue until they graduate;
Under the situation of economic crisis in which the country currently is, it
will not be out of place to review the Basic Travel Allowance (BTA)
downwards while only critical cases of illness should benefit from official
foreign exchange.
On its own part, there is the compelling need for the CBN to introduce strong
measures, which though may be tagged by some people as harsh, to check
the trend of dollarization of the economy and the large volumes of cash
floating in the economy with serious implications for inflation and exchange
rate stability.
OPINION
Against the backdrop of the global and domestic economic features, my
monetary policy opinion is predicated on the subsisting worrisome features of
the domestic economy, in particular inflation, the primary mandate of the CBN,
and recent empirical findings by the Bank on the Monetary Policy Rate (MPR) –
inflation nexus.
The primary mandate of the Bank, according to the CBN Act, 2007, remains
monetary and price stability. The support to economic growth by the Bank,

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although provided for in the Act (Section 31), is to me ancillary. For some time
now, the Bank has supported the nation’s growth objective rather massively
and understandably. The initiatives have yielded encouraging results in terms
of leading the economy out of two recessions and enabling steady recovery,
the Russian-Ukraine war notwithstanding.
But at this point in time, the Bank’s primary mandate is threatened by rising
monetary expansion and worrisome increases in the rate of inflation, for the
seventh consecutive month. The inflation has been driven by both monetary
and non-monetary/structural factors including insecurity challenges, exchange
rate depreciation, energy prices, infrastructure deficits, and exogenous shocks
arising from the lingering effects of covid-19 and the adverse effects of the
Ukraine-Russian war on supply chains.
In response, the CBN has since May 2022 pursued a tighter monetary policy
strategy entailing upward adjustments in the Monetary Policy Rate to address
the escalating inflation. But, perhaps, because of policy lags, the significance
of the non-monetary factors at work, and structural nature of some of the
factors, a deceleration of inflation has not yet happened.
However, a recent policy study by the Research Department of the Central
Bank on “The Impact of Monetary Policy Rate Adjustment on Key Indicators”
including the rate of inflation, provides hope on the effectiveness of the
monetary policy strategy in reversing the upward trend of inflation on a
sustained basis from September/October 2022, till June 2023.
The study showed that raising the MPR from the extant 14.0 percent to 14.5
percent or 15.0 percent would reduce headline inflation faster than leaving the
rate at 14.0 percent. It also shows that holding the policy rate at 14.0 percent is
more growth-inducing compared to raising it to 14.5 or 15.0 percent. The growth
outcomes of raising the MPR to 14.5 percent or 15.0 percent were found to be
lower than those of holding the rate at 14.0 percent. It tends to confirm the
hurtful nature of high interest rates in relation to growth.

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Nevertheless, the growth projections under interest hikes are not bad as
generally perceived. Even if they were to be worse than those suggested by
the empirical findings, the Bank would still need to do the needful at this time of
serious threat to its primary mandate. Trade-offs are inevitable under the
present circumstances. The fiscal authority would need to support growth more
vigorously, while the monetary authority focuses more on monetary and price
stability.
Therefore, guided largely by the empirical insights, among others, and the need
to have a good handle on inflation, I will support a further tightening of the
monetary policy stance by raising the MPR by 100 basis points to 15.00 percent
and the Cash Reserve Requirement by 5 basis points to 32.5 percent. Other
parameters should be held constant.

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7. OBIORA, KINGSLEY ISITUA
The Bank must maintain focus on inflation especially as
its persistence continues to have severe impact on
every economic agent, but most especially poor and
vulnerable households. It is in light of these adverse
trends that I voted to raise the Monetary Policy Rate
(MPR) to 15.5 per cent from 14.0 per cent, increase the
Cash Reserve Ratio (CRR) to 32.5 per cent from 27.5 per
cent, retain the Liquidity Ratio (LR) at 30.0 per cent and
the asymmetric corridor of +100/-700 basis points
around the MPR, respectively. I believe this stance will
help re-anchor inflation expectations, restore price
stability, and engender inclusive growth.

The global inflationary pressures continue to intensify amid economic
slowdowns. Although drivers of inflation vary across regions and countries, key
developments that are aiding the current inflationary pressures across the world
include rising food and energy prices occasioned by the ongoing RussiaUkraine war, post-pandemic increasing demand and supply chain disruptions,
tight financial conditions and China’s economic slowdown. The Russia-Ukraine
war, in particular, has further disrupted the world commodity markets, adding
to rising food and energy prices globally. These factors are weighing heavily on
global economic activity. As a result of these factors, global inflation has been
revised upward and projected to remain elevated. In Advanced Economies
(AEs), inflation is expected to increase by 6.6 per cent in 2022 from estimated

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3.1 per cent in 2021. Inflation in Emerging Market Developing Economies
(EMDEs) is projected to increase by 9.5 per cent in 2022, up from 5.9 per cent in
2021, respectively (IMF July 2022, World Economic Outlook). In advanced
economies, inflation is currently far above the target rate of 2.0 per cent set by
the Central Banks under inflation targeting framework. In the United States and
the United Kingdom, inflationary pressures remained persistently high though
they eased to 8.3 and 9.9 per cent in August from 8.5 and 10.1 per cent in July
2022. In the Euro Area, inflation increased to 9.1 per cent in August from 8.9 per
cent in July 2022. In some Emerging and Developing Economies (EMDEs),
inflation is getting more entrenched, with Turkey, Argentina, Ghana and Egypt
recording 80.2, 78.5, 33.9 and 14.6 per cent in August 2022, up from 79.6, 71.0,
31.70 and 13.60 per cent in July 2022, respectively.

To contain these global inflationary pressures, Central Banks across the world
are responding by aggressively raising interest rates. The Federal Reserve, the
Bank of England, the European Central Bank, the Bank of Canada, and the
Reserve Bank of Australia are aggressively lifting interest rates and have further
signalled for more interest rate hikes in 2022. In terms of frequency, the Federal
Reserve has raised its interest rate five times since March 2022. Also, the Bank of
Canada, and Bank of Australia have raised their interest rates four and three
times, respectively, since March 2022. The Bank of England has increased its
interest rate seven times since December 2021. While South Africa has raised its
interest rate six times since November 2021, Nigeria has increased its rate for the
3rd consecutive time since May 2022. Other African countries, including
Angola, Egypt, Ghana, Morocco, Tunisia, and Kenya are also aggressively
hiking the rates to rein in inflationary pressures that have become more
persistent in these economies. Inflation is rising rapidly worldwide, and Central
Banks must act quickly to contain it, especially in low-income countries where
soaring food prices and other necessities are worsening food insecurity,
inequality, and poverty. It is estimated that about 345 million peoples’ lives, and

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livelihoods are in immediate danger of acute food insecurity worldwide, with
the majority living in Low-income countries (UN World Food Programme, 2022)

Against this backdrop, global growth is expected to slow down significantly in
2022 compared with 2021. The J.P. Morgan Global Composite Purchasing
Managers Index (PMI) declined for the first time since June 2020. It fell to 49.3 in
August from 50.8 in July 2022 due to simultaneous contraction in both
manufacturing and services sectors, occasioned by a decline in the volume of
international trade and new order inflows. This development confirms the
continued weakening of the global economy. Accordingly, the IMF has
projected global growth to slow down to 3.2 per cent in 2022 from an estimated
6.1 per cent in 2021. The downward revision was due to supply chain disruptions,
rising commodity prices, tight financial conditions, the Russia-Ukraine war and
weak growth in China. As a result, growth in the Advanced Economies (AEs) is
forecast to moderate to 2.5 per cent in 2022 from 5.2 per cent in 2021. In the
EMDEs, it is expected to slow down from an estimated 6.8 per cent in 2021 to
3.6 per cent in 2022 (IMF, WEO July 2022). In the United States, growth is
projected to decline to 2.3 per cent in 2022 from an estimated 5.7 per cent in
2021, driven by soaring inflation and a tight monetary policy stance. In the Euro
Area, growth is forecast to slow down to 2.6 per cent in 2022 from an estimated
5.4 per cent in 2021. This is due to negative spillover from the Russia-Ukraine war,
potential energy crisis and tight monetary policy stance. Also, in China, growth
is expected to decrease by 3.3 per cent in 2022, from 8.1 per cent in 2021, due
to zero-COVID policy and a struggling property market.

Following these global developments, growth in domestic economy appears to
have cooled, albeit slightly. The latest official figures from the National Bureau
of Statistics (NBS) showed a moderation of real GDP growth (year-on-year) to
3.54 per cent in Q2 2022 from 5.01 per cent in the corresponding quarter of
2021, representing a decline of 1.47 percentage points. It, however, increased
compared with 3.11 per cent in the preceding quarter. The moderate growth

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was mainly driven by the non-oil sector, including Road Transport; Financial
Institutions; Telecommunications, Manufacturing (Food, Beverage & Tobacco);
Trade; and Agriculture (Crop Production) which grew by 56.38, 20.06, 7.70, 5.11,
4.51 and 1.54 per cent, respectively. Overall, the non-oil sector moderated by
4.77 per cent, compared with 6.08 per cent in Q1 2022, reflecting a decline of
1.31 percentage points. In terms of relative contribution, the non-oil sector
contributed 93.67 per cent to the GDP in Q2 2022. The real growth of the oil
sector, however, contracted for the 9th consecutive quarter in Q2 2022. It
contracted by -11.77 per cent (year-on-year) in Q2 2022, indicating, however,
an increase of 14.27 percentage points, compared with a contraction of -26.04
per cent in Q1 2022. The contraction in the Oil sector was mainly due to pipeline
vandalism and oil theft, with adverse implications for Federal Government
revenues and accretion to external reserves and exchange rate stability.
Overall, the Oil sector contributed 6.33 per cent to GDP in Q2 2022. As a result,
IMF projected the economy to moderate slightly to 3.4 per cent in 2022 from 3.6
per cent in 2021. However, the Balance of Payment’s (BOP) position recorded
an overall surplus of 0.08 per cent of the GDP in Q2 2022, compared with a
deficit of -2.22 in the corresponding quarter of 2021, driven by an increase in
the current account balance, decrease in the Net Acquisition of Financial
Assets (NFA) and increase in Net Incurrence of Financial Liability (NFL).
Consequently, the gross external reserves increased (month-on-month) by 0.39
per cent to US$38.46 billion at the end of August 2022 from US$38.31 billion at
the end of July 2022, thereby contributing to the relative stability of the
exchange rate at the Investors and Exporters (I&E) windows. Overall, the
modest growth was driven, in part, by the continued intervention programmes
of the Central Bank of Nigeria (CBN).

Despite these headwinds, the banking system remained sound, safe and
resilient amid slowing economic growth. Total assets of the banking industry
showed an increase of ₦10.72 trillion or 19.13 per cent from ₦56.04 per cent in
August 2021 to ₦66.76 trillion in August 2022, driven by balances with

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CBN/banks, investments, and credit expansion to the real sector. As a result, the
total flow of credit to the economy increased from ₦22.62 trillion in August 2021
to ₦28.12 trillion, representing an increase of 24.3 per cent to the key sectors of
the economy, including Oil and Gas, Manufacturing, General, Governments
and commerce. Also, lending to individuals and households increased from
₦1.848 trillion in Q2 2020 to ₦2.496 trillion in Q2 2022. The industry Non-Performing
Loan (NPLs) ratio was 4.8 per cent at the end of August 2022 compared with 6.0
per cent at the end of August 2021, which was below the prudential maximum
of 5.0 per cent. The decline in NPLs was attributable to write-offs, restructuring
of facilities, Global Standing Instruction (GSI) and sound credit risk management
by banks.

Upward pressure on domestic prices have caused significant imbalances in the
economy. Inflationary pressures have continued to intensify in the country as
headline inflation increased to a 17-year high. Headline rose to 20.52 per cent
in August from 19.64 per cent in July 2022, the seventh consecutive month of
surging since February 2022, driven by rising food and core inflation. Food
inflation increased by 23.12 per cent in August from 22.02 per cent in July 2022.
The sustained rise in food prices is driven by spill-over effects of increased
transportation costs, exchange rate pressure on input costs, and security
challenges in food-producing areas. Core inflation also increased to its highest
level since January 2017, reaching 17.20 per cent in August from 16.26 per cent
in July 2022. This is the fifth consecutive month of increase in core prices. This is
driven by the rise in the prices of processed foods, housing, water, electricity,
gas and other fuel, clothing, footwear and transport. The economy grew by 3.6
per cent in 2021 and is expected to moderate to 3.4 per cent in 2022, indicating
the growth is still fragile. This is partly because domestic crude oil production
continued to trend below the OPEC quota of 1.83 mbpd. The continuous
shortfall was attributed to the renewed cases of oil theft and pipeline
vandalism, leading to increasing fiscal deficit and rising debt burden. The
monthly Composite Purchasing Manager Index (PMI) fell to 47.2 index points in

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August 2022 from 50.4 pts in July 2022, indicating a contraction in the overall
economic activity after four consecutive months of expansion. Furthermore,
lingering security challenges, rising poverty, inequality, unemployment and
widening infrastructural deficits continued to drag growth recovery.

The MPC needs to respond to inflation and its associated imbalances: With
inflation far above our implicit target of 6-9 percent, it is necessary that we
continue to act because rising inflation is a threat to inclusive growth, poverty
reduction and job creation. Having achieved some modest growth for the
seventh consecutive quarter, we must remain focused and act aggressively to
bring this inflation under control and assist the Bank to re-anchor inflationary
expectations on a downward trajectory, restore price stability and achieve
sustained economic growth.

On these bases, I voted to:

Increase the Monetary Policy Rate (MPR) from 14.0 percent to 15.5
percent.

Increase the Cash Reserve Ratio (CRR) from 27.5 percent to 32.5 percent.

Retain the Liquidity Ratio (LR) at 30.0 percent; and
Retain the asymmetric corridor to +100/–700 basis points around the MPR.

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8. OMAMEGBE, MO’
Global Economic Developments
The global economy continues to be weighed down by inflationary pressures,
high energy prices, the Russian/Ukraine war and rising uncertainty. The effects
of these headwinds have been extensive as several economies are in a
recession or some form of financial crisis. The IMF’s bailouts to economic
troubled nations have reached an all-time high. As at the end of August 2022,
the fund has disbursed US$140 billion in 44 separate programs.
In a recent research paper titled “Risk of Global Recession in 2023 Rises Amid
Simultaneous Rate Hikes,” The World Bank warned that the simultaneous nature
of interest rate hikes in response to increasing inflationary pressure may trigger a
global recession in 2023 as well as a number of other financial crises. The bank
further observed that the degree of synchronicity by which central banks around
the world have been raising interest rates has not been seen in the past fifty
years.
Inflation remains a concern globally as a number of countries continue to
experience a rise in general price levels. Inflation data shows the US recorded
an 8.3% rate in August 2022, from the record four-decade high of 8.5% in July
2022. While in the Euro area inflation rose to the ninth consecutive record high
at 9.1 % in August 2022, up from 8.9 % in July 2022.
In the African continent, inflation in Egypt was recorded at a high of 14.6% in
August 2022, up from July 2022 rate of 13.6%. This is the highest rate since
November 2018. South Africa's inflation eased to 7.6% in August 2022 after hitting
a record high of 7.8 % in July 2022, its highest level in 13 years. In Ghana inflation
rose to a record 33.9%, the highest since 2001, despite raising the benchmark
interest rate to a record high of 22% the previous month.

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In the US, The Federal Reserve raised the benchmark interest rate by 75 basis
points, the third of such consecutive rate increases bringing the Fed rate to 3%-
3.25%. In the United Kingdom, the Bank of England raised its benchmark interest
rate by 50bps to 2.25%, this is the highest since 2008 raise and represents the
seventh consecutive increase in its policy rate.


Domestic Economy
According to the National Bureau of Statistics (NBS), Nigeria’s Gross Domestic
Product (GDP) grew in Q2 by 3.54% (YoY) relative to 3.11% in Q1 2022.
NBS data also showed Nigeria's inflation rate in August 2022 increased to 20.52%
(YoY). This is the highest point since October 2005. Food inflation rate was
23.12%, 2.82% higher than the 20.3% recorded in the preceding month. Core
inflation rose to 17.2% from 16.26 % in July 2022, the highest point since January
2017. Urban and rural inflation were 20.95% and 20.12% respectively. These rising
price levels have been attributed to the disruption in the supply of food
products, rising input prices and import costs.
Nigeria’s 2022 fiscal budget continues to experience further shocks as crude oil
production fell to an all-time low of 0.972 mbpd in August 2022 from 1.08 mbpd
in July 2022 according to the National Upstream Petroleum Regulatory
Commission (NUPRC). Crude oil production continues a steady decline since
January 2022 as the country lost about 13.21 million barrels of crude oil
estimated at N603.64 billion between January 2022 and August 2022.
The total cost of Nigeria's fuel subsidies rose to N 2.568 trillion in August 2022,
according to the latest data from the Nigerian National Petroleum Company
Limited (NNPCL). There has been a sustained loss in crude oil production due to
large scale theft with an estimated monthly revenue loss of about US$1.2 billion.
The country external debt profile continues to be a concern and global rate
hikes will likely impact debt servicing obligations.

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Nigerian Capital Market
The complexity of the Nigerian capital market is growing. However, with the
development of the market and expansion of product offerings, the derivatives
market presents a great opportunity for the next phase of growth of the market.
Derivatives will play a major role in the development of innovative products to
not only deepen the capital market and provide liquidity, but also complement
the benefits of the Commodities market by providing hedging opportunities for
various types of risks. The use of derivatives in global financial markets has grown
rapidly in response to increased volatility in exchange rates, interest rates,
commodity prices and the need to manage risk in a complex financial
environment.
The development of derivative products in our market will go a long way in
hedging against foreign currency fluctuations and encourage foreign direct
investments.
Monetary policy tightening is beginning to negatively impact the equities
market as the market witnessed a reduction in the value and volume of
securities traded in the major Exchanges in the past month. The NGX All Share
Index lost about 6% as of September 27, 2022 and this underperformance was
witnessed across all indices and most investment classes.
There has been a gradual reallocation of portfolios in favour of fixed income
securities as investors seek downside protection from a potential bear market.
Increase in Treasury Bills yields further dampens the outlook for equities in the
coming months. While a contraction in the market performance may be further
envisaged due to a sustained tightening policy, however, low equity prices
present a buying opportunity for investors.
Overall consideration
Inflation is high in the country and remains high globally. The rising inflation
reflects the disequilibrium between increased demand and supply shortfall due

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primarily to the pandemic and the Russian/Ukraine war. Pressures on supply
chains around the world have eased considerably, but their operations are still
far short of pre-pandemic levels. On the domestic front, we continue to see
increased pressures on supply chains, food and energy prices.
According to the NBS, food inflation rate rose to 23.12% in August 2022. Elevated
global price pressures on imported goods will likely further pass through to
domestic prices. The rising inflation significantly impacts Nigerians especially
those in the low-income demographic. This class of citizens spend nearly all their
income on food and necessities and consequently mostly impacted by
increasing food and energy prices.
The Monetary Policy Committee tightened policy in the past couple of cycles
to tame inflation. We have seen simultaneous policy tightening across the world
with additional implications for our country. While growth has held somewhat
steady due to CBN’s targeted intervention in priority sectors, the transmission of
the effect of the Bank’s tightening policy in the economy to bring down inflation
will take some time to manifest.
The global economic outlook appears dim and uncertain, and this uncertainty
and associated headwinds requires we pay increased attention to both local
and global risks. Several central banks in developed economies and the Euro
zone have continued to aggressively tighten monetary policy with rates
increases of 125 basis points or more in the past six months. Additional shocks
emanating from the Russia/Ukraine war, China’s zero-Covid 19 policies and the
pandemic are anticipated to adversely affect not only the global economy but
also our domestic outlook. Spillovers from the synchronous global tightening as
well as cross border effects of interest rates and exchange rates poses significant
tradeoffs for monetary policy.

As the inflation rate continues to trend upwards, it would be premature to loosen
policy at this time. It will take some time for the cumulative effect of tightening
to work its way broadly through the economy and reverse the current
inflationary trend. Therefore, monetary policy should maintain a restrictive
stance to ensure we get a handle on the inflation trajectory.

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My Policy Decisions
I therefore vote to:

Raise MPR by 150 basis points to 15.50 percent;
Retain the Asymmetric Corridor of +100/-700 basis points around the MPR;
Raise the CRR by 500 basis points to 32.5 percent;
Retain the Liquidity Ratio at 30 percent.


9. SALISU, MOHAMMED ADAYA
Global Developments and Economic Outlook

The global economy is in a straitjacket, as since the last meeting of the
Monetary Policy Committee on 18th and 19th July, 2022. The growth in global
output has continued to slow down due to the same set of factors, including
the continued Russian war in Ukraine, rising inflation, and supply chain
disruptions in China. Thus, it is now apparent that the global economy is faced
with material downside risks to growth and upside risks to inflation, which could
further undermine the pace of economic recovery and expansion. It is
therefore highly likely that the 2022 global output growth forecast of 3.2 percent
earlier projected by the International Monetary Fund (IMF) may not materialise.

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It is noteworthy, however, that the global growth forecast masks considerable
variation across the regions of the World, with the outlook in emerging markets
and developing economies (EMDEs) outperforming that in advanced
economies (AEs), especially in the Euro Area, whose economies may be more
adversely affected by their dependence on Russia and Ukraine for energy and
agricultural commodities and inputs. For instance, Saudi Arabia, which grew by
12.2 per cent year-on-year in Q2, 2022 up from 9.90 per cent in Q1, 2022, is
projected to be the world’s fastest growing economy in 2022, outperforming
most AEs and emerging economies (Trading Economics, August 2022, reported
in the Economic Research Report of the CBN’s Monetary Policy Department).
Despite this impressive growth performance, fuelled largely by rising energy
prices, the Saudi Arabian Monetary Authorities have been tightening policy in
line with the US Federal Reserve due to the pegged exchange rate system
between the two countries.

Countries such as India and Indonesia have also recorded impressive growth
performance, while many other countries have been affected by the
continued Russian war in Ukraine, which is causing serious downside risks to
many European countries as well as the global economy. The slowdown in
China’s economic growth is another source of concern to the global economy.
As is well known, China is the world’s manufacturing powerhouse. Thus, the reintroduction of stricter Covid-19 containment measures in China has slowed
down economic activities, with devastating consequences for output, supply,
and exports. These supply-related disruptions have exacerbated inflationary
pressures globally. As is being observed, global inflation sustained an upward
trend, remaining well above the long-run objectives of almost all central banks
across the globe. Although inflation in the United States slowed down to 8.30
per cent in August 2022, compared with 9.10 per cent in July 2022, it was four
times higher than the 2.0 per cent inflation target rate and above the market
forecast of 8.0 per cent. In contrast, inflation in the United Kingdom surged to

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double digit in September 2022 – the highest level in 40 years. In the euro area,
the consumer price index (CPI) rose to 9.10 percent compared with the
corresponding period in 2021 – its highest level since the inception of the
monetary union.

Domestic Developments
On the domestic front, the Nigerian economy has continued to grow despite
global and domestic challenges. Real gross domestic product (GDP) grew at
3.54 per cent in Q2, 2022, compared with 3.11 per cent in the preceding
quarter, driven largely by the non-oil sector, especially the services and
agriculture sub-sectors. In contrast, the oil sector contracted by 11.77 per cent
in Q2, 2022, due to crude oil theft and other production challenges that
constrain Nigeria from meeting its quota under the Organisation of Petroleum
Exporting Countries (OPEC) oil production policy. In addition, Nigeria has not
taken full advantage of the high international oil prices due to the high cost of
imported refined petroleum products, which translates to high fuel subsidy with
attendant consequences for Government revenues and foreign exchange
management. Despite the unsatisfactory performance of the oil sector, the
Nigerian economy is expected to continue a positive growth trajectory, with
medium term growth projections ranging from 3.52 per cent (CBN) to 4.20 per
cent (Federal Ministry of Finance, Budget and National Planning) in 2022. Both
the World Bank and the IMF have, however, forecasted that the Nigerian
economy will grow by 3.40 per cent in 2022. Even so, there is room for
improvement in economic performance as the Nigerian economy appears to
be operating below its full potential. Analysis by CBN staff found credible
evidence of an existence of a substantial output gap between the real GDP
and potential GDP, which increased from 7.10 per cent in Q1, 2022 to 7.23 per
cent in Q2, 2022. This is not surprising in view of the underutilization of productive
resources in the country with unemployment in excess of 33.0 per cent
according to the National Bureau of Statistics.

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In spite of the continuous growth in real GDP, Nigeria is faced with a serious
problem of rising inflation, especially food inflation. In August 2022, inflation rose
to 20.52 per cent, up from 19.64 and 18.6 per cent in July and June 2022,
respectively, despite successive increases in the monetary policy rate. Food
prices have risen astronomically due to structural issues as well as the effects of
the war in Ukraine, which have exacerbated food inflation through high prices
of farm inputs such as fertilizer. Other drivers of inflation, especially food inflation,
in Nigeria include disruption to farming activities because of worsening security
conditions, flooding, rural road infrastructural deficits, persistent supply chain
disruptions, post-harvest losses, and imported inflation through sustained
exchange rate pressures with pass-through to domestic prices. Thus, if high
inflation is to be curbed in Nigeria, there is an urgent need for the fiscal
authorities to do more to complement the efforts of the monetary authorities.

Policy Decision
The Monetary Policy Rate (MPR) in July 2022 was raised by 100 basis points to 14
per cent, even though I voted to raise the rate by 75 basis points in the hope
that a cumulative rate hike of 225 basis points in May and July would be enough
to tame inflationary pressures. I was, however, proved wrong, as a study on the
time lag between policy rate hike and deceleration in inflation by CBN staff
suggests that in the past, the increase in consumer prices began to decelerate
three months after the first hike in policy rate, and the pace was further
strengthened one month after the second hike. However, given the
forthcoming 2023 elections, the food insecurity challenges, and the uncertainty
around the war in Ukraine, it is likely that inflation will remain elevated for much
longer and at higher levels than previously assumed. Thus, the Central Bank of
Nigeria must not relent in using the MPR and other monetary policy tools to curb
the inflationary pressures in the country, especially now that the fiscal authorities
have limited tools in view of the constrained fiscal space. This calls for a drastic
action on the part of the fiscal authorities, to do more to complement the efforts
of the monetary authorities, including reducing the size of fuel subsidy, reducing

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the cost of governance, exploring ways of generating more non-oil revenue,
increasing the volume of crude oil production by tackling crude oil theft, and
security generally.

Since inflation in Nigeria is stubbornly high and it is likely to continue to rise
unabatedly in the medium term, I was clear in my mind that an increase in both
the MPR and CRR was necessary to have any significant impact on inflation.


Accordingly, I voted to:
Raise the MPR by 100 basis points to 15%
Raise the CRR by 500 basis points to 32.5%
Retain the Asymmetric Corridor at +100/-700 basis points around the MPR
Retain the Liquidity Ratio at 30.0%

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10. SANUSI, ALIYU RAFINDADI
1.0
Decision
My vote to raise the MPR and CRR in the September’s meeting reflects my
conviction that, given the trend and level of inflation as well as staff forecasts,
monetary policy has to continue to tighten to rein in inflation. Although the
present inflationary episode has some significant supply-side, structural, cost
and imported components, available data show that the roles of their secondround effects, monetary factors, and high inflation expectations assume a very
important influence. In addition, central banks' synchronised monetary policy
responses that raise real yield across the globe require further tightening to
mitigate the foreign exchange market pressure from the impending capital
flow reversals. Besides the unabating fiscal deficits and rising public debt amidst
the electioneering spending expected during this pre-election year, further
tightening is required to rein in inflation and stabilise the exchange rate. I,
therefore, voted to further tighten the policy stance at this meeting.
2.0
Background and Justification
2.1
Global Economic Developments

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The unabating global inflationary consequences of the Russian -Ukrainian war
have continued to shape the policy responses of the major central banks
amidst the re-introduction of COVID-19 containment measures in major
Chinese industrial cities, have disrupted the global supply chain and depressed
global manufacturing output. Consequently, the risk of recession is heightened.
On the one hand, the disruptions to the global supply chain occasioned by the
Russia-Ukraine war and the re-introduction of lockdowns in some major
industrial cities in China to contain the resurgence of the COVID-19 pandemic
have continued to slow down the global output recovery. On the other hand,
the continued global inflationary pressure arising from the fallout of the war in
Ukraine, especially in energy and food prices, has caused most central banks
in both Advanced Economies (AEs) and Emerging Market and Developing
Economies (EMDEs) to aggressively raise their policy rates to rein in inflation.
Given the mounting global corporate and public debt portfolios, the tightening
global financial condition following the aggressive rate rise has increased the
risk of another global financial meltdown. These developments have caused
the IMF to further downgrade its output growth forecast for the global economy
for 2022 from 3.6% to 3.2% and from 3.6% in 2023 to 2.9%. In the Advanced
Economies (AEs), output growth is similarly forecasted to decline progressively
from the 5.2% achieved in 2021 to 2.5% in 2022 and 1.4% in 2023. In the EMDEs,
output growth is projected to slow down from the 6.8% achieved in 2021 to 3.6%
in 2022 before rising to 3.9% in 2023. Y-o-Y output in the US has recorded the
second quarterly contraction of -0.6% in 2022Q2 compared to -1.6% in 2022Q1.
The UK has also recorded an output contraction of -0.1% in 2022Q2 compared
to 0.8% in 2022Q1. Similarly, China and South Africa recorded output
contraction in 2022Q2. However, the Euro Area, Japan, Russia, Brazil and
Nigeria, all recorded some improvements in 2022Q2. JP Morgan's global PMI
decreased in August 2022 to 49.3 from 50.8 in July 2022. The Global
Manufacturing and Global Services PMIs also declined, suggesting global
output contraction.

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International oil prices have remained high because of Russian supply concerns
and rising oil demand in China. As of 22nd September 2022, the price of OPEC
Basket stood at $96.31/b. Global demand is forecasted to grow from 99 million
barrels per day in 2022 to 101.49 million barrels per day in 2023. Global
commodity prices, including prices of agricultural produce, have generally
declined as Russia suspends the blockade of Ukrainian wheat export. The global
food price index has also continued to decline.
Although inflation remains high and significantly well above the long-term
targets in most advanced economies, inflationary pressures in the US and UK
have started to ease as global commodity prices and global supply constraints
ease. Inflation in the Advanced Economies is forecasted to rise to 6.6% in 2022
from 3.1% in 2021 but will decline to 3.3% in 2023. In EMDEs, inflation is forecasted
to rise to 9.5% in 2022 from 5.9% in 2021. In 2023, it is expected to decline slightly
to 7.3%. As of August 2022, inflation (year-on-year) has risen in all the major
EMDEs economies, including Ghana (33.9%), Egypt (14.6%), India (7.0%) and
Nigeria (20.52%), but declined in China (2.5%) and South Africa (7.6%).
As inflation continues to rise, Central Banks in Advanced Economies and EMDEs
have continued with aggressive rate hikes to rein in inflation. The Bank of
England raised its repo rate by 50 basis points to 2.25%. The US Fed also raised
its rate by 75 basis points to 3.00 - 3.25%. The ECB also raised its rate by 075 basis
points to 1.25%. In EMDEs, most central banks are shifting to monetary tightening
in response to their rising inflation and an anticipated rise in capital outflows
associated with the rates hike in major advanced economies. Capital outflows
from the EMDEs have continued, with several countries experiencing reserves
loss, currency depreciation and heightened risks to growth and financial
stability. Consequently, the South African Rand, the Egyptian Pound and the
Ghanian Cedi have all depreciated against the US dollar. Although the net
portfolio outflows were recorded in the last five months (since March 2022) in
EMDEs due to the policy normalisation in the AEs, a net inflow of US$27billion
was recorded in August 2022.

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One key implication of these global developments on the domestic economy
is that while the rising global inflation increases the costs of an imported
component of the domestic CPI, the tightening global financial condition
could substantially raise the sovereign debt and its servicing payments and
weaken access to external funding. In addition, the capital outflows could raise
pressure on the external reserves and foreign exchange market.
2.2
Domestic Economic Developments and their Implications
Domestic output grew by 3.54% (y-o-y) in Q2 2022 compared with 3.11% in Q1
2022. This better-than-expected growth was driven by the non-oil sector,
particularly Services, Agriculture and Manufacturing. This is the seventh
consecutive positive growth since the last recession in 2020. The oil sector GDP
contracted for the 9th successive quarter because of seemingly unabating
production problems associated with oil theft and pipeline vandalism. These
problems have continued to deprive Nigeria of the opportunity presented by
the high oil prices to build external reserves, stabilise the exchange rate, as well
as mitigate the pass-through effects of imported inflation. Output is forecasted
to grow at 3.51% in Q3 2022, 3.94% in Q4 2022 and 3.52% in 2022. The outlook is
predicated on the effective implementation of the Medium-Term National
Development Plan (MTNDP), improvement in manufacturing activities, as well
as the positive impact of CBN interventions.
NBS data show that domestic headline inflation has continued to rise
from19.64% in July 2022 to 20.52% in August 2022, representing 88 basis points
increase, driven by 110 and 94 basis point increases in the food and core
components, respectively. A closer analysis of the inflation data reveals two
important facts: first, out of the 88 basis points increase in the headline inflation,
the three largest components accounting for 75% of the headline inflation
(Food & Non-alcoholic beverages, Clothing and Footwear, and Energy)
recorded an increase of 78 basis points. This implies that 89% of the rise in
headline inflation was due to a rise in these three, the largest being a 66bp
increase in Food and Non-alcoholic beverages. The increase in Food inflation

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(110 bps) was mostly from Processed Food, Bread & cereal, Yams, Potatoes &
other tubers, Fish & Seafood, Meat and Vegetables. The rise in core inflation (by
94bps) was generalised, but with the processed food component, Energy,
clothing & wear recorded the highest increases. These generalised increases in
headline inflation imply that the inflationary process is driven by a combination
of demand and supply side factors, owing to the second-round effects due to
the persistence in food and energy inflation leading to high inflation
expectations. Staff estimates from surveys show that in August 2022, expected
inflation was significantly higher than actual, which partly implies that there is a
role for monetary policy action despite the relative prominence of cost-push
factors. In addition, analysis of the available data suggests that developments
in the monetary sector may also have a significant role in the inflationary
process. For instance, although broad money (M3) grew by 11.05%, less than
the provisional benchmark of 15% for 2022 because the rise is driven by rising
claims on the government, its role in the current inflationary processes may be
substantial. Since March 2022, the net claims on government have grown faster
than the provisional benchmark of 11.42% for 2022. For example, it grew from
45.28% in July 2022 to 51.75% in August 2022. This largely reflects the difficult fiscal
situation, characterised by declining revenue, rising expenditure and mounting
public debt stock and repayment, which forces the government to borrow.
Staff forecasts show that headline inflation would further accelerate to 20.94%
in September 2022 from 20.52% in August 2022.
The banking system stability report shows that the banking system has remained
safe, sound and resilient and continues to contribute to the real sector. Capital
adequacy has remained above the regulatory minimum at 13.4% as of August
2022. The Non-Performing Loans (NPLs) ratio was 4.8%, below the regulatory
maximum of 5%. The industry’s total credit to the economy has increased by
N5.50 trillion or 24.31% between August 2021 and August 2022. Gross industry
credit, which stood at N28.12 trillion in August 2022, has risen steadily since 2019,
largely due to the Bank’s LDR policy.

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3.0
The Basis for My Policy Choice
Given the trend and level of domestic inflation, as well as the staff projections
suggesting that inflation would continue to rise, price stability must be the major
consideration of monetary policy decisions. Although the present inflationary
episode may have originated from significant supply-side, structural, cost and
imported components, available data show that the roles of their secondround effects, monetary factors, as well as high inflation expectations have also
assumed prominence. This suggests that tightening the policy stance is required
to rein in inflation. In addition, the synchronised monetary policy responses of
central banks that raise real yield across the globe require further tightening to
mitigate the foreign exchange market pressure from the impending capital
flow reversals. Besides, the unabating fiscal deficits and rising public debt
amidst the electioneering spending expected during this pre-election year,
further tightening is required to rein in inflation and stabilise the exchange rate.
I, therefore, voted to further tighten the current policy stance.
Consequently, I voted to:
Raise the MPR by 150 basis points to 15.50 per cent;
Raise the CRR by 500 basis points to 32.5 per cent;
Retain the asymmetric corridor at +100/–700 basis points; and
Retain the liquidity ratio at 30.0 per cent.

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11. SHONUBI, FOLASHODUN A.
As the Russian-Ukrainian war evolves into a stalemate, with very slim likelihood
of a resolution soon, pressures from disruption to global supply chain, rise in
energy & food prices, and financial market uncertainties have constituted
significant downside risk to growth. Moreover, the aggressive tightening to curb
spiraling global inflation has further exacerbated risks of the global economy
plunging into stagflation, thereby compounding the dilemma of policy makers.
Impact of pass-through from this precarious global economic situation on the
Nigerian economy is worsened by fundamental and peculiar anomalies in the
domestic macro-economic environment. I reckon that the task at this moment
is to review our recent actions with a view to recalibrating less-effective policies
and strengthening measures that have shown potency, to consolidate the
gains.

Global and Domestic Economic Developments
Global economic recovery faced downside risks from many fronts. Record level
inflation and slimmer policy options in most economies are further limitations to
expansion opportunities for a global growth that is already bedeviled by
slowing trade, contracting business activities and tighter financial conditions.
Coming from a less than full recovery position, after the pandemic-induced
recession, recent steady drag in global growth and unabating rise in inflation
have heightened the risk of the global economy slipping into stagflation.

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Accordingly, the International Monetary Fund projected global growth
downward to 3.2 per cent in 2022 and further down to 2.9 per cent in 2023.

Domestic economic growth, at 3.54 per cent (year-on-year) in the second
quarter of 2022 reflected sustained expansion of the non-oil sector, which has
been the major driver of growth since the beginning of 2021. Dismal
performance of the oil sector continued with a contraction of 11.77 per cent in
Q2:2022, while the non-oil sector grew by 4.8 per cent, driven by the expansion
in the agriculture and services sub-sectors. Composite purchasing managers’
index, contracted significantly to 47.2 per cent in August 2022, from 50.4 per
cent in July 2022, on account of the slowdown in activities across the
agriculture, industry and services sub-sectors.
Rising logistic cost, constrained food supply, imported inflation and strong
expectations continue to push up domestic prices. Consequently, headline
inflation reached 20.52 per cent in August 2022, reflecting further increase in
food and core inflation to new highs of 23.12 and 17.20 per cent, respectively.
Notably, headline inflation, on a month-on-month basis, trended downward to
1.77 per cent in August 2022, from 1.82 per cent in the preceding month, as
food and core inflation exhibited similar trend.
Improvement in resilience of the banking sector was underscored by the
sustained positive trend in major prudential ratios. Industry non-performing loans
ratio declined to 4.8 per cent in August 2022, below the regulatory maximum of
5.0 per cent, just as the industry liquidity ratio, at 40.4 per cent, was above the
minimum benchmark of 30.0 per cent. Industry capital adequacy ratio, at 13.4
per cent, was above the industry benchmark of 10.0 per cent.
Growth in net claims on the Federal Government in particular, and increased
banking sector credit were the main sources of liquidity and driver of growth in
monetary aggregates. Consequently, the trend in broad money supply (M3)
reflected annualised growth above the benchmark for fiscal 2022. The monthly
weighted average Open-Buy-Back rate was lower at 13.21 per cent in August

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2022, compared with the level in July 2022 and reflected liquidity conditions in
the banking system.
Notwithstanding the marginal rise in stock of external reserves, the external
sector has not reflected the full benefit of the current fortunes of the global oil
market. Dwindling crude oil revenue due to low productivity and theft, drying
capital flow and high import bill continue to worsen conditions in the sector. The
fiscal sector remained significantly challenged by below budget revenue flow,
high expenditure, recurring deficit, and huge debt stock.
Overall Considerations and Decision
Disruptions from the protracting Russian-Ukrainian crisis and broad-based high
inflation are major threats to global growth prospects. Aggressive policy
tightening across different world economic blocks to curb escalating inflation is
feared to be capable of causing sudden stop and reversal in growth. Whereas
high commodity prices may have overstated global trade, even as volume
may have risen modestly close to pre-pandemic levels, recent trend showed
slowing trade volume due to muted demand and low industrial production.
Heightening risks of recessions in Europe and the US, due to prolonging
geopolitical tensions constitute downside risks to global growth.

Domestically, output remain positive, but fragile. Same cannot be said of other
aspects of the economy where all possible triggers of inflation expectation exist.
General prices (goods and services, interest, and exchange rates) are
elevated, fiscal deficit keeps rising, financed by borrowings, and contributing
to growth in money supply. Clearly, we face a significantly challenging situation
where the populace now holds strong sentiment about inflation, which has
become self-fulfilling. As the agency responsible for price stability, we cannot
allow such sentiments to keep growing. Though difficult, our situation is not
uncharted. We need to deploy strong measures to curb inflation, while being
mindful of unintended effects.

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To preserve output and productivity, the stability of the banking system must be
protected so that it can continue to serve as veritable transmission channel for
our interventions, which must now be refocused more towards productive
investment and less on consumption. Actions of the fiscal authority to rationalize
expenditure, address widespread insecurity and eliminate the bottlenecks
(weak infrastructure, theft, subsidy) in the oil industry will be a fundamental
impetus for increased productivity to provide a lifeline for the realization of the
full benefits of measures by the Bank to stimulate growth, safe foreign exchange
and promote export.

Current domestic inflation is fueled by negative sentiments that is precipitating
high expectations. This unprecedented nature and level of inflation therefore
requires more than tepid measures. Growth in money supply need to be
aggressively managed not only to address current pressure but also to take
proactive action against other likely drivers of increase in the short to mediumterm. To further deal with the monetary impulse, fiscal authority will do well to
review and prioritize the structure for deploying liquidity from borrowings.

To anchor expectations and dilute its impact, we must show sign that we are
ready and willing to do more. Just like the global unison in dealing with the
pandemic, the whole world is responding to inflation. it is therefore imperative
for us to curb inflation. What we have done in recent past is in line with theory.
Though future tightening may affect growth, but the persisting rise in inflation
will eventually be injurious to growth.

I reckon that increasing rate alone won’t be sufficient if we must be as
aggressive as the situation demands. Of course, there is cost to every action,
measures to bring down inflation cannot be costless. But inflation at its current
level already hurts purchasing power, aggregate demand, and worsen
poverty. Beyond aligning with the belief that the Bank is expected to act to
arrest inflation, there is a compelling need for the Bank to demonstrate

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readiness to do all that is necessary to decisively uphold its price stability
mandate.

I therefore vote to:
Raise the MPR to 15.50 per cent;
Retain the Asymmetric corridor of +100/-700 basis points around the MPR
Raise Cash Reserve Ratio (CRR) to minimum of 35.0 per cent; and
Retain the Liquidity Ratio at 30.0 per cent.


12. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
Amidst lingering impact of the Covid-19 pandemic, the ongoing war in Ukraine
is
fragmenting
global
economic
dynamics,
thereby
weakening
macroeconomic conditions, exacerbating uncertainties, and impairing

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outlook. Household capacity and business confidence have waned
considerably, as the spiralling cost of living crisis dampen private expenditure.
Likewise, public policy has become increasingly hectic as worsening energy
and food price complexities strain social safety-net spending, while
constraining tax revenue. Global economic turmoil is compounded by
encumbrances in China, supply-chain drawbacks, and inflaming rhetoric on
the Russian-Ukraine war. While these muted output in many countries,
especially in advanced economies with negative growths, they also sparked
severe spikes in inflation.
Accordingly, 2022 IMF global growth forecast is downgraded 0.4pp to 3.2
percent and reduced 0.7pp to 2.9 percent for 2023, while global inflation
projection surged 0.9pp for both years. Global growth is further modulated by
widespread monetary tightening aimed at curtailing the unprecedented
overshoot of inflation targets. The imminence of global recession is thus
elevated, as higher yields expose fragile economies to deeper structural
failures and weaker fundamentals. For EMDEs, tightening in advanced
economies is overturning portfolio flows, intensifying currency volatility, and
escalating financial markets vulnerabilities.
As the negative spillover from deteriorating global conditions drag many
economies, domestic outlook remained resilient, albeit subject to upward
inflation pressures. Real GDP grew by 3.54 percent in 2022q2, year-on-year,
from 3.11 percent in 2022q1. This reflected the sustained buoyancy of the nonoil sector, which grew 4.77 percent –propelled by services (6.70 percent) and
agriculture (1.20 percent) sub-sectors– as oil GDP shrank -11.77 percent due to
persistent production losses, vandalism and theft. Performance of the non-oil
sector followed the policy supports to households and high-impact economic
sectors and the impact of various CBN interventions. However, declining PMI,
at 47.2 points in August from 50.4 and 51.9 points in June and July, respectively,
underlines the fragility of the domestic economic cycle and accentuates the
need to act appropriately and timeously.

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Annualised inflation rate quickened above the tolerance-limit of the domestic
economy, due to global spillovers and local drivers that exacerbated existing
supply-demand mismatches and invigorated expectations. A higher-thanexpected headline inflation, at 20.52 percent in August, soared further into
growth-deterring heights, showing a hefty 0.88pp ascent over July outcome
and 4.92pp year-to-date. The spike followed the 1.10pp jump in food inflation
to 23.12 percent and the 0.94pp rise in core inflation to 17.20 percent, and
reflected stifling energy costs, cumbersome infrastructure deficiencies,
pervasive security challenges, and the effects of global monetary tightening
on exchange rate pass-through. Noting the adverse effect of spiralling inflation
on inertia and expectations, and with foreseeable spillovers from global
conditions, decisive actions are urgently imperative to curtail inflation towards
the tolerance-band and to growth-supportive levels. The CBN will, nonetheless,
sustain its supply-correcting interventions in critical sectors to minimise excess
demand gaps.
Rising inflationary trend paralleled prevailing liquidity conditions as broad
money momentum quickened by 11.05 percent in August 2022 from 8.66
percent in July following a faster 26.19 percent expansion of NDA from 22.78
percent. While this derived, largely, from the sizeable claims on Federal
government, it importantly reflected the sustained growth of banking system
credits to the private sector, consistent with the CBN policy to finance highimpact sectors. Despite rising private sector credits and elevated uncertainties,
the banking system remained safe, sound and stable as NPLs ratio (4.80
percent), liquidity ratio (40.10 percent) and CAR (13.40 percent), bested their
respective thresholds. With tumultuous global dynamics and the need to
insulate Nigeria from foreign shocks, it is important to fast-track diversification
and ensure inclusive growth through continued de-risking of lending to
productive sectors.
In my consideration, I note the deteriorating global conditions, precipitating
output contractions, elevated inflation pressures, and likely spillover

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domestically. This is complicated by prevalent monetary tightening and
associated currency volatility, which upended capital flows, reversed
expected recovery from the Covid-19 shock, and signpost imminent global
recession. I note that heightened global uncertainties and weakened outlook
have dire implications for the domestic economy. While domestic output
growth has remained positive, unchecked acceleration of inflation, now at 17year high, threatens long-run macroeconomic stability and could permanently
depress our potential GDP. The effects of persistent structural rigidities,
nationwide security challenges, FX pressures, and infrastructure deficiency, are
compounded by anticipated elections spending and amplifying inflation
expectations.
I note that although the cyclical upturn of Nigerian economy continued, it is
important to ensure that inflation expectations are effectively anchored.
Recent inflation rates, driven by global and domestic shocks, have remained
at growth-deterring levels and urgently need to be curtailed within the
tolerance-band. In-house projections suggest continued ascent in the next few
periods, if we delay to act assertively. While remaining mindful of inflationoutput trade-off, the major threat to our economy today is the quickening
inflation momentum and levitating expectations. Given the established
response lag of policy actions, I am certain that the previous hikes will begin to
impact inflation trend in the next few quarters. However, further monetary
tighten is required to shorten the response lag and effectively curb inflation
inertia. Failure to tighten impulse today will not benefit the output, as the
higher-than-beneficial inflation deters actual and potential GDP both in the
short- and the long-run. In my view, a rate hike today may dent output slightly
in the short-run, but the long-run benefits of lower inflation, at this time,
outweighs it cost.
I emphasise that failure to tighten will intensify inflation pressure and undermine
long-run growth. Since the key mandate of the CBN remains price and
monetary stability, I remain committed to cautious, practical, and well-

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balanced decisions that bring inflation to tolerable levels, while optimising
output considerations. Overall, I am convinced that additional policy
tightening is needed to better balance the objectives of price stability and
output growth. Therefore, I vote to:
i. Raise the MPR by 150 basis points to 15.50 percent;
ii. Raise the CRR by 500 basis points to 32.50 percent;
iii. Retain liquidity ratio at 30.00 percent; and
iv. Retain the asymmetric corridor at +100/–700 basis points.

GODWIN I. EMEFIELE, CON
Governor

September 2022