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

The Monetary Policy Committee (MPC) met on 21st March, 2022, in an
environment
of
heightened
geopolitical
tensions
and
persisting
macroeconomic uncertainties, associated with the recent Russia-Ukraine crisis
and headwinds stemming from the lingering impact of the COVID-19
pandemic. The Committee reviewed developments in the global and domestic
environments in the first quarter of 2022 and the outlook for the rest of the year.
These include the likelihood of tightening external financial conditions
associated with monetary policy normalization in the Advanced Economies,
the cocktail of sanctions imposed on Russia, global supply chain disruption
associated with the invasion of Ukraine, and increasing vulnerabilities
associated with the burgeoning global private and public debt portfolio and
risks to financial stability. Others include increased uncertainties across major
financial markets and the increased risk of continuing rise in prices confronting
central banks due to the huge monetary and fiscal stimuli injected into the
global economy to subdue the downside risks to growth.
Ten (10) members of the Committee attended this meeting.
Global Economic Developments
The Committee noted with concern, the recent heightening of uncertainties
confronting the recovery of the global economy as the Russia-Ukraine conflict
and numerous sanctions against Russia, introduced a new dimension of risk to
the tepid recovery of the global economy. It further took into cognizance, the
lingering headwinds associated with the COVID-19 pandemic and global
supply chain constraints; rising inflationary pressure; and more recently, the
progression of an interest rate hike by the US Federal Reserve Bank and Bank of
England (BOE). Members noted that the ongoing war and the resultant
sanctions against Russia will continue to have a considerable impact on the
global supply chain as both countries are major players in the global
commodities market. With both countries significantly interconnected to the

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global financial markets, global capital flows are expected to experience some
downturn, exacerbated by the increasing sanctions on Russia.
Consequently, the earlier projections by the International Monetary Fund (IMF)
for global output growth in 2022 and 2023 of 4.4 and 3.8 per cent, respectively,
are likely to be revised downwards due to the overarching downside risks
identified on the horizon.
Price development across major Advanced Economies continued to trend
upwards and is expected to be accentuated in the short to medium term,
reflecting the persisting supply bottlenecks, rising food and energy prices, and
the ongoing war which heightened the observed trend. In the Emerging Market
and Developing Economies (EMDEs), inflation remained high, with some
economies recording inflation rates well above the average in the Advanced
Economies. This was mostly due to a mix of downside risks from the COVID-19
pandemic, capital flow reversals, legacy structural challenges, supply-side
bottlenecks, and exchange rate market pressures.
In the global financial markets, investors maintained a substantial portion of their
portfolios in gold and other precious metals, as the uncertainty around market
securities persists alongside the Pandemic and the emergence of new risks
following the imposition of sanctions on Russia. It is still unclear at the moment
how the progression with monetary policy normalization by some key
Advanced Economies will impact the recovery of the global economy, given
the risks associated with this Crisis. Investors are however adopting a cautious
approach in view of the impact of these developments on activities in the
global markets. Global financial conditions are thus, expected to tighten in the
short-term as the investment horizon gradually becomes clearer. This is
expected to impact capital flows to emerging market economies as risk-averse
portfolio investors adopt a wait-and-see approach. Consequently, the risks to
the overall recovery of the global economy remain heightened and call for
cautious policy maneuvering to avoid a sharp downturn such as experienced
in 2020.
Domestic Economic Developments
According to the National Bureau of Statistics (NBS), Real Gross Domestic
Product (GDP) grew by 3.98 per cent (year-on-year) in the fourth quarter of
2021, compared with 4.03 per cent in the third quarter of 2021 and 0.11 per cent
in the corresponding period of 2020. On a quarter-on-quarter basis, GDP grew
by 9.63 per cent in the fourth quarter of 2021 compared with 11.07 per cent in
the preceding quarter. This indicates the fifth consecutive quarter of real output

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expansion, following the exit from recession in 2020. The positive performance
was driven largely by the growth in the non-oil sector to 12.36 per cent in Q4
2021 from 10.99 per cent in Q3 2021. Quarrying, transportation & storage;
education; financial & insurance services; information & communication; as
well as a steady rebound in manufacturing and mining activities were key to
the growth of the non-oil sector.
The Committee, however, noted that although the Manufacturing Purchasing
Managers’ Index (PMI), remained above the 50-index points benchmark in
February 2022, it moderated slightly to 50.1 index points from 51.4 index points
in January 2022. This sustained positive performance in the manufacturing PMI
reflects the resilience of the economy in light of persisting headwinds to the
recovery. The Non-Manufacturing PMI, however, remained below the 50 index
points in February 2022 at 49.0 index points, with a slight moderation compared
with 49.01 points in January 2022 as legacy headwinds such as the persisting
insecurity and infrastructural constraints continued to impact production and
the ease of doing business in Nigeria.
The Committee observed with concern, the marginal increase in headline
inflation (year-on-year) to 15.70 per cent in February 2022 from 15.60 per cent
in January 2022, a 0.10 percentage point uptick.
This increase was largely attributed to a rise in the core component to 14.01 per
cent in February 2022 from 13.87 per cent in January 2022, while food prices
moderated marginally. The rise in core inflation was mostly due to rising energy
prices as a result of the current scarcity of Premium Motor Spirit (PMS), rise in the
cost of Automotive Gas Oil (AGO), and hike in electricity tariff. The Committee,
however, expressed cautious optimism, that with sustained interventions by the
Bank in various sectors of the economy and broad fiscal support to tame these
legacy structural constraints, price development will moderate as output
growth improves. The MPC, therefore, urged the fiscal authorities to seek
innovative ways of addressing the current critical supply-side challenges
confronting the economy, to enable the unhindered transmission of all the
recently deployed fiscal and monetary stimulus to the real economy.
Members noted that the growth rate of broad money supply (M3) increased to
2.12 per cent in February 2022, compared with 1. 74 per cent in January 2022.
This was largely attributed to an increase in the growth rate of Net Domestic
Assets (NDA) to 5.78 per cent in February 2022 from 2.62 per cent in the previous
month.

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On the developments in the money market, the Committee observed the
movement in money market rates around the asymmetric corridor, reflecting the
prevailing liquidity conditions in the banking system. Accordingly, the monthly
weighted average Open Buyback (OBB) and Inter-bank Call rates decreased
to 5.81 and 9.30 per cent in February 2022 from 6.00 and 16.00 per cent in
January 2022, respectively. The decrease in the rates reflected the liquidity
conditions in the banking system.
The MPC noted the sustained improvements in the equities market in the review
period. The All-Share Index (ASI) and Market Capitalization (MC) both increased
significantly from 42,716.44 and N22.30 trillion on December 31, 2021, to 47,282.67
and N25.48 trillion on March 18, 2022, respectively. This prevailing positive
performance
was
attributed
to
gradually
improving
macroeconomic
fundamentals which support improved outcomes and returns on investments
from companies quoted on the Nigerian Exchange
Limited.

The MPC also noted the continued resilience of the banking system, evidenced
by the further moderation of the ratio of Non-Performing Loans (NPLs) to 4.84 per
cent in February 2022 from 4.90 per cent in December 2021. The Committee also
noted that Liquidity Ratio (LR) remained above its prudential limit at 43.5 per cent
in February 2022, while the Capital Adequacy Ratio (CAR), moderated slightly
to 14.4 per cent in February 2022 from 14.5 per cent in December 2021. Overall,
Members expressed confidence in the Bank’s regulatory regime and
commitment to maintaining stability in the banking system, urging the
Management to sustain its tight regulatory surveillance.
On the external reserves position, the Committee noted the decrease in the level
of gross external reserves to US$39.44 billion as of March 17, 2022, from US$40.21
billion on January 25, 2022, indicating a decrease of 1.95 per cent during the
review period. The moderate accretion to reserves reflects the duality of
Nigeria’s position as an oil exporter and importer of refined petroleum products.

The Committee reviewed the performance of the Bank’s various interventions to
stimulate
productivity
in
manufacturing,
industry,
agriculture,
energy,
infrastructure, healthcare, and micro, small and medium enterprises (MSMEs).
Between January and February 2022, the Bank disbursed N29.67 billion under the
Anchor Borrowers’ Programme (ABP) for the procurement of inputs and
cultivation of maize, rice, and wheat, three crops that hitherto were significant

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concerns of FX demand. These disbursements bring the total under the
programme to over 4.52 million smallholder farmers, cultivating 21 commodities
across the country, comes to a total of ₦975.61 billion. The Nigeria Commodity
Exchange (NCX) has also been restructured to effectively aggregate excess
outputs from the Bank’s ABP-financed projects, with the objective of moderating
food prices. The Bank also released N19.15 billion to finance 5 large-scale
agricultural projects under the Commercial Agriculture Credit Scheme (CACS),
bringing the total disbursements under the Scheme to ₦735.17 billion for 671
projects in agro-production and agro-processing.

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

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

To support households and businesses affected by the COVID-19 Pandemic, the
Bank disbursed N21.66 billion to 19,685 beneficiaries, comprising 12,044
households and 7,641 small businesses under the Targeted Credit Facility (TCF)
within the period. The cumulative disbursements under the TCF stood at N390.45
billion to 797,351 beneficiaries, comprising 660,096 households and 137,255 small
businesses.

The Bank disbursed ₦11.11 billion to power sector players, under the
Nigeria Bulk Electricity Trading Payment Assurance Facility (NBETPAF), bringing
the cumulative disbursements under this facility to ₦1.28 trillion. The sum of ₦12.64

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billion was also released to Distribution Companies (DisCos) under the Nigeria
Electricity Market Stabilisation Facility – Phase 2 (NEMSF-2). The cumulative
disbursement under the NEMSF-2 thus stood at ₦232.93 billion. Both interventions
were designed to improve access to capital and ease the development of
enabling infrastructure in the Nigeria Electricity Supply Industry.

Outlook
The overall medium-term outlook for the global economy remains uncertain as
the war between Russia and Ukraine persists, alongside the ongoing COVID-19
pandemic. The sanctions against Russia are expected to have a considerable
backlash against the global economy as Russia is an interconnected economy
both in the global commodity and financial markets. The extent of the backlash
has, however, not fully crystallized but presents a significant downside risk to the
recovery of the global economy if the crisis is not resolved immediately.
Additionally, the COVID-19 pandemic remains a significant downside risk to
global recovery as the virus continues to mutate into highly infectious strains. This
is imparting a high level of uncertainty on economic agents, thus, creating
inhibitions towards making the required investments to set the recovery on a
sustainable path. As part of the lifting of restrictions associated with the COVID19 pandemic, the strong recovery of aggregate demand has continued to pose
a strong upside risk to inflation, as supply bottlenecks persist. This has been further
aggravated by sanctions imposed on trade with Russia and other blockages
associated with supplies from Ukraine. Consequently, inflation is expected to
remain considerably high in the short term, even as some Advanced Economies
progress with interest rate lift-off. The rise in both corporate and public debt in
the Advanced Economies and Emerging Market and Developing Economies, is
also a major threat to global financial stability as the risk of sustainability is
heightened in the currently tensed global environment. Capital flows are thus,
expected to be restricted as global financial conditions tighten over the short to
medium term.
In the domestic economy, available data on key macroeconomic indicators
suggest the likelihood of subdued output growth for the Nigerian economy for
most of 2022. This is hinged on the dampening impact to the growth of rising
energy prices in the domestic economy; tightening external financial conditions
as some Advanced Economies pursue interest rate lift-off; as well as the
persistence of legacy security and infrastructural problems. It is, however,
expected that monetary and fiscal stimuli will remain in place to continue to
support the recovery until the downside risks to growth and the upside risks to

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inflation dissipate substantially. Accordingly, the Nigerian economy is forecast
to grow in 2022 by
3.24 per cent (CBN), 4.20 per cent (FGN), and 2.70 per cent (IMF).


The Committee’s Considerations
MPC noted with concern the impact which the global price increase in
petroleum and other products is having practically on all economies. The
Committee further noted that this has resulted in imported inflation on the
Nigerian economy and believes that specific actions need to be taken to
ensure that this trend does not continue given the adverse consequences and
aggressive rising price level could have on the cost of living and purchasing
power of Nigerians.
Before the Russia-Ukraine war, MPC was optimistic that the moderate decline in
inflation was sustainable due to the positive impact of good harvest on price
levels. The MPC worries that, whereas global prices have gone up, this has been
compounded by the shortage of supply of petroleum products. In the short run,
MPC urges NNPC to take urgent steps to ensure an adequate supply of
petroleum products in Nigeria so as to reduce the rate of arbitrary increase in
the price of petroleum products by oil marketers. The Committee noted, with
grave concern, the unprecedented rate of oil theft recorded in recent time,
and its debilitating impact on government revenue and accretion to reserves.
In the medium-term, MPC is hopeful that the proposed take-off of the Dangote
Refinery in the course of the year would help to improve the supply of petroleum
products in Nigeria. MPC also notes that the rising price of diesel is compounded
by the problem of inadequate electricity supply which has adversely impacted
domestic prices. MPC advises the CBN Management and the fiscal authorities
to take specific and urgent actions to avoid many power generating stations
shutdown for turn-around maintenance, resulting in the current unwarranted
shutdown of generating assets.
MPC is relieved that food inflation declined marginally due to good harvest.
Although some scarcity is expected as we approach the planting season, the
Committee is optimistic that with the high level of strategic grain reserves of the
CBN, it is relieved that food prices would remain relatively moderated. MPC
further advised Management to redouble its developmental finance initiatives
aimed at boosting domestic food output which would help in moderating food
inflation going forward, thereby moderating headline inflation.

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The Committee’s Decision
While growth has continued to improve, members noted that inflation was
confronted with upward pressure due to emerging risks within the domestic and
external environment. The MPC, however, noted that the substantial upward
push to price levels continued to be influenced by supply-side factors such as
the scarcity of PMS, persisting insecurity and backlash from the Russia-Ukraine
war. These require a careful and focused policy intervention to address and
resolve. In this light, the MPC, urged the Bank to continue using the tools at its
disposal, while increasing its collaboration with the fiscal authority to ensure that
inflation is adequately reined in and growth is returned to a strong and
sustainable path.
The Committee also encouraged the Bank to continue the use of its intervention
mechanism to deploy funds to output-stimulating and employment-generating
sectors of the economy.
In its consideration as to whether to hold, tighten, or loosen, MPC remained
concerned that the global situation on rising prices may continue in the near
term but may begin to moderate if deliberate and urgent actions are taken by
both the monetary and fiscal authorities to correct the rising inflation. On
another hand, Committee was satisfied that the use of the Bank discretionary
CRR policy should be deployed more aggressively to control the level of money
supply in the economy.
On tightening in order to rein in the rising price level, MPC was of the view that
given the fragile state of the current GDP growth and the potential external and
domestic headwinds from the Russia-Ukraine war, a contractionary policy
stance would stifle the expected investment expansion needed to drive growth
and absorb the shocks in Nigeria.
MPC also feels that not only would tightening reverse the steady improvement
recorded in credit expansion, it is also of the view that tightening would not
necessarily tame the inflation, particularly where the marginal decline is
relatively not yet sustainable.
In the case of whether to loosen, the Committee feels that loosening would
trigger further liquidity surfeit and fuel inflationary pressure as available funds
outstrip the economy’s absorptive capacity. MPC also feels that loosening
would trigger FX demand pressure, as the excess liquidity would exert demand
pressure on the FX market and trigger a naira depreciation which would also
fuel inflation.

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

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
Up to Q4 2021, the global economy remained on a steady path of recovery from
the coronavirus-induced setbacks despite the mutations, especially the Omicron
variant. Most countries had learned growth-friendlier ways of dealing with
resurgence. Thanks to progress with vaccination, responses to Omicron generally
entailed minimal activity restrictions and lockdowns. Trade continued to be robust
and travels were relatively less restricted. Hence, the global economy grew by
about 5.9 per cent in 2021 from a contraction of 3.1 per cent in 2020. Recovery was
powered by robust consumer demand and trade, both underpinned by
unprecedented high levels of policy support and rapid vaccine rollouts. However,
a new threat, the war between Russia and Ukraine, surfaced in Q1, 2022. This war
is currently the most important risk to the short- to medium-term outlook for global
output growth. Its direct consequences including the sanctions imposed on Russia
by NATO are several and potentially disruptive of the recovery process.
Commodity prices have trended faster upwards, with crude oil price remaining
over $100 p/b. Similarly, prices of some agricultural commodities such as wheat,
corn, and sunflower oil, have come under severe pressure. The war has intensified
uncertainty across financial markets globally. Although the IMF, in its January 2022
World Economic Outlook (WEO) update, envisaged a global growth of about 4.4
per cent in 2022, a downward revision appears likely in the next update on account
of increased geo-political uncertainties.
Globally, the negative spillovers from the war are already being felt. Under the
prevailing circumstances of widespread geo-political tensions and the coronavirus
pandemic resurgence in parts of the world, there can be no guarantees that the
global economy will maintain in 2022 the path and speed of recovery in 2021.
Meanwhile, inflation continues to be a key concern for economic policy makers
globally. Commodity prices are rising fast as investors embrace gold, and global
demand for crude oil appears to outstrip supply, owing to the sanctions on Russia.

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Against this background, it is unclear if the drift towards policy normalization and
anti-inflation posturing can be sustained by many central banks.
For the domestic economy, I see complications from the war unfolding in multiple
directions. First, crude oil prices are high and could remain so for some time.
Unfortunately, this is neither translating to more revenues for government nor
increased accretion to the country’s external reserves. Under this condition, the
cost of subsidy on PMS will increase, further limiting the fiscal space for supporting
growth. Other downside risks to growth emanating from the war in Ukraine include
rising gas prices as well as cost of some intermediate goods. Manufacturing and
agriculture could take a hit from these developments.
In view of these prospects, it appears to me that domestic output recovery is
severely threatened. In effect, the CBN cannot at this time relent in supporting
growth using monetary policy and development finance interventions which have
so far proved to be among the economy’s critical safety nets. I voted, therefore,
at the March 2022 meeting of MPC to retain the extant monetary policy setting,
while also urging the Bank to sustain its development finance interventions, to
insulate domestic output and employment from major adverse spillovers from the
war in Ukraine.
The recently released national accounts statistics for Q4 2021 lend enormous
credence to the efficacy of the extant policy strategy of the Bank. Output recovery
continued through Q4 from the near shut-down induced by COVID-19 in 2020. Real
GDP grew by 3.98 per cent (year-on-year) in the quarter, surpassing expectations.
This performance is attributable mainly to sustained policy support. However, oil
GDP remained weak due to production shortfalls. The subsector is yet to reflect the
recovery in oil prices due mainly to a variety of local impediments to production
and theft. This carries important fiscal implication – government is spending more
on subsidy as the cost of imported refined petroleum products has risen
substantially, but revenue from crude oil sales has not really improved. This situation
poses a risk to domestic economic recovery especially as it relates to the
implementation of the Economic Sustainability Plan (ESP).

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Real GDP performance so far has been underpinned by credit expansion and
declining interest rates, both attributable to development financing by the Bank
and the recent monetary policy innovations – Loan-to-Deposit ratio (LDR),
Differentiated Cash Reserve Requirements (DCRR) and Global Standing Instruction
(GSI). The innovations have significantly transformed the credit landscape and
continue to underpin activity rebound in several sectors. Despite the surge in credit,
the banking system fundamentals have remained strong. At end-February, all
major industry soundness indicators suggested resilience. Tier-one capital (the lossabsorbing component of capital) was significantly high as indicated by its
proportion (85.74 per cent); capital adequacy ratio (CAR) remained robust at 14.5
per cent and the ratio of non-performing loans (NPLs) stood below the prudential
limit of 5.0 per cent at 4.8 per cent.
My prognosis of the current geo-political uncertainty is not quite favourable. Even
if the war in Ukraine is short-lived, sanctions will not immediately go away, and so
would be their impact on, and consequences for the domestic economy.
Importantly, two subsectors are likely to be most impacted – manufacturing and
agriculture. Manufacturing, because prices of intermediate imports would remain
elevated due to the disruption in supply. In addition, the sector relies heavily on
energy – diesel and gas – both of which are impacted globally by the war. High
energy costs directly constrain manufacturing. Agriculture could also take a hit as
fertilizers and other inputs are impacted. Russia and Belarus are major players in the
global market for potash, urea, and other chemicals required to produce fertilizers.
Both countries are on the other side of the war. Given these scenarios, both sectors
would require extra policy support to weather the storm ahead.
While acknowledging the challenge posed by inflation as evidenced by the
increase in the core and headline measures of inflation in February 2022, I believe
that the surest way to address this is to increase domestic production and ease the
bottlenecks to free circulation of goods within the country. In this regard, not only
should the flow of credit to the real economy be sustained, government must
continue to tackle the problems of insecurity and infrastructure to reduce

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production and distribution costs. The recently established Infrastructure
Corporation of Nigeria (InfraCorp), a dedicated privately managed infrastructure
vehicle, offers a unique opportunity for addressing the infrastructure deficit.
Governments (State and Federal) can leverage this vehicle, given the constraints
on growing public revenue at the present.
A related policy imperative is the stability of the Naira exchange rate. So far, the
administrative measures by the CBN have helped to calm the market. However, as
real incomes fall abroad due to inflation, remittances could also decline. And so,
those measures including the ‘Naira 4 dollar’ scheme, the deposit money banks’
window for meeting business and personal travel needs, and most recently, the
Bankers Committee’s ‘RT200 FX Programme’, should be sustained.

Overall, I see the need for deeper reflections on the path of monetary policy in
2022 as there might be no easy choices given that risks are spread across both
growth and inflation objectives. The extant approach by the Bank which seeks to
ensure adequate liquidity in critical sectors has proved to be optimal, even though
further innovations may be needed during the year to limit the impacts of the
unfavourable external conditions. For now, my policy preference remains retention
of all parameters. In effect, I voted to:
1. Retain the MPR at 11.5 per cent.
2. Retain the asymmetric corridor at +100/-700 basis points.
3. Retain the CRR at 27.5 per cent.
4. Retain the Liquidity Ratio at 30 per cent.

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2. ADENIKINJU, ADEOLA FESTUS
International Economic Developments
The global economy outlook has changed since the January 2022 meeting of
the MPC. The Russia Ukraine conflict, which started on February 24, 2022, has
added significantly to the uncertainties and risks around the long-run
emergence of the global economy from the COVID-19 pandemic. The two
countries, Russia and Ukraine are major suppliers of energy and agricultural
commodities to not only Europe but the global economy. Since the onset of the
war on February 24, energy and agricultural prices have risen by at least 30% on
average: crude oil rose by 32%, wheat by 55%, corn by 21%, and sunflower oil
by 30%. The sanctions imposed on Russia by the West have also compounded
the supply and logistics problems affecting global trade. It also has the potential
of raising interest rates on international capital flows.

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The implications of these developments include the following: global output is
expected to moderate to 4.4% in 2022 from 5.9% in 2021, global inflation is
expected to remain elevated in the short to medium term, and developing
countries will also likely face food and energy crises. Inflation in advanced
economies is already at record levels, averaging 3.9% in 2022, higher than the
2% inflation target. The crisis is also expected to negatively impact capital flows
to developing economies, and slow down global trade recovery. Major
financial market indices such as the S&P 500 and FTSE 100 took a major hit as
investors migrated to safer assets including gold and silver. This has increased
currencies volatility against the dollar.
Oil prices soared because of the crisis, amidst tight supply shocks. OPEC basket
oil climbed to US$104/b as at 16th of March. Crude oil prices in 2022 are
estimated to average US$135/b as against U$98/b. The United States and other
Advanced Economies have been forced to release millions of barrels of oil from
their strategic reserves in coordinated response to calm the oil market.
However, this may only provide a short reprieve to the market in the long term.
Nigeria like many other developing countries is already feeling the impacts of
the Russia-Ukraine crisis. This is manifesting in increase in domestic food prices,
rising energy costs, and higher budget deficits. Hopefully, the newly opened
Dangote Fertilizer company will mitigate the impact of the crisis on fertilizer
prices. Ukraine is one of the largest exporters of urea and potash, major
ingredients to produce fertilizer.
Domestic Economic Developments
Bank Staff report on Economic Developments and Outlook showed that real
output grew by 3.98% in 2021Q4 compared with 4.03% in2021Q3. The growth
was largely driven by the non-oil sector. The oil sector contracted for the 7th
consecutive quarter. Headline inflation also rose to 15.70% in February 2022 from
15.60% in January 2022, driven by increase in core inflation. The manufacturing
PMI and non-manufacturing PMI slowed in January 2022 relative to the previous
month. This is a reflection of weaker sentiments and a worsening employment

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outlook. The gross external reserves decreased marginally by 0.46% to
US$39.44billion as of March 17, 2022, from US$39.62 billion by end-February 2022,
due to increased third-party payments and interventions. This decrease
occurred at the back of over 30% increase in the world price of crude oil.
Index of electricity production, electricity generation and electricity
consumption rose in February 2022 relative to January 2022. The increase in
generation and consumption was attributed to the continuous metering of
households under the National Mass Metering Programme, and the upgrade
and maintenance of various transmission and distribution networks across the
country.
The monetary base grew by 0.20% by end-February 2022, Monetary base stood
at N13,635.91 billion at end of February, but 9.66% below the 2022 provisional
benchmark of N15,094,69 billion. Net claims on government grew by 11.92% at
end-February 2022. M3 growth in February was 2.12% annualized 12.72% was
below the 2022 benchmarks of 15.21%. Domestic claims rose by 6.82% in
February or annualized 40.92% against the provisional benchmark of 16.23%.
Claims of other sectors annualized 29.28% against 18.05%, benchmark, and on
the central government by annualized 71,52% as against 11.42%.
The OBB rate rose from 6.10% on 22-February to 11.49% on 18 March 2022,
reflecting tight liquidity in the banking system. Trade balance and current
account balance also showed improvements following the sustained rise in
commodity prices, particularly crude oil, in the international market.
Government fiscal operation showed that fiscal deficit stood at N7.6 trillion from
January to December 2021. The deficit was higher than FGN’s retained revenue
which stood at N4.8 trillion. The deficit was 57.3% above budget. Government
expenditure rose from N951.14 billion in January 2022 to N952.60 billion in
February 2022. However, FG retained revenue declined from N405.51 billion to
N371.67 billion over the same period, leading to increase in budget deficit and
public debt. The decline in revenue was attributed to decline in collections from
PPT& Royalties and corporate taxes.

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The Report on Banking System Stability showed that the banking system remains
robust, stable, and resilient. All metrics of Financial System Stability including
Capital Adequacy Ratio, Non-performing loans ratio, liquidity ratio, and returns
on assets and returns on equity are in line with the prudential guidelines.
Moreover, measures of bank size, gross assets, gross deposits, and gross credit
continued their upward trajectories. There is rising costs of credit as interest
bands narrowed. The Other Financial Institutions continue to provide significant
amount of credit to households and small enterprises in the economy.
My Concern
Bank Staff forecast that real GDP will rise by 3.24% in 2022 at an assumed oil price
of US$80/b. The World Bank and the IMF projected 2.50% and 2.70% respectively.
The Federal Ministry of Finance, Budget and National Planning forecasted
growth of 4.20% for 2022. Due to the ongoing Russia Ukraine crisis, the Bank Staff
forecast that inflation will continue to rise in the medium term to 16.84% by May
2022.
There is no doubt that current recovery is fragile. Projected real GDP growth is
not strong enough to support poverty reduction and reduce unemployment
rates in the economy. The uncertainty and downside risks to the economy are
also quite high. This is compounded by the huge insecurity across the country.
However, I do not believe that we can totally take our eyes away from the rising
and persistent inflation build-up in the economy. While I agree that the current
inflation is largely supply-driven, we need to deal with inflation expectations,
which if not properly anchored, will compromise long-term investment and
economic growth. Headline Inflation has risen consistently since November
2021. The February inflation figure is the fourth straight month of rise in the
average price level. There is a build-up of inflation expectations in the
economy. This will be compounded by the increased spending associated with
electioneering in Nigeria. The CBN, being the only institution vested with the
responsibility to maintain price stability, must address this inflationary tendency.

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The global economy is also changing rapidly, and countries are positioning
themselves for the emerging new order. Since 2020, over 40% of central banks
across the world have increased their policy rates. Some of our comparator
countries in Africa have also increased their policy rates. This will impact on
relative yields between Nigeria and those countries and affect portfolio
investment flows. The speed of normalisations indicated by the Federal Reserves
and other central banks in advanced economies also means that we cannot
realistically keep interest rates at the present level in the face of rising domestic
prices.
I am also concerned about the rising share of government in total credit to the
domestic economy. Credit to the government in February when annualized is
far above the provisional benchmark for 2022. The rise in public debt is a
constraint on future income and economic growth. I believe that we must signal
to the government the costs of deficit financing and continue to prod the
government to explore alternative financing mechanisms for infrastructural
spending.
The transmission of the imported food prices to Nigeria confirmed the
importance of maintaining food security in the country. CBN interventions in
critical agricultural products like wheat should be sustained. Food security
should be a national priority with partnerships of researchers, government, and
the private sector working together to deepen the agriculture value chain.
More farmers should be able to access the intervention funds across the
country. Intervention should extend to the procurement of inputs, storage, and
protection of farmers against price volatility.
As I indicated in my January 2022 Statement, the costs of fuel subsidy and its
general impacts on investments in the downstream petroleum sector need to
be addressed. Also is the massive loss of oil output to theft, vandalism, and other
criminality that has threatened fiscal flows from crude oil, as well as investment
in onshore production. This is not just going to affect current revenue from oil,

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but if not urgently addressed would have massive impacts on investments and
future revenue flow from oil.
My Vote
As much as I am concerned about the current fragility of our growth recovery
as well as the underlying driver of current inflation, there is a need for the Bank
to be prepared to anchor inflation expectations in the economy. The Bank must
signal a change in the current direction of monetary policy if the current
inflation trend endures. Hence, I cast my vote to increase MPR by 25 basis points,
and retain all other monetary parameters at their extant values:
1) Raise MPR by 25 basis points, from 11.5% to 11.75%
2) Retain CRR at 27.5%
3) Retain LR at 30%
4) Maintain an asymmetry corridor around the MPR at +100/-700 basis points..

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3. AHMAD, AISHAH N.
The March 2022 Monetary Policy Committee meeting held within an
environment of elevated global risks given heightened geopolitical tensions
from
Russia’s
invasion
of
Ukraine,
amidst
persisting
macroeconomic
uncertainties associated with the COVID-19 pandemic.
Sanctions against Russia as a result is expected to have considerable impact on
global recovery in view of the strategic role of both countries in the global
commodity and financial markets. While some effects of the conflict may not
fully materialize in the near term, the resulting spike in food and energy prices is
expected to worsen global inflation conditions. Policy makers are, thus, faced
with striking the delicate balance between containing inflation and supporting
economic recovery, which remains a difficult policy option across jurisdictions.
This dilemma, combined with legacy trade and supply chain disruptions and
rising debt levels, exerts further pressure on global economic prospects. Thus,
earlier output growth projections of 4.4 and 3.8 per cent for 2022 and 2023
respectively, by the International Monetary Fund (IMF), may be derailed.
Notwithstanding persistent global risks, the domestic economy continues on its
path of recovery. According to the National Bureau of Statistics (NBS), Real
Gross Domestic Product (GDP) grew by 3.98 per cent (year-on-year) in the
fourth quarter (Q4) of 2021, compared with 4.03 per cent in the third quarter
(Q3) of 2021 and 0.11 per cent in the corresponding period of 2020. This
represents the fifth consecutive quarter of real output expansion, following the
exit from recession in Q4 of 2020.

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The positive performance was driven largely by growth in the non-oil sector by
12.36 per cent in Q4 2021 from 10.99 per cent in Q3 2021. Quarrying,
transportation & storage; education; financial & insurance services; information
& communication; as well as a steady rebound in manufacturing and mining
activities were key to the growth of the non-oil sector.
Although the Manufacturing Purchasing Managers’ Index (PMI), remained
above the 50-index points benchmark in February 2022, it moderated slightly to
50.1 index points from 51.4 index points in January 2022 indicating the need for
sustained stimulus to strengthen the positive growth trajectory considering
persisting headwinds.
Indeed, the Bank’s development finance interventions have combined well
with the Federal Government of Nigeria (FGN) growth initiatives under the Fiscal
Sustainability Plan to revive and sustain domestic economic activity.
Headline inflation (year-on-year) rose by 10 basis points to 15.70 per cent in
February 2022 from 15.60 per cent in the previous month, driven largely by a rise
in the core component to 14.01 per cent in February 2022 from 13.87 per cent
in January 2022, while food prices moderated marginally. The uptick in core
inflation was mostly due to rising energy prices as a result of the recent scarcity
of Premium Motor Spirit (PMS), rise in the cost of Automotive Gas Oil (AGO), and
hike in electricity tariff.
While the recent spike in domestic prices may be transitory, it is prudent to take
forward-looking policy decisions to mitigate unforeseen adverse price
developments and manage inflation expectations. Sustained interventions by
the Central Bank of Nigeria (CBN) to improve food supply alongside fiscal efforts
to contain long standing structural constraints are important considerations in
that regard.
Of note also is the sustained growth in broad money supply (M3), to 2.12 per
cent in February 2022, compared with 1.74 per cent in January 2022, a
development that threatens the already sticky price movement, requiring

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prompt action to forestall the derailment of macroeconomic gains recorded
thus far.
Furthermore, the monthly weighted average Open Buyback (OBB) and Interbank Call rates decreased to 5.81 and 9.30 per cent in February 2022 from 6.00
and 16.00 per cent in January 2022, respectively. The decrease in the rates
signifies loose liquidity conditions in the banking system, which could worsen
inflation conditions if unchecked. It would also be important to sustain the
liquidity management actions of the Bank, which have helped prevent
overheating of the economy following increased liquidity injections in response
to spillover effects of the pandemic.
The recently launched "Race to US$200 billion in FX Repatriation" policy of the
CBN designed to boost non-oil export receipts is expected to improve foreign
exchange supply and strengthen relative exchange rate stability. This policy
complements fiscal sector initiatives to diversify the economy and enhances
the renewed focus on improving domestic economic productivity.
The financial system remains resilient and continues to provide significant
support for the domestic recovery. Data provided by Bank staff showed stability
in broad financial soundness indicators and sustained improvement in asset
quality, alongside growing credit to the private sector. Capital adequacy as at
February 2022 was robust at 14.40 per cent. Industry liquidity was also strong at
43.5 per cent over the same period while the non-performing loans ratio
declined further to 4.8 per cent in February 2022, from 4.94 per cent in
December 2021. This reflects the case-by-case review of regulatory
forbearance, effects of the Global Standing Instruction (GSI) policy, and sound
industry risk management practices.
Notably, total assets rose to N62.01trillion in February 2022 from N52.32 trillion in
February 2021, while total deposits rose to N39.38trillion from N32.69trillion over
the same period. Total credit also increased by N4.13 trillion between endFebruary 2021 and end-February 2022 with significant growth in credit to

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manufacturing, general commerce, and oil & gas sectors. The continued
growth in credit particularly to output enhancing sectors is expected to further
support economic recovery. However, sustained regulatory vigilance is required
to mitigate any potential crystallization of credit risk in the financial system from
lingering macroeconomic risks.
Policy Decision
In summary, spillover effects from the Russia – Ukraine conflict, in the face of
lingering risks from the COVID-19 pandemic, present fresh threats to global
economic recovery. On the domestic front, significant monetary and fiscal
stimulus have helped output maintain its recovery, although age-long structural
challenges continue to burden domestic prices. In view of the slow growth
environment, it is obvious that output considerations are germane at this time;
however, it may be more important to contain rising inflation given the growth
retarding level of current price developments.
The Committee, therefore, has a window to use the tools at its disposal to fight
inflation promptly while keeping an eye on output growth. A marginal interest
rate hike, thus, signals the need to curb inflation and could tangentially
moderate foreign exchange pressures in the medium term by attracting foreign
investors. While I acknowledge that a rate hike could potentially have a
negative effect on real sector lending prices, this is mitigated by the Bank’s
interventions which has broadened affordable access to loans. I am, therefore,
convinced that sustaining these interventions, alongside a marginal increase in
the monetary policy rate to combat inflation, would combine well to strengthen
the recovery process.
Thus, I vote to raise the Monetary Policy Rate by 25 basis points from 11.50 per cent
to 11.75 per cent and retain all other parameters at the existing levels - an
asymmetric corridor of +100 and -700 basis points around the MPR; CRR at 27.5 per
cent, and Liquidity Ratio at 30 per cent.

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4. ALIYU, AHMED
INTERNATIONAL AND DOMESTIC ECONOMIC DEVELOPMENTS
The March 2022 MPC meeting took place in the context of emerging shocks to
the global economy fuelled by the Russian – Ukraine war. While the COVID-19

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pandemic seemed to be abating, the nascent recovery of the global economy
is confronted with new risks, as a result of the conflict. Due to the strategic
importance of the two countries in world trade, the war is expected to have a
significant impact on global supply chain, following the myriad of trade and
financial services sanctions against Russia.
The Russian – Ukraine crisis is expected to lower global growth and raise inflation
in the short term, through higher energy and commodity prices, lower
confidence, and disruption to international trade. Although global growth is
estimated to remain in positive territory, the IMF has hinted at cutting its next
forecast to account for the economic consequences of the conflict. Currently,
global growth is predicted to decelerate to 4.4 percent in 2022 from 5.9 percent
in 2021. Also, growth in the Advanced Economies is projected to moderate to
3.9 percent in 2022 from 5.0 percent in 2021and further to 2.6 percent in 2023,
while Emerging Markets and Developing Economies (EMDEs) are expected to
grow by 4.8 percent in 2022 from 6.5 percent in 2021and down to 4.7 percent in
2023.
Consequently, global inflation surged with nearly all agricultural commodity
price levels rising. Inflation is expected to accelerate in many countries in the
short to medium term; much of it via import pass-through to domestic prices
following the sanctions on Russia and escalating supply chain bottlenecks. The
conflict has already affected food prices in the Middle East and North Africa as
many countries in the region depend on both countries for wheat and other
grains. In Egypt, for instance, inflation increased to 8.8 percent in February 2022
from 7.3 percent in January as a result of the rise in the cost of wheat.
Current data show elevated rates of inflation (above the 2.0 percent long-run
targets) in the Advanced Economies, with the US and Eurozone inflation rates
at 7.9 and 5.9 percent, respectively, in February 2022, while the UK inflation rate
stood at 5.5 percent in January 2022. On average, inflation in Advanced
Economies is forecast to rise to 3.9 percent in 2022 from 3.1 percent in 2021,

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while for EMDEs inflation is projected to increase to 5.9 percent in 2022 from 5.7
percent in 2021 (January 2022, World Economic Outlook).
On global trade, the dominant role Russia and Ukraine play in the world’s supply
of oil and gas, wheat, corn, sunflower oil, fertilizers, and their related inputs, as
well as metals, amongst others, would significantly influence macroeconomic
outcomes in 2022. A protracted war in Ukraine could impact the production of
grains and reduce food supplies to Europe, Africa and Asia. Already, both
countries which supply about 30 percent of the world’s wheat, have declared
to suspend export of the commodity to strengthen their own food security.
As a result, wheat prices, month-on-month, increased by 4.35 percent in
February 2022, while corn prices rose by 5.78 percent in the same period. Crude
oil spot prices are expected to average US$135 per barrel in 2022, revised from
US$98 per barrel. Accordingly, global trade which recovered strongly in 2021,
reaching a record level of about US$28.5 trillion, is expected to moderate in
2022.
Global financial conditions are anticipated to tighten in the coming months, as
higher inflation is likely to speed up the normalization of interest rates and
quantitative tightening by most Advanced Economies.
THE DOMESTIC ECONOMY
Economic performance remained strong in Q4 2021 as real GDP year-on-year
grew by 3.98 percent in Q4 2021 (above staff forecast of 3.1 percent growth)
compared with a growth of 4.03 percent in Q3 2021. Growth in Q4 2021 was
driven largely by the strong performance of the non-oil sector, following the
contributions of Services (55.11 percent), Agriculture (26.84 percent), and
Industry (18.05 percent) to real GDP growth. Quarter-on-quarter, the economy
grew by 9.63 percent in Q4 2021.
Market sentiments dipped slightly in the review period, with the marginal decline
of the Manufacturing Purchasing Managers Index (PMI) to 50.1 points in
February 2022, relative to 51.4 points in the preceding month, although the

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index was marginally above the 50 points benchmark. The non-manufacturing
PMI also moderated to 49.0 points in February 2022 compared with 49.1 points
in January.
Recent price developments show an increase in headline inflation to 15.70
percent year-on-year in February 2022 from 15.60 percent in the previous
month. The increase in inflation was primarily due to the rise in energy prices as
reflected by the increase in the core index to 14.01 percent in February, from
13.87 percent in January 2022. Food inflation, however, declined marginally to
17.11 percent in February from 17.13 in January 2022, largely on account of
sustained interventions in the agricultural sector and the resulting improvement
in food supply.
Monetary aggregates show that Broad Money (M3) grew by 2.12 percent or
13.09 percentage points below the 2022 provisional benchmark of 15.21
percent. The development was driven by the rise in Net Domestic Assets (claims
on Government, Other Sectors, and Other Items). On money market
developments, the average Open Buy Back (OBB) rate, month-on-month,
declined to 5.81 percent (-270bps) in February 2022, due to favourable liquidity
conditions in the banking system.
The performance of key Financial Soundness Indicators (FSIs) in the review
period, points to a strong, safe and sound banking system. The industry Capital
Adequacy Ratio (CAR) at 14.42 percent at end-February 2022 remained above
the 10.0 percent regulatory benchmark. Non-Performing Loans (NPLs) improved
further to 4.48 percent in February 2022 from 4.94 percent at end-December
2021, and better than the 6.38 percent recorded a year earlier on account of
sound macro-prudential practices. Industry Total Credit improved by 19.53
percent, year-on-year, due largely to increased industry funding base and
compliance with the Loans to Deposit Ratio (LDR) directive.
On the external sector front, gross external reserves increased marginally by 0.76
percent to US$39.62 billion in February 2022, from US$39.32 billion in January
2022. The reserves cover 7.41 months of import of goods and services and 11.47

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months of import of goods, only. Activity in reserves was mainly influenced by
FX swaps and crude oil-related taxes and penalties, following the recently rising
oil prices. Trade balance improved to US$0.78 billion in January 2022 from
US$0.20 billion in December 2021, due to increased export receipts following the
sustained rise in commodity prices, particularly crude oil prices.
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. The increase in inflation from 15.60 percent
in January to 15.70 percent in February 2022 is indeed worrisome. Following the
December 2021 uptick which moderated in January, inflation appears to be
persistent in view of the February 2022 outcome.
Under the circumstances, a tightening policy stance seems to be appropriate
to address the current inflationary pressure. But the factors driving inflation at
this time are more of structural influences and exacerbated by external shocks.
The National Bureau of Statistics inflation report cited the recent scarcity and
increases in the price of refined petroleum products as the major driver of
inflation in February 2022.
Although growth in real GDP has been sustained for five consecutive quarters
since the exit from recession in Q4 2020, the recovery, albeit strong, remains
fragile on account of new headwinds that constitute downside risks to the
indicator. These include pressure points arising from the Russian – Ukraine war as
evidenced in the disruption of the global supply of commodities; the passthrough of rising international prices to domestic inflation, as well as the lingering
global pandemic.
There is a need to calibrate policy responses to achieve an optimum mix of
policies that will address the Bank’s mandate of price stability conducive to
economic growth. I am cautious of the impact of inflation on the economy,
and therefore, remain committed to a declining inflationary trend. I share the
argument that the current inflationary pressure is driven by structural rigidities in

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the economy. Hence, pursuing a tight policy stance could discourage
investment which would be detrimental to growth. Given the temporary
pressure on headline inflation, activities geared at addressing structural factors
causing supply-side shocks and inflation should be the focus of policy.
In the light of these developments, I am of the view that the current pro-growth
policies of the Federal Government should be sustained and enhanced to
ensure adequate domestic production and supplies. This would insulate the
economy from the looming danger of imported inflation and the associated
downside risks to growth arising from the adverse fallouts of the Russian - Ukraine
war.
To lower fiscal burdens, increase accretion to reserves, and ease pressure in the
foreign exchange market; policies and interventions to boost non-oil exports
through incentives for value-added production, concessionary facilities to ramp
up local production of exportable, support for private sector-led initiatives in
new refineries and fertilizer plants, and continuous targeting of genuine
demand for foreign exchange, are expedient and should remain the focus of
policy.
In the light of the foregoing considerations, I voted to maintain the status quo in
all the policy parameters, as follows:

MPR at 11.5 per cent

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

Liquidity ratio at 30.0 per cent

CRR at 27.5 per cent

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5. ASOGWA, ROBERT CHIKWENDU
Background:
Since the last MPC meeting in January 2022, two major issues have reshaped
the global and domestic economic outlook. First, is the resurgence of the highly
transmissible Omicron variant of COVID-19 in some Asian countries since late
January 2022, and the second, is Russia’s unprovoked invasion of Ukraine in late
February. Both of these appear to have introduced new layers of uncertainties

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to the general economic outlook. At the start of 2022, global recovery was fully
underway, albeit with variations across regions. Unfortunately, recent events
have heightened uncertainty and monetary policy choices in some countries
now reflect these new geopolitical risks. Prior to the war, many central banks
have been tightening their monetary policy stance and withdrawing stimulus
packages so as to stem the rising inflationary pressure. With clear predictions on
the near-term consequences of the geopolitical tensions, some central banks
are now inclined toward a more cautious stance in their approach to interest
rate hikes. As such, my personal opinion at this MPC meeting reflects the recent
movement of economic factors at the international and domestic levels
especially an assessment of the durability of sudden growth shocks arising from
these new uncertainties. The detailed considerations are explained below.
Assessment of the Global Economy:
Available information suggests some moderation of economic activities during
this first quarter of 2022, especially in the wake of Russia’s invasion of Ukraine.
International prices of commodities such as crude oil, raw materials, and metals
have risen very significantly. The global financial and capital markets have
increasingly become volatile since February 2022. The disruption of exports from
the Black Sea together with the sanctions on Russia is already affecting the
supply of wheat and other grains, which may further drive up global food prices.
Before the recent crisis, global growth recovery looked good and the 2021
fourth quarter output results for many countries showed positive momentum
despite the risks associated with the COVID-19 pandemic and longer-lasting
inflationary pressures. CBN staff report indicates that in the United States of
America- USA, output grew by 7.0 percent in the fourth quarter of 2021,
compared with 2.3 percent in the third quarter. Similarly, in Japan, output grew
by 1.3 percent in the fourth quarter of 2021, compared with a contraction of 0.7
percent in the previous quarter while in China, output also strengthened by 1.6
percent in the fourth quarter of 2021 compared with 0.7 percent in the third
quarter. In the United Kingdom, however, output growth remained unchanged

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at 1.0 percent in the fourth quarter of 2021, similar to the third quarter results,
while in the Euro Area, the economy surprisingly slowed down in the fourth
quarter of 2021 with a growth of 0.3 percent as compared with 2.3 percent
growth recorded in the third quarter of 2021.
Early January 2022 forecasts by the IMF in its ‘World Economic Outlook’ revised
global output projections for 2022 downwards to 4.4 percent from its earlier
forecast of 4.9 percent, mainly because of the withdrawal of accommodating
monetary policy stances in many countries as well as the prolonged supply
bottlenecks. This IMF projection did not however factor in the ongoing war in
Ukraine which may have altered the global growth outlook for the first quarter
of 2022. There is a widespread belief that global growth is now expected to be
weaker than the predictions in January 2022, owing to export market disruptions
and greater uncertainty amongst firms and households, especially in Europe.
Official output figures for the first quarter of 2022 in many countries are not yet
out, but some high frequency indicators are already pointing toward a slower
pace of growth at the start of 2022. For instance, the global composite
purchasing managers’ index (PMI) slipped to an 18-month low of 51.4 in January
2022 but recovered to 53.4 index points in February 2022 with weakness in both
services and manufacturing sectors. The recovery in the global PMI in February
2022 is however attributed to improvements in household consumption in the
United States and in the Euro Area, but is now expected to moderate in March
2022 due to the ongoing conflict in Europe.
Global inflationary pressures remained high at the start of 2022. Prior to the
recent invasion of Ukraine by Russia, the IMF in its January 2022 ‘World Economic
Update’ had also revised its inflation projections for both advanced, emerging
market and developing economies (EMDEs). The new projection shows that
inflation is expected to reach 3.9 percent in advanced economies and 5.9
percent in Emerging Market and Developing Economies (EMDE) in 2022, up
from the December 2021 earlier forecasts of 1.6 percent and 1.0 percent
respectively. CBN staff report shows that in the USA, year-on-year inflation

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increased to 7.5 percent in January 2022 as compared with 7.0 percent in
December 2021, while in the UK, year-on-year inflation also rose to 5.5 percent
in January as compared with 5.4 in the previous month. In the Euro Area, yearon-year inflation rose to 5.8 percent in February 2022 compared with 5.1
percent in January 2022. In India, year-on-year inflation rose to 6.01 percent in
January 2022, compared with 5.66 percent in the previous month, thus for the
first time breaching the Reserve Bank of India’s long-run inflation target of 2.06.0 percent. Since the invasion of Ukraine, commodity and energy prices have
increased substantially especially as Russia was a significant exporter of gas,
supplying close to 40 percent of gas used in the Euro Area and also the second
largest global crude oil producer. By the 7th of March, the price of Brent crude
oil had reached a day high of 129 dollars per barrel and has hovered around
100 dollars per barrel since then. Similarly, gas spot prices in Europe jumped to
about 240 Euros per MWH before declining to around 115 Euro per MWh by the
third week of March. Global food prices, as measured by the FAO Food Price
Index, rose by around 5 percent in February compared with January 2022 and
are expected to rise further in March.
Global financial and capital markets have recently become volatile because
of the uncertainty associated with the war in Ukraine. Global equity indexes
have fallen since February with corporate bond risk premiums rising. The VIX
Index, a measure of volatility in stock markets, has risen to a one-year high in
February 2022. A recent rush towards safe-haven assets has also driven the price
of gold to astronomical levels. CBN staff report shows that the earlier trend of
exchange rate depreciation against the US dollar observed since the end of
2021 has continued for many countries. For instance, in the UK, the sterling
effective exchange rate had fallen by 1.7 percent between January and
March 2022.
In terms of monetary policy choices, prior to the Russia-Ukraine war, many
central banks have commenced a tightening regime on the back of higher
inflation and higher inflation expectations. Even up to March 2022 amidst the

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tensions, several central banks have continued to tighten policy rates. The Bank
of England increased its rate to 0.75 percent in mid-March 2022 from 0.50
percent in February which is the third recent hike. In the USA, the Federal Open
Market Committee (FOMC) voted in late March to increase the target range
for the federal funds rate by 0.25 percentage points. On the 2nd of March, the
Bank of Canada increased its bank rate to 0.75 percent while the Bank of
Mexico raised its target rate by 50 basis points by mid-March. The European
Central Bank kept interest rates unchanged in early March, but was clear on
discontinuing net asset purchases under the Pandemic Emergency Purchase
Programme (PEPP) at the end of March 2022. Looking forward, we expect that
with the Russia-Ukraine conflict, central banks of many countries will be inclined
to adopt a more cautious stance in their earlier plans for policy rate hikes,
especially with the new uncertainties about the growth outlook in 2022.
Domestic Economic Assessment.
Turning to the domestic trends, I have considered key indicators comprising, the
real sector, the external sector, fiscal and financial sectors as well as the
inflationary outlook.
On the Real sector, growth remains on a recovery path following a strong
performance in the fourth quarter of 2021 as real GDP grew by 3.98 percent
(year-on-year), while on a quarter-on-quarter basis, it grew by 9.63 percent. This
growth performance in 2021 was driven mainly by improvements in the non-oil
sector, especially the services and agricultural sectors on the back of demandeasing measures. Real GDP estimates for the first quarter of 2022 may still take
some time before it is released but on balance, growth is still expected around
the previously forecast range as the impact of the ongoing Russia-Ukraine war
may likely be limited in the first quarter. Available high frequency real sector
indicators for 2022 already point to the direction of growth momentum in the
first quarter of 2022. The manufacturing PMI stayed in the expansion zone in
February 2022 at 50.1 index points, though it moderated from the 52.0 index
points in December 2021 and 51.4 index points in January 2022. Agricultural

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prospects also remain strong in 2022 with estimated larger yields and value for
key commodities. Where the war lasts longer than necessary, there may be
improvements on oil revenue receipts for the country, if the current oil thefts are
addressed and production attains the quota level. However, global supply
chain disruptions as a consequence of the war may threaten the recovery path
of many African countries.
On the external sector, the forecast is that it will remain strong in 2022, given the
current resilience of the Balance of Payments (BOP). CBN staff report shows that
in the third quarter of 2021, the BOP as a percentage of GDP increased
significantly to 4.81 percent from the low level of -2.22 percent of GDP in the
second quarter of 2021. This is attributed to the increase in the current account
balance from a deficit of 2.21 percent of GDP in the first quarter of 2021 to a
surplus of 0.36 and 3.35 percent of GDP in quarter 2 and quarter 3 of 2021
respectively. A low but manageable current account balance was also
obtained in quarter 4 of 2021 on the back of a maintained goods trade surplus.
The value of total imports in quarter 4 of 2021 increased by 11.33 percent
compared to the value recorded in quarter 3, while for exports, the value in
quarter 4 increased by 12.27 percent when compared to the value recorded in
quarter 3 of 2021. A drawback is the capital and financial account which has
not been in a surplus position for a long time now. The financial account
according to the CBN staff report recorded a net borrowing position in the third
quarter of 2021 as compared with a net lending position in the second quarter.
The net inflow of Foreign Direct Investment (FDI) has been very low while there
was a substantial reversal of FPI flows from the country in the fourth quarter of
2021. This poor trend is apparently due to the unconducive domestic investment
climate which appears to be worsening.
Naira exchange rate movements remain under control despite the increasing
global financial market uncertainty since the start of the Russia- Ukraine war.
The Central Bank of Nigeria’s managed-float regime through interventions in
recognized windows has been able to contain excessive exchange rate

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volatility. Although there was a slight month-on-month depreciation of 1.21
percent in the exchange rate between January and February 2022, it is still
comparatively less than the currency depreciation experienced in other
developing countries such as Ghana, Kenya, India, Philippines within the same
period. What is important in the coming months is for the Bank to further
strengthen exchange rate stabilisation in line with market mechanisms.
The gross external reserves increased by 0.76 percent between End-January
2022 and End-February 2022. This marginal increase looks low given the
skyrocketing international crude oil prices, but is explained by the large oil thefts
in the Niger Delta Region which has diminished the possible benefits to the
country as production level has dropped consistently. However, the current
level of reserves is still adequate to shield the economy against external
vulnerabilities.
On the fiscal sector, the escalating deficit projection in the first quarter of 2022
is already taking the same shape as the precarious situation witnessed in 2021.
Available data show that the Federal Account Allocation Committee (FAAC)
distribution for February 2022 represents a decline of 10.25 and 9.98 percent in
total amount disbursed, compared with the corresponding months of 2021 and
2022. This early warning trend indicates that unless there are strengthened tax
collection efforts and/or targeted expenditure realignments, the budget deficit
levels in 2022 will surpass the 57.3 percent recorded in 2021. Already, Nigeria is
being mentioned as one of the countries that may likely move into debt distress
soon, given the staggering 92.6 billion dollars, public debt stock as at the end
of 2021.
The financial sector remains strong similar to the position at the last MPC meeting
especially looking at the banking and capital market developments. The
banking sector appears sound and resilient with a considerably high Capital
Adequacy Ratio (CAR) and Liquidity Ratio in February 2022, in line with
prudential requirements. With a persistently lowering non-performing loan ratio
(NPL) since 2021 despite the shocks caused by the COVID-19 pandemic, the

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asset quality of the banking system is now one of the strongest in Sub-Sahara
Africa. Bank intermediation continued to improve in February 2022 with industry
total credit increasing from 24.6 trillion Naira in January 2022 to 25.25 trillion Naira
in February 2022. The extension of the moratoria on bank loans up to the middle
of 2022 as part of the COVID-19 relief measures continues to alleviate the
burden on the borrowers impacted severely by the pandemic.
The equity market is also good, similar to the position at the last MPC meeting
with market capitalization and the All Share Index increasing substantially in
early March 2022 as compared with the levels in January 2022. For the
monetary conditions, the current levels indicate a tighter space as broad
money (M3) grew by only 1.7 percent in January 2022 which is even below the
provisional benchmark for 2022 as compared with the growth of 12.63 percent
recorded in December 2021. This recent low level of monetary growth may also
be reflective of the current state of low household and business demand.
The domestic inflation however gathered momentum in February 2022 as
headline inflation rose to 15.70 percent which was a slight increase from the
15.60 percent recorded in January 2022. While the food inflation component
reduced marginally during this period, the core inflation component increased
to 14.01 percent in February from 13.87 percent recorded in January 2022 and
this upward pressure stems from high fuel prices, particularly PMS and AGO. On
a month-on-month basis, food inflation however increased marginally in
February. For now, the inflationary pressures continue to be influenced more by
supply-side disturbances rather than demand-side pressures. We expect
inflation in 2022 to remain fairly under control if the supply distortions are
addressed but there are still several risks to the inflation outlook that requires
policy vigilance, including on the domestic side; the rising cases of terrorism and
banditry, and on the international side, the global supply chain disruptions.

Policy Decision:

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My policy decision is based on the above assessment of international and
domestic developments that are likely to affect growth and inflation outlook in
2022. Thus, weighing the downside risk to the domestic growth recovery and the
upside risk to the inflation outlook over the short to medium term, I believe that
a continuation of the ongoing accommodative stance by the Central Bank is
the best option for now. I will therefore vote to:
Retain the MPR at 11.5 %
Retain the CRR at 27.5%
Retain the Asymmetric Corridor at +100/-700 basis points
Retain the Liquidity Ratio at 30.0%.

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6. OBADAN, MIKE IDIAHI
INTRODUCTION
Until the invasion of Ukraine by Russia on 24th February, 2022 and the ensuing
war, the major challenges facing the global economy were the supply
bottlenecks that accompanied the covid-19 containment measures and the
significant rise in inflation. The latter was driven by rising aggregate demand,
supply chain disruptions and the huge fiscal and monetary injections by various
countries aimed at dealing with the debilitating effects of covid-19, particularly
the recession which many economies had to grapple with. But then, most of
the Advanced Countries were planning to or had embarked upon combating
the inflation by normalising their monetary policies. For example, the Bank of
England, on 10th February, 2022, raised its policy rate by 25 basis points to 0.5
percent from 0.25 percent, while the United States Federal Reserve Bank (FED),
on 14th March, 2022, implemented its long-awaited decision by raising its policy
rate by 25 basis points to 0.25 – 0.5 percent to stem the rising inflation and
improve labour market conditions. In addition, the Fed is expected to
completely taper its US$120 billion monthly asset purchase by the end of March.
Most of the emerging markets and developing economies (EMDEs) were also
shifting towards tightening monetary policy in response to rising inflation.
Examples are South Africa, Russia, and Ghana in light of rising inflation and
anticipated rising capital outflows associated with US monetary policy
normalisation. Then, global economic recovery was gaining momentum with
notable improvements in growth and growth projections, Global Purchasing
Managers’ Index and manufacturing. Now, global economic recovery is being
dampened by two developments: lingering covid-19 pandemic although
many countries have begun to relax restrictions on economic activities and
travel, and the Russian-Ukraine war with the associated escalating supply chain
disruptions.
INTENSIFICATION OF GLOBAL UNCERTAINTIES AND VULNERABILITIES

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As a result of the Russian-Ukraine war, greater uncertainties have enveloped the
global economy. The war has intensified geopolitical and economic
uncertainties in the midst of sanctions imposed on Russia by the Western
countries such as the US, UK, and the European Union member states. The
challenge to the global economy has arisen through the channels of upward
pressure on extant high levels of inflation, negative impact on growth, high
energy prices, reversal of capital flows to EMDEs, and accentuation of the
impact of covid-19.
Global growth.
Uncertainties surround the Russia-Ukraine war and its ramifications to the extent
that there are speculations that it could result in recession in some countries.
Even before the outbreak of the war, the International Monetary Fund (IMF), in
its January 2022 update of the World Economic Outlook, had projected a
moderation of global output growth from 5.9 percent in 2021 to 4.4 percent in
2022 and 3.8 per cent in 2023. The war and sanctions are expected to result in
huge global losses as both Russia and Ukraine are major players in the global
supply chain. Also, there are expectations of a backlash of the sanctions on
several economies as Russia is a key player in the financial and commodities
market. The headwinds to recovery associated with the war include: rising
energy prices, persisting supply bottlenecks, commodity price shocks and rising
global inflation amid strong demand. With the war, the covid-19 pandemic
appears to have taken a back sit as the full focus of global policy makers turned
to the war, sanctions and their backlash as well as the medium to long-term
impact of the war. However, the impact of the pandemic continues to pose a
significant headwind to full economic recovery.
Global inflation
In 2021, inflation rose significantly in several countries and it was initially thought
to be transient. But this has turned out not to be so. The estimated inflation for
the Advanced Economies (AEs) and EMDEs in 2021 were 3.1 and 5.7 percent,
respectively, compared with 0.7 and 5.1 percent in 2020, for the two groups of

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countries, respectively. As a result of the ongoing war, global inflation is
projected to remain elevated in the near-to-medium term in response to
soaring energy costs, labour market shortages, strong aggregate demand and
supply disruptions. Prices of commodities and energy respond to increased
disruptions to the global supply chain, driven by the sanctions imposed on Russia
and the expected backlash on the global economy.
Global trade and markets
Global trade witnessed strong recovery in 2021 reaching a record level of about
US$28.5 billion. However, the recovery of trade in goods and services is
expected to moderate in 2022 as inflation persists in the advanced economies,
alongside the war between Russia and Ukraine. A major headwind to global
trade is the worsening supply bottleneck in the global market. Fragile and
sensitive supply chains under covid-19 are now facing new challenges in the
aftermath of Russia’s invasion of Ukraine. The prospects for the continued
recovery of global trade may be weakened by the impact of the sanctions on
Russia and the expected backlash on the global economy.
Also, renewed uncertainties have hit global financial markets, causing investors
to step back once again and seek refuge in gold and other precious metals.
Global financial markets are now facing turmoil and renewed uncertainty due
to the combined impact of the lingering covid-19 pandemic and the backlash
from the sanctions imposed on Russia.
Crude oil prices
After a gradual and continued rally in the wake of the recovery of global
aggregate demand, post-lockdown, oil prices shot up sharply in the last week
of February up to the first week of March 2022 as hostilities between Russia and
Ukraine escalated. As international sanctions built up against Russia (a major oil
exporter) and its exports, the ensuing supply shortage has pushed oil prices well
above the US$100 per barrel mark. As at 18th March, 2022, crude oil prices were
as follows: OPEC basket: US$ 104.96 per barrel; Bonny Light: US$109.18 per barrel;

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UK Brent: US$107.93 per barrel. Indeed, oil price reached US$140.00 per barrel
on 7th March, 2022 and with expectations of hitting US$200.00 per barrel in the
short to medium term. Crude oil spot prices are expected to average US$135.00
per barrel in 2022.
Global capital flows
There has been a slowdown in foreign portfolio inflows into emerging markets.
In February 2022, such inflows stood at US$17.6 billion compared with US$66.4
billion in February 2021, the highest since December 2020. The risk factors
include increased uncertainty surrounding the inflation outlook in the
Advanced Economies, uncertainty over tapering plans by the US Fed, the
regulatory developments in China and its real estate market related systemic
risk, and uncertainty regarding the Russia-Ukraine war and the resulting
sanctions imposed on Russia. These factors have weighed down investor
sentiment.


Monetary policy normalisation
As was mentioned earlier, some central banks of the Advanced Countries, in
particular, are at one stage or the other of their monetary policy normalisation.
However, the Russia-Ukraine conflict poses a huge dilemma for the central
banks in the Advanced Economies. There is uncertainty as to whether or not
these banks will postpone, progress with or adjust the normalisation plans in view
of the possible negative impact of the Russia-Ukraine war on global recovery
and, perhaps, even triggering a recession. There is the fear that in the event of
another recession, governments and markets will be largely exposed to sizeable
vulnerabilities associated with the huge build-up of both private and public
debt which may, consequently, trigger another financial crisis. EMDEs are very
likely to be hurt by the commencement of monetary policy normalisation as

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capital outflows are exacerbated and consequently exerting further upward
pressure on exchange rates.
IMPLICATIONS OF THE GLOBAL DEVELOPMENTS FOR NIGERIA
As outlined above, the global economy is currently grappling with several
challenges including the lingering covid-19 pandemic, rising inflation and rising
commodity prices, the impact of Russia-Ukraine war and the backlash from
sanctions on Russia, monetary policy normalisation, among others. These have
implications for the different economies in varying degrees. As a highly
globalised economy, the Nigerian economy is vulnerable to shocks from global
commodity and financial markets and is at present at the receiving end of most
of the implications of negative exogenous shocks.
Rising crude oil and gas prices in the world market. This would, under normal
circumstances, be good news to Nigeria, a country that is well-endowed
with oil and gas resources, to take advantage of the rising oil and energy
prices to earn more oil revenue and boost foreign exchange reserves. But
the country has not been able to benefit from the high crude oil prices
because of challenges relating to oil theft, pipeline vandalisation and
attacks, weak investments in the sector/divestments by some major oil
companies. Crude oil production reduced from 2.07 mbpd in quarter 1, 2020
to 1.61 mbpd in quarter 2, 2021. Reports even indicated further decline to
1.27 mbpd in August. Current data indicate that Nigeria’s oil production
dropped in February 2022 to an average of 1.25 mbpd from 1.39 mbpd in
January. This low level of output with export at about 1.0 mbpd partly
explains why the sharp increase in oil price has not impacted much on
government revenue or foreign reserves accretion. The other factor that has
continued to limit the impact of high oil prices is the continued heavy
importation of refined petroleum products for nearly all the domestic
consumption needs, Nigeria being a net importer of refined petroleum
products. With rising crude oil prices, the cost of importing refined petroleum
products has risen significantly implying higher subsidy payments and
increased fiscal deficits and also impacting negatively on net accretion to
reserves.
The Russia – Ukraine war has further worsened global inflation arising from
supply shortages and bottlenecks. Nigeria is an import-dependent country,
and inflation has been trending upwards amongst its major trading partners

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and having exchange rate pass-through effects on domestic prices in the
country, for example, of imported wheat and other agricultural
commodities, refined petroleum products and natural gas, fertiliser,
imported inputs, etc. Thus, rising commodity prices abroad, especially in the
country’s trading partners, increase the risk of higher domestic prices
through imports; increased import bills have attendant implications for the
depletion of external reserves and weakening of the naira exchange rate.
Monetary policy normalisation. Before the Russia – Ukraine war, the issue of
monetary policy normalisation by the AEs to tame the rising inflation had
been on the front burner. It is not clear if the pace of normalisation will
reduce with the present supply shortages occasioned by the war. But if the
pace continues as had been planned, Nigeria will be negatively impacted,
against the backdrop of its weak macroeconomic fundamentals, through
capital flows reversal and associated heightened pressure on external
reserves and exchange rate. A depreciating naira could magnify the
exchange rate pass-through to inflation. Also, the country’s cost of new
borrowings may increase as interest rates rise due to monetary policy
normalisation. This would constrain the fiscal space and perhaps also affect
credit rating of the country. However, the country could benefit from interest
rate hikes in the AEs through higher returns on foreign currency
denominated investments abroad.
BASIS FOR OPINION
Before the Russia – Ukraine war, economic recovery was gaining momentum in
the country. Nigeria’s real GDP grew by 3.98 percent (year-on-year) in Q4-2021
revealing a sustained recovery in the domestic economy for the fifth
consecutive quarter. The average growth rate for 2021 was 3.4 percent. On a
quarter-on-quarter basis, real GDP grew by 9.63 percent, a slightly moderate
growth when compared to 11.07 percent growth recorded in the previous
quarter. Nevertheless, although the output growth figures signpost a sustained
economic recovery, the growth is still low, fragile and sluggish against the
backdrop of high rate of unemployment and poverty. Importantly, besides the
shock and headwinds posed by the Russian-Ukraine war and lingering covid-19
pandemic, the Nigerian economy faces acute energy shortages, legacy
structural bottlenecks and security challenges that pose significant downside
risks to the economy's full recovery to its long-run desired growth path.

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Also, before the Russia – Ukraine war, there was optimism that inflation, after the
spike last December which was considered transient, would decelerate in the
short-term. And headline inflation actually declined in January 2022 to 15.60
percent from 15.63 percent last December. Suddenly, the Russia – Ukraine war
has disrupted the positive inflation outlook and the inflation rate climbed to
15.70 percent in February 2022 attributable largely to imported inflation,
occasioned by supply chain disruptions abroad leading to higher commodity
and energy prices as a result of the war. This has worsened the global inflation
that was attributed to the large monetary and fiscal stimuli deployed across the
globe to reflate economies from the effects of covid-19-induced recession.
What has happened in Nigeria is that besides the exogenous triggers of inflation,
economic agents have capitalised on the supply shortages relating to some
products to arbitrarily increase the prices of goods and services in the country.
They are able to do this in a market system that is being blatantly manipulated.
The decline in food inflation in February 2022 to 17.11 percent from 17.13
percent in January and the increase in core inflation to 14.01 percent in
February 2022 from 13.87 percent in January confirm the exogenous nature of
the drivers of the current inflation. The increase in core inflation in the country
was strongly linked to two factors: i) the high cost of energy products, arising
from shortages, and profiteering by economic agents, particularly, relating to
petrol, diesel and aviation fuel; and ii) the continuous demand pressure in the
foreign exchange market which has led to depreciation of the exchange rate
and high prices of imported goods in Nigeria.
Consequently, a further tightening of monetary policy will not tame the inflation.
Rather, it will lead to increase in lending rates of the commercial banks, limit
access to credit, and hurt investment in the real sectors of the economy.
Indeed, a further tightening policy will be antithetical to the CBN’s goal of
increasing access of investors to cheap credit in order to aid economic
recovery, spur growth, increase employment and reduce poverty. On the other
hand, easing monetary policy in the present circumstances could increase
untargeted money supply growth and exacerbate inflation. The situation of low

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growth, high unemployment and poverty incidence and double-digit inflation,
no doubt, entails difficult policy choices.
Nevertheless, output growth requires continuous policy support, especially
monetary policy to complement fiscal policy which, for some time now, is
characterised by weak fiscal space. Targeted development finance
interventions of the CBN would need to be sustained to boost aggregate supply
of goods and services in aid of non-monetary inflation control. Meanwhile, the
current double-digit inflation can be reduced by considering the following:
NNPC should do the needful to eliminate the current refined petroleum
products scarcity and the regime of high prices attributed to it.
The Government should provide necessary support to the investors
developing local refineries, including modular refineries, to enable them
expedite the completion of their projects, take-off, and start supplying
products to the local markets.
The Bank should endeavour to maintain a stable naira exchange rate to
minimise its pass-through effects on imported goods prices.
Governments at the Federal and state levels should use moral suasion to
discourage economic agents from arbitrarily increasing the prices of goods
and services. It could have a psychological and positive effect.
The CBN should ensure effective implementation of its development
finance interventions in specific agricultural products and non-export value
chains. It should address any genuine concerns of stakeholders on the
interventions.
In light of the foregoing, my vote is to hold the monetary policy parameters
constant, viz:
MPR


-
11.5%
Cash Reserve Requirement (CRR) -
27.5%
Liquidity Ratio


-
30%
Asymmetric Corridor

-
+100/-700 basis points.
7. OBIORA, KINGSLEY ISITUA

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In view of a modest economic recovery and in support
of the monetary policy actions already taken, I voted to:
retain the Monetary Policy Rate (MPR) at 11.5 per cent,
the Cash Reserve Ratio (CRR) at 27.5 per cent, the
Liquidity Ratio (LR) at 30.0 per cent and the asymmetric
corridor of +100/-700 basis points around the MPR. I
believe this stance will further support a sustained
economic recovery and contain inflationary pressures.

Although COVID-19 vaccination continued to save lives and help the global
economic recovery, Russia’s invasion of Ukraine is derailing this recovery path. The
invasion of Ukraine on 24 February 2022 has not only resulted in human suffering
and deaths but also has had far-reaching economic implications for the world
economy. It is adversely affecting global inflation, output, supply chains, business
and consumer confidence. This is because Russia and Ukraine are major producers
of several base metals (Aluminum, Palladium and Nickel) and agricultural
commodities (Wheat, Maize and other coarse grains). The supply chain disruptions
associated with the war is resulting in higher commodities prices, thereby fueling
global inflation and weakening output. Also, as the war is putting upward pressure
on commodities prices, the COVID-19 pandemic is resurging after a consistent
decline in recent weeks. The virus is rising in some parts of the world, especially in
China, Japan, South Korea, Vietnam, and other western pacific countries, leading
to an increase in the number of confirmed cases to over 470 million and over 6
million deaths as of 21 March 2022. Therefore, there is an urgent need to intensify
the effort in ramping up vaccination across the world, especially in countries
where the virus is resurging.
On the back of these developments, the IMF had revised downward the global
economic outlook for 2022. Notwithstanding the downward revision, the J.P
Morgan Global Composite Purchasing Managers Index rose to 53.4 index points
in February 2022 from 51.1 index points in January 2022, driven by growth in new
orders, employment and improvements in business optimism. In the January
World Economic Outlook (WEO), the International Monetary Fund (IMF) revised
downward the projection of the global economy to 4.4 per cent in 2022 from
5.9 per cent in 2021. The downward revision was driven by soaring global
inflation, tightening monetary policy stance in some advanced economies and
the downturn in China’s property sector. The growth in Advanced economies,
Emerging Market and Developing Economies, and Sub-Saharan Africa is

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expected to moderate to 3.9, 4.8, and 3.7 per cent in 2022 from 5.0. 6.5 and 4.0
per cent in 2021, respectively. The economies of the United States, Euro Area
and the United Kingdom are forecast to moderate by 4.0, 3.9, 4.7 from 5.6, 5.2
and 7.2 per cent, respectively. The growth in China is also projected to
moderate to 4.8 per cent from 8.1 per cent in 2021. Most analysts expect a
further downward revision of the global outlook due to the reverberating effect
of the ongoing Russia-Ukraine war, which has added to the downside risk of the
global economic outlook.
Following the expected moderation in global growth, the Nigerian economy is
also forecast to grow slower in 2022, compared with 2021. Official statistics from
the National Bureau of Statistics (NBS) indicated that real GDP moderated to
3.98 per cent in Q4 2021 from 4.03 per cent in Q3 2021 per cent and significant
growth from 0.11 per cent in the corresponding quarter of 2020. The growth was
driven by the non-oil sector, with Trade, Agriculture, Telecommunications and
Financial Institutions recording growth of 3.87, 5.31, 5.34 and 25.19 per cent,
respectively. Overall, the non-oil sector moderated to 4.73 per cent in Q4 2021
from 5.44 per cent in Q3 2021. It, however, contributed 94.81 per cent in Q4 2021
to the nation’s GDP, higher than 92.51 per cent in the preceding quarter.
Although the Oil sector improved, it contracted further by 8.06 per cent from a
contraction of 10.73 per cent in Q3 2021. Also, in Q4 2021, the Oil sector’s relative
contribution to total real GDP stood at 5.19 per cent, down from 7.49 per cent
in Q3 2021 due to pipeline vandalism and oil theft, with adverse implications for
Federal Government revenues and accretion to external reserves. Accordingly,
the IMF projected the Nigerian economy to moderate to 2.70 per cent from 3.40
per cent in 2021. Although Manufacturing (PMI) remained in the positive
territory, it declined to 50.01 index points in February 2022 from 51.4 index points
in January 2022. It was driven by an increase in production, employment levels
in manufacturing, as well as an increase in supplier delivery. Furthermore, the
gross external reserves inched up by 0.76 per cent (M-O-M) to US$39.62 billion
at the end of February 2022, from US$39.32 billion at the end of January 2022,
driven by FX swap transactions and crude oil-related taxes & penalties. Overall,

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the modest economic growth was driven by the continued fiscal stimulus and
accommodative monetary policy stance of the Central Bank of Nigeria (CBN).
The banking system maintained its resilience amid economic recovery. Total
assets of the banking industry grew by 18.53 per cent from N52.32 trillion in
February 2021 to N62.01 trillion in February 2022, driven by balances with
CBN/banks, OMO bills, and credit to the real sector of the economy. As a result,
the total flow of credit to the economy increased during the review period. A
total of 116,443 new credits valued at N819.63 billion were granted to various
sectors of the economy, from Oil and Gas, Manufacturing, Governments to
General commerce. This was higher than 96, 583 new credits valued at N566.35
billion in February 2021. Overall, the industry credit increased by 19.53 per cent
to N25.25 trillion in February 2022 from N21.13 trillion in February 2021. The industry
NPL ratio continued to trend below the prudential threshold of 5 per cent. It
decreased to 4.80 per cent at the end of February 2022 compared with 6.38
per cent in February 2021. The downward trend was attributable to recoveries,
restructuring of facilities and sound management practices by DMBs.
As the domestic economy continues to recover, imbalances remain. Although
the domestic economy is on the path to a strong recovery, it is still fragile.
Despite rising oil prices, Crude Petroleum and Natural Gas continued to
contract in Q4 2021. Also, oil production remained below the OPEC allocation
quota, with attendant consequences on fiscal revenues and external reserves.
Inflation pressure has also persisted, as headline inflation increased to 15.70 per
cent in February 2022 from 15.60 per cent in January 2021, driven by
infrastructural deficiencies, increases in both the pump price of Premium Motor
Spirit (PMS) and electricity tariffs. However, food inflation slightly moderated to
17.11 per cent in February from 17.13 per cent in January 2022, reflecting partly
the Bank continued intervention in agriculture to boost food production in the
country.

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Yet forecasts are fraught with significant headwinds. The invasion of Ukraine by
Russia is a growing concern, especially with rising inflation and weakening
global economic growth. The resurgence of COVID-19 infections in some
locations is a reminder that though the global spread may have waned, it is not
yet over. The recent effort, however, by the World Health Organisation (WHO)
to support the Covid-19 vaccine production in six African countries (Egypt,
Kenya, Nigeria, Senegal, South Africa and Tunisia) is quite commendable. They
will help reduce the continent’s reliance on vaccine imports and increase the
immunization rates. While the domestic outlook has somewhat improved, it is still
confronted with short to medium-term challenges. This explained why the IMF
projected the economy to moderate to 2.70 per cent in 2022 from 3.40 per cent
in 2021. However, the Bank in collaboration with the Federal Government is
extensively focusing on interventions targeted at increasing aggregate
demand, boosting domestic agricultural production, driving lending to MSMEs
and investing in critical infrastructure. Therefore, considering the modest growth
recovery and allowing the measures aimed at containing inflationary pressures
to take their full effect, I voted to:

Retain the Monetary Policy Rate (MPR) at 11.5 per cent;
Retain the Cash Reserve Ratio (CRR) at 27.5 per cent;
Retain the Liquidity Ratio (LR) at 30.0 per cent; and
Retain the asymmetric corridor to +100/–700 basis points around the MPR..

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8. SANUSI, ALIYU RAFINDADI
1.0 Decision
Today, I voted to raise the MPR by 50 basis points in order to prevent a reversal
of the current disinflationary process. Although I am still convinced that the
inflationary process was primarily driven by supply-side and structural issues,
which ordinarily requires no change in monetary policy stance, the threat of a
reversal of the disinflationary trend in December and February, following a
number of domestic and global developments, strongly points to the possibility
of the second-round effects. Given the available data and staff forecasts, I am
convinced that the prolonged rise in the prices of the food and energy
components of inflation may have started to feed into the core inflation,
resulting in a second-round effect, thereby making monetary policy response
appropriate and efficient. I, therefore, voted to raise the MPR as a means of
putting a lid on the possible second-round effects of the prolonged shocks to
Food and Energy inflation on the Core inflation.
2.0 Background and Justification
2.1 Global Economic Developments
The war in Ukraine has dampened the optimism for stronger global recovery,
thereby truncating the IMF’s growth forecasts for output growth in 2022. The
mounting global sanctions and the consequential rise in energy and food prices

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as well as imported inflation associated with the war, have introduced a new
set of downside risks to the global growth and upside risks to the global inflation
outlook. Amidst the existing domestic structural challenges, these external
sources of shocks have significant adverse effects on the domestic inflationary
process.
The Russian-Ukrainian war started at a point when the COVID-19 pandemic
entered a new phase in which the virus appeared set to take a weaker form
that is more flu-like, raising hope for full global economic recovery in 2022. This
optimism is, however, dampened by the several shocks that are spreading
across several countries following the Russian invasion of Ukraine and the
backlash of the trade and financial sanctions imposed on Russia and Belarus by
the US and the EU. These shocks, which include rising global energy prices,
persistent bottlenecks in the global supply chain, rising commodity prices as well
as rising global inflation, have substantially increased the downside risks to the
global growth outlook at a point when the risks associated with COVID-19
pandemic were waning. The war in Ukraine has, therefore, introduced
additional uncertainties to the outlook for global economic activity, which
critically depends on the dynamics of the war. Consequently, IMF has revised
its earlier growth forecasts downwards from 4.9% to 4.4% for the year 2022,
compared with 5.9% in 2021. Similarly, the World Bank has reduced its growth
forecasts for 2022 from 5.5% to 4.1%. Total output is forecasted to grow at 3.8%
in 2023. Output growth in the Advanced Economies (AEs) is similarly forecasted
to progressively decline from 5% in 2021 to 3.9% in 2022, and further to 2.6% in
2023. Growth in the Emerging Markets and Developing Economies (EMDEs) is
also forecasted to decline from 6.5% in 2021 to 4.8% in 2022 and remain flat at
4.7% in 2023.
The events in Ukraine are important to the evolution of the global economic
activity, in part, because of the significant dependence of the world trade on
several Russian and Ukrainian products. These include Natural gas (41% of
Europe’s supply), crude oil (34% of Europe’s supply), agricultural commodities

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(20% of the world’s trade in wheat, 20% of world corn exports, and 80% of world
sunflower oil exports), fertilizers (Urea and potash) and industrial metals (leading
exporters of aluminium, nickel, copper, iron ore, neon). Consequently, the
global commodity market is already severely affected by the war. For instance,
Crude oil price has sharply risen to $104.96/b (OPEC Basket) as at 18th March
2022, as a result of the supply shock and uncertainty in the face of the
escalating conflict amidst strong global oil demand. Prices of agricultural
produce, especially wheat and corn, have also risen following the disruptions in
the global grains market. The global food price has increased by 3.91%
between January and February 2022; wheat and corn have, respectively,
increased by 4.35% and 5.78% between January and February 2022.
The global inflationary pressures, which were driven by the strong pent-up
demand amidst (easing) supply bottlenecks before the invasion, are now
exacerbated by the conflict. Global inflation has, therefore, maintained its
upward trajectory. In the near-term, global inflation is projected to remain high
because of the disruptions to the global supply chain by the war. As at February
2022, inflation in the United States was 7.9%, which was the highest rate in 40
years. In the Euro Zone, inflation was at the all-time-high rate of 5.9% while in the
UK it was at the 30-year high rate of 5.5%. In the Advanced Economies, inflation
is forecasted to increase to 3.9% in 2022 from 3.1% in 2021, before declining to
2.1% in 2023. In the EMDEs, Inflation is expected to rise to 5.9% in 2022 from 5.7%
in 2021. It is expected to decline slightly to 4.7% in 2023.
The outlook for global trade, which had fully recovered in 2021 from the
disruption of the pandemic, is now threatened by the Russian-Ukrainian war. The
recovery is expected to moderate in 2022 in the wake of mounting sanctions
on Russia by the US and EU. Freight costs and delays are expected to increase
because of the blockage of the Black Sea as well as the no-fly zone over Russia.
The heightened uncertainty in global trade is likely to remain for the duration of
the crisis.

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Monetary policy normalisation in the Advanced Economies has been well
underway, with rates hike already started by the Bank of England in its February
10th meeting and by the US Fed during its March 14th meeting in order to curb
the raging inflationary pressure. The European Central Bank had, however,
retained its rates in order to conclude its bond purchase programme, and deal
with the high unemployment and worsening welfare arising from the
consequences of the Russian-Ukrainian war. The Central Banks in most EMDEs
have also started raising their policy rates. South Africa, Brazil, Russia, and
Ghana have all raised their key policy rates in anticipation of the capital flow
reversals arising from policy normalisation in the AEs. Global capital flows to the
emerging markets have continued to slow down. Portfolio inflows to the
Emerging Markets declined from US$66.4 billion in February 2021 to US$17.6
billion in February 2022 due to waning investor confidence, policy normalisation
in the AEs, and uncertainties relating to the Russian-Ukrainian conflict.
The key implications, for Nigeria, of these global developments (the rising
energy and food prices, rising global inflation, policy normalisation, and global
trade disruptions) include, amongst other things, the potential threat to reverse
the current disinflationary trend that started in April 2021.
2.2 Domestic Economic Developments and their Implications
As expected, domestic output sustained its strong recovery during the last
quarter of 2021 with a better-than-expected growth rate of 3.98% (y-o-y),
compared with 4.03% in the 3rd Quarter of 2021. Like in the previous quarter, the
output growth was driven by the non-oil sector, which grew by 4.73. % (y-on-y).
The non-oil GDP growth was driven by growth in services (5.5%) and agriculture
(3.58%). The oil GDP, however, contracted for the 7th consecutive quarter by -
8.06% (y-on-y) in Q4 2021 from -10.73 in Q3 2021. The moderation was due to the
declining level of crude oil production which has remained well below the
OPEC quota mainly due to the worsening level of oil theft and pipeline
vandalism. The unchecked oil theft is preventing Nigeria to benefit from the

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rising global oil price. According to staff forecasts, output will grow at 2.71% in
Q1 2022 and 2.99% in Q2 2022, and 3.24% for the year 2022.
The disinflation, which started in April 2021, appears to have been paused since
December 2021 by an uptick that turned out to be temporary following a
marginal decline in January 2021. However, in February 2022, another uptick
was recorded, suggesting a possible end of the disinflationary trend. Since
December 2022, therefore, inflation has remained obstinately
sticky
downwards, owing to unabating pressures from both the food and core
components. Specifically, the headline inflation has increased (y-on-y) from
15.60% in January 2022 to 15.70% in February 2022. The increase was driven by
the core component, which increased (y-o-y) from 13.87% in January 2022 to
14.1% in February 2022, representing the 4th consecutive rise since November
2021. The rise in Core Inflation was largely driven by increases in the prices of
housing, water, electricity, gas & other fuels, and clothing & footwear. The rise
in core inflation is linked to the high cost of energy goods particularly PMS and
AGO. Food inflation, however, has marginally declined (y-o-y) further from
17.13% in January 2022 to 17.11% in February 2022, driven by moderation in the
prices of processed foods, bread and cereals, and yam, potatoes & other
tubers.
On a month-on-month basis, however, the increase in headline inflation from
0.16% to 1.63% in February 2022 was driven by acceleration in both the Food
and Core components. The m-o-m rise in the food component was driven by
increases in the prices of bread and cereals, potatoes, yam & other tubers, oil
& fats, and fruits. The m-o-m rise in the core inflation component was driven by
prices of processed food, clothing & footwear, furnishing, household equipment
& maintenance, transport, education, health, restaurant & hotels, and
miscellaneous goods and services. The upward trend in the core inflation is
attributable to a number of factors including the lingering structural issues,
external shocks, continuous foreign exchange market pressure, imported
inflation, and rising energy prices. In addition, the prolonged high food and

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energy prices may also feed into the core inflation through the cost and
expectations channels to produce second-round effects on the headline
inflation. According to Staff Projections, inflation will rise in the near-term, to
15.72% and 16.34% in March and April 2022, respectively, driven by both the
core and food components as a result of scarcity of refined petroleum
products, disruptions in electricity supply, and effects of the Russian-Ukrainian
war.
According to the data available, the banking industry has continued to remain
resilient, with all the ratios indicating that the industry is sound. The Capital
Adequacy Ratio (CAR) of the industry was 14.4% as at February 2022, which is
above the regulatory minimum of 10%. The quality of the industry’s assets has
also improved further as the Non-Performing Loan (NPL) ratio declined to 4.8%
in February 2022, below the regulatory maximum of 5%. The industry’s total
credit to the economy has also increased from N20.48 trillion in December 2020
to N25.25 trillion in February 2022 owing to the Bank’s LDR policy. Analysis of the
interest rate band reveals that 70.49% of customers paid interest rates of less
than 15% in February 2022. This shows that interest rates are declining as more
credits are being granted by the banking system.
3.0 The Basis for My Policy Choice
The unabating pressure on the food price component of the headline inflation,
which started in August 2019, had largely remained the major driver of headline
inflation. Being predominantly supply-side, therefore, the heterodox policy
interventions by the bank aimed at boosting production provides an effective
means of simultaneously reducing inflation and also supporting output growth.
This was evidenced by fast output recovery since Q1 2021 following the
pandemic-induced recession, and declining inflation. Conventionally, in the
case of transitory supply-side shock, the hold-steady approach to monetary
policy is more efficient, and the temporary increase in inflation is better
accommodated. However, in the presence of second-round effects whereby
the rising food or energy prices feed into the core inflation, then a monetary

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policy response is required. Given my analysis of the available data, coupled
with the staff projections of inflation, I am convinced that the observed upward
trend in the core inflation may be reflecting the presence of second-round
effects. In addition, being a pre-election year, a significant liquidity injection is
expected, which a forward-looking monetary policy has to appropriately
respond to. Therefore, in choosing between the options to tighten, hold or
loosen the current policy stance, I voted to raise the MPR by 50 basis points in
order to rein in inflation. Although the output recovery still remains fragile, the
bank’s use of the development finance interventions in selected employmentgenerating and output-stimulating sectors would continue to support output
recovery.
Consequently, I voted to:
Raise the MPR by 50 basis points to 12.00 per cent;
Retain the CRR at 27.5 per cent;
Retain the asymmetric corridor at +100/–700 basis points around the MPR; and
Retain the liquidity ratio at 30.0 per cent.

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9. SHONUBI, FOLASHODUN A.
Challenges to global growth took a new dimension with the onset of the
Russian-Ukraine crisis, even as disruptions to the global macroeconomic
environment on account of the pandemic is yet to abate. Almost one month
into the crisis, with chances of a short-term closure fading, the adverse impact
is already manifesting via further disruptions to global trade, higher energy
prices and financial market downturn. Concerns are therefore building about
the implications for growth and inflation, a situation that further complicates the
policy options for central banks.

Despite the moderate positive outcomes of the effort of both fiscal and
monetary authorities, recent developments in the domestic macroeconomic
environment have shown that the Nigerian economy is not totally insulated from
the spillovers of the current crisis in the euro area. Domestic growth remains
fragile and the already elevated inflation is aggravated by the rise in energy
prices, due mainly to domestic supply bottlenecks, while domestic and foreign
exchange revenue continue to dwindle. We obviously need to further explore
our ingenuity in policy making to do more of what is working and identify what
else can be done to consolidate the gains made so far, while ameliorating the
impact of the current crisis.

Classified as
Global and Domestic Economic Developments
Impact of the Russian-Ukraine crisis has changed the dynamics of headwinds to
global growth. Rising likelihood of the conflict protracting has further
heightened uncertainties around a global economy that still struggles to
recover from pandemic-induced damage. With global inflation already
impacted by rising energy prices and economic activities, particularly in the
euro-area, suffering from disruptions to trade, energy supply shortage and
labour market dislocations, the outlook for global growth and inflation in 2022
faces major headwinds. Global growth is thus projected to moderate,
especially as a result of projected further slowdown in the Advanced
Economies, while global inflation expectation is anchored on pressure from
rising energy prices.
Whereas domestic food inflation declined marginally from 17.13 per cent in
January 2022 to 17.11 per cent in February 2022, headline inflation rose to 15.70
per cent (year-on-year), from 15.60 per cent in the previous month. The rise in
headline inflation reflected the increase in core inflation, on account of
elevated energy prices due to bottlenecks in domestic supply of petroleum
products and higher cost of imports. On a month-on-month basis, headline
inflation picked up by 1.63 per cent in February 2021, compared with 1.47 per
cent in January 2021.

Following a 3.98 per cent growth in the 4th quarter of 2021, the economy grew
by 3.4 per cent (year-to-year) in 2021, against 1.92 per cent contraction in 2020.
This reflected the 4.44 per cent growth in non-oil sector, even as the oil sector
contracted significantly by 8.30 per cent. That the non-oil sector was the main
driver of growth in 2021 is a welcome development. More so, significant
disruptions to domestic oil production and the subsidy regime has not allowed
the full benefits of recent rise in global oil prices to manifest in the domestic
economy.

The impressive state of the banking system was sustained in the first quarter of
2022, even as the sector continues to be the main medium though which CBN

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supports growth. Despite growth in credit, resilience of the sector was
underscored by further improvement in the NPLs ratio to 4.84 per cent, below
4.90 per cent in 2021 and the regulatory minimum of 5.0 per cent.
Notwithstanding the marginal moderation in industry liquidity and capital
adequacy ratios, the levels recorded were within prudential limits, while the
upward trend in industry asset and deposit was sustained. It is worthy of note
that growth in major monetary aggregates was within the provisional
benchmark, while money market rates trended downward.

The fiscal and external sectors continued to grapple with limitations imposed by
inefficiencies in the current domestic economic structure and macroeconomic
environment. Despite rising global oil price, expected accretion to reserves and
increase in foreign exchange inflow is lost to production shortfall on account of
vandalism/theft and funding of refined product importation. Consequently, the
fiscal space has become narrower and weaker as government is unable to
mobilise enough resources to make the expected interventions and impact.
Overall Considerations and Decision
Prospects of global growth in 2022 is predicated on how quickly further
escalation of the Russian-Ukraine crisis is curbed and ultimate resolution
achieved. This is in addition to what more is accomplished with the progress on
continual easing of pandemic induced restrictions. Delayed or lack of progress
may invariably pose significant challenge to global trade, financial market
operations and productive activities. The global economy may thus be
heralded into an era of significant inflationary pressure and muted growth, a
condition that complicates opportunities for policy maneuvers.

The dynamics of today’s global macroeconomic environment has increasingly
exposed the danger of a domestic economy that derives its strength from
outside its shores. An economy that leverages its internal strength can easily
ward-off negative spillovers from a global economic environment that

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consistently faces new threats, arising from vulnerabilities generated by
unending novel interactions.
Accordingly, ongoing collaboration between the Bank and fiscal authorities to
support recovery and promote sustainable growth is in the right direction. The
Bank’s effort at using the legitimate means of development financing to support
agriculture and small businesses to promote domestic production is expected
to help preserve the trajectory of growth and moderate the inflationary
pressure. Also worthy of note is the potential impact of novel interventions such
as the 100 for 100 Policy on Production and Productivity, and the, RT 200 FX
Policy, on local production for export and external sector prosperity.
The fiscal authority faces increasing pressure from the requirement for more
expenditure to address insecurity, close the gap in infrastructure development
and ameliorate protracting impact of the pandemic in the face of dwindling
revenue and high debt stock. Again, I will implore the fiscal authority to explore
additional options under the Public Private Partnership model for its public
investment and infrastructural development projects, so as to free resources for
other initiatives, targeted at improving welfare of the citizenry.

Looking into the immediate future on inflation, even with the robust plan of the
Bank to moderate food prices by deploying strategic reserves, the inability to
prevent smuggling into neighbouring countries that have been ravaged by
drought due to our porous borders, may limit the impact of such intervention.
More so, the effects of the recent crisis in the euro area on global energy prices,
increased cost of trade and the rising cost of imports, which are yet to fully
crystalize will be major sources of inflationary pressure. We must effectively
leverage the opportunity provided by available indicative data and therefore
remain forward looking. As the authorities strive to sustain the trajectory of
growth and address insecurity challenges, we must act ahead of time to deal
with the subtle monetary component of inflationary pressure and curb spiraling
inflation, without suffocating economic growth.

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I therefore vote to:
Raise MPR by 50 basis points to 12.0 per cent.
Retain Asymmetric corridor of +100/-700 basis points around the MPR.
Retain CRR at 27.5 per cent; and
Retain Liquidity Ratio at 30 per cent.


10. EMEFIELE, GODWIN I.

Classified as
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
With the onset of the Russia-Ukraine conflict, the expected recovery of the
global economy from the Covid-19 shock has weakened. The myriad of
economic sanctions against Russia are constraining supply chains, tightening
global markets and heightening vulnerabilities. We are witnessing intense
global energy and food crises, along with escalating risks in many countries,
particularly, in the emerging markets. Already, the economic fallouts from the
conflict are resonating globally and, reinforced by lingering Covid-19
headwind. These have exacerbated macroeconomic uncertainties and
undermined short-term prospects. Accordingly, IMF global growth projections
of 4.4 and 3.8 percent for 2022 and 2023, respectively, may be downgraded
to reflect the adverse effects of the war. Soaring prices, following energy and
food crises, will intensify global inflationary pressures and complicate monetary
policy as countries struggle to balance the price versus growth objectives,
amid the new crisis. The conflict could impair external financial conditions in
emerging markets, as advanced economies begin to normalise monetary
policy. Overall, short-term global outlook is faltering as supply shortages push
inflation expectations and financial market vulnerability worsens.
Domestic macroeconomic outlook remains positive but fragile, amidst global
headwinds and local energy constrictions. Following a strong performance in
2021, recovery is expected to continue in 2022. Five consecutive quarters of
GDP expansion with a 3.98 percent growth in 2021q4 from 4.03 percent in
2021q3. This translates to 3.40 percent growth in 2021 as against the contraction
of -1.92 percent in 2020. Growth performance followed the 4.44 percent
expansion of the non-oil GDP (mainly services, agriculture and manufacturing
activities) as oil GDP contracted by -8.30 percent. These show the ongoing
diversification of the domestic economy and the evident success of the CBN
interventions in agriculture, Micro Small and Medium Enterprises (MSMEs), and
manufacturing sectors, which are helping to resolve the long-standing
structural bottlenecks and bolster productivity. At 50.1 points in February 2022

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manufacturing PMI, stayed above the 50 mark threshold, implying a continued
rebound of business activities, labour mobilisation, and productive capacity,
although the non-manufacturing index was below target. With the sturdy
trajectory of domestic economic activities, in-house models project 2022
growth at 3.24 percent compared with 4.20 percent by FGN and 2.7 percent
by the IMF.
Inflation expectations rose slightly in the domestic economy following an uptick
in headline rate to 15.70 percent in February 2022 from 15.60 percent in
January. This reflected the slim rise in core inflation to 14.01 percent as food
inflation declined to 17.11 percent. Current inflation is attributable to renewed
energy market shocks, as lingering PMS scarcity and electricity constraints
drive-up domestic prices. Rising inflationary trend is noted and will be
monitored closely. The trend is, notably, consistent with near-term forecasts of
a short-lived ascent early in 2022 which will start declining after the first quarter.
Analysis indicates that the uptick is transitory and could be overturned with
sustained CBN’s supply-boosting interventions in agriculture, manufacturing,
and particularly infrastructure.
Money and financial markets developments show expansionary liquidity
conditions during the review period. Weighted average OBB and interbank call
rates indicate systemic liquidity surfeit, dipping from 6.00 and 16.00 percent in
January 2022 to 5.81 and 9.30 percent in February 2022. Correspondingly,
broad money growth quickened from 1.74 percent in January to 2.12 percent
in February 2022. This was largely attributed to the 5.78 percent increase in net
domestic assets in February 2022 from 2.62 percent in the previous month. It
reflected the continued growth of banking system credits to the private sector
supported by the sustained drive of the CBN to increase lending to high-impact
real sector ventures. Gross credit maintained its upward trajectory since 2019,
with a N4.13 trillion (or 19.53 percent) growth in industry credit between
February 2021 and 2022. Amidst rising private sector credits, the banking system
remains safe, sound and stable as NPLs ratio (4.84 percent), liquidity ratio (43.50

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percent) and CAR (14.42 percent), all stayed within satisfactory levels vis-à-vis
their respective thresholds.
In my consideration, I note the heightening uncertainty in global
macroeconomic conditions due to recent geopolitical conflicts, which could
undermine global growth and intensify inflationary pressures. The resultant
energy and food crises which are rippling worldwide could further debilitate
recovery, especially in emerging market economies. As Russia and Ukraine
currently account for most of the world’s supply of wheat and maize, the
conflict could destabilise countries that are most reliant on importation of these
commodities. Fortuitously, Nigeria is adequately insulated from emergent
global shortages, as the various CBN initiatives are ensuring domestic selfsufficiency in the production of these commodities. Yet, there is a wide-ranging
prospect of imported inflation as elevated globally costs drag the prices of
tradable goods. The CBN will continue to analyse unfolding global dynamics
and the ramifications for the domestic economy. The Bank will ensure to take
bespoke actions to mitigate possible adverse upshots of the prevailing
conditions.
I assert that the objective of price and monetary stability remains inviolable, as
we remain mindful of growth outlook. I note the continued improvement in
short-term economic outlook, which, though positive, is fragile and should not
be derailed. The MPC has so far adopted unconventional approaches to
bolster domestic supply capacity, boost aggregate output, and stabilise
prices. We will continue our policy of disinflation that is conducive to growth.
To strengthen recovery and forestall the impact of the ongoing geopolitical
conflict, we will continue to partner with the fiscal authorities to sustain support
for manufacturing, agriculture, infrastructure, and MSMEs. I note that our recent
actions have put GDP and inflation on satisfactory long-run trajectories. I
acknowledge the recent unexpected rise in domestic inflation, which though,
transient could justify arguments for tightening. But, importantly, economic

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recovery is still fragile, while per capita income and unemployment rate are at
unacceptable levels.
My inclination today is to carefully balance the objective of price stability with
output growth. Again, the dilemma of the trade-off between inflation and
output remains extant, and I believe that a rate hike could upend our modest
recovery. I am of the view that the current levels of policy parameters are
appropriate to tackle emerging shocks, as the CBN strengthens its intervention
programmes. I prefer to maintain the prevailing stance in order to foster price
stability and output stabilisation without introducing disruptive policy shocks.
Thus, I vote to:
1. Retain the MPR at 11.5 percent;
2. Retain the asymmetric corridor at +100/–700 basis points;
3. Retain the CRR at 27.5 percent; and
4. Retain liquidity ratio at 30.0 percent

GODWIN I. EMEFIELE, CON
Governor

March 2022