CENTRAL BANK OF NIGERIA
MONETARY
MONETARY
POLICY REVIEW
POLICY REVIEW
MONETARY
POLICY REVIEW
AUGUST 2022
AUGUST 2022
VOLUME XI, NUMBER 1
VOLUME XI, NUMBER 1
AUGUST 2022
VOLUME XI, NUMBER 1
Central Bank of Nigeria
33 Tafawa Balewa Way
Central Business District
P.M.B. 0187, Garki,
Abuja
Phone: +234 (0)9 462 36011
Website: www.cbn.gov.ng
E-mail:
ISSN: 2141-6281
©2021 Central Bank of Nigeria
iii
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Mandate
§Ensure Monetary and Price Stability
§Issue Legal Tender Currency in Nigeria
§Maintain External Reserves to safeguard the international
value of the Legal Tender Currency
§Promote a Sound Financial System in Nigeria
§Act as Banker and Provide Economic and Financial
Advice to the Federal Government
Vision
“To be a people-focused Central Bank promoting
confidence in the economy and enabling an
improved standard of living”
Mission Statement
“To ENSURE Monetary, Price and Financial System
Stability as a Catalyst for Inclusive Growth and
Sustainable Economic Development.”
Core Values
Integrity
Partnership
Accountability
Courage
Tenacity
Central Bank of Nigeria
CONTENTS
Page
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Table of Contents
Statement by the Governor

vii
Chapter 1: Overview.. ..


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

2.1
Global Output ....


2.2
Global Inflation ..


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

Chapter 3: The Domestic Economy


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

3.2
Domestic Price Developments..


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

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

Chapter 4: Economic Outlook and Risks..


4.1
Outlook for Global Output .. ..


4.2
Outlook for Global Inflation .. ..


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

4.4
Outlook for Domestic Inflation ..


4.5
Outlook for Monetary Policy in the Second Half of 2022 ..

4.6 The Risks to the Outlook ..


Appendices ..


List of Tables
Table 2.1:
Policy Rates of Selected Central Banks Dec 2022 –


Jun 2022


Table 2.2:
Selected International Stock Market Indices as at


June 30, 2022 ..


Table 2.3:
Sovereign Yields Spreads (Benchmark 10-Year Government


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

Table 2.4:
Exchange Rates of Selected Countries (value in currency


units to US$)


Table 3.1:
Growth Rates of Real GDP by Expenditure (%), 2020Q1-


2022Q2..


Table 3.2:
Inflation Rates, January – June 2022.. ..

..

Table 3.3a:
Major Components of Headline Inflation (Y-on-Y),


January - June 2022.. ..


Table 3.3b:
Major Components of Headline Inflation (M-on-M),


January - June 2022 .. ..


Table 3.4:
Major Components of Food Inflation (Y-on-Y),


January - June 2022..


Table 3.5:
Major Components of Food Inflation (M-on-M),


January - June 2022. ..


Table 3.6:
Major Components of Core Inflation


(Y-on-Y) January - June 2022 ..
..
..
..

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Page
Table 3.7:
Major Components of Core Inflation


(M-on-M) January - June 2022

..
..

Table 3.8:
Actual and Seasonally Adjusted Headline Inflation


January - June 2022 .. ..


Table 3.9:
OMO Bills Auction (January - June 2022)(N'billion).. ..

Table 3.10:
CBN Standing Lending Facility (January - June 2022)
(N'billion)..


Table 3.11:
CBN Standing Deposit Facility (January - June 2022)
(N'billion)..


Table 3.12:
Foreign Exchange Supply by the CBN (US$ Million) ..

Table 3.13a:
The Performance of Monetary Aggregates and their


Implications


Table 3.13b:
The Performance of Monetary Aggregates and their


Implications


Table 3.14: Weighted Average Monthly Money Market Interest Rates


(January - June 2022)..
..
..

..

Table 3.15:
Average Monthly Spot Exchange Rates (N/US$) July 2020 -


June 2022..


Table 3.16:
End-Month Exchange Rates (N/US$) July 2020 - June 2022

Table 3.17: Nominal and Real Effective Exchange Rates Indices

(January 2020 - June 2022)


Table 3.18:
Monthly Foreign Exchange Flows through the CBN


(January 2020 - June 2022)


Table 3.19:
Monthly Foreign Exchange Flows through the Economy

(January 2021 - June 2022)


Table 3.20:
NSE All-Share Index (ASI) and Market Capitalization (MC)
(June 2020 – June 2022) ..


Table 4.1
Global Output and Inflation Outlook ..
..
..

Table 4.2 Global Inflation Outlook ..


Table 4.3
Possible Variations in Nigeria's GDP growth outlook ..

Table 4.4
Inflation Forecast..


List of Figures
Figure 3.1:
Gross Domestic Product Growth Rate (2020Q1 – 2022 Q2).. 16
Figure 3.2:
Non-oil Sector Performance (2019Q1 – 2021 Q2)..
..

Figure 3.3: Oil Sector Performance (2020Q1 – 2022 Q2) ..
..

Figure 3.4:
Agricultural Sector Contribution by Activity, (2020Q1 –


2022 Q2)


Figure 3.5:
Industrial Sector's Contribution by Activity, (2020Q1 –


2022 Q2)..


Figure 3.6:
Services Sub-Sector Contribution, 2020Q1 – 2022 Q2...

Figure 3.7:
Quarterly Domestic Oil Production and Export (2020Q1 –


2022 Q2)


Figure 3.8: Monthly Bonny Light Price, Jan 2021 - Jun 2022
..

Figure 3.9:
Headline, Core and Food Inflation Rates (January –


June 2022)..


Figure 3.10:
Major Components of Headline Inflation (Y-on-Y) January –
Page
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June 2022.


Figure 3.11: Major Components of Headline Inflation (M-on-M) Jan. –


Jun. 2021 2021.


Figure 3.12:
Major Components of Food Inflation (Y-on-Y) January -


June 2022


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


June 2022..


Figure 3.14: Major Components of Core Inflation (Y-on-Y) January -


June 2022..


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


June 2022..


Figure 3.16:
Actual and Seasonally Adjusted Headline Inflation


January - June 2022..


Figure 3.17:
OMO bills Auction (January - June 2022) ..
..
..

Figure 3.18:
Standing Lending Facility (January - June 2022)
..

Figure 3.19:
Standing Deposit Facility (January - June 2022)
..

Figure 3.20: Total FX Supply (Including Forward Sales (January -


June 2022)


Figure 3.21: Money Supply (M1), (M2) and (M3) (December 2020 -


June 2022)


Figure 3.22:
Growth in Money Supply (M1), (M2) and (M3) (Dec. 2020 -


June 2022) .. ..


Figure 3.23:
Net Domestic Assets (NDA) (January - June 2022)
..

Figure 3.24: NDA, NDC and Other Assets (Net) (January - June 2022).

Figure 3.25: Domestic Credit to Private Sector (January - June 2022).

Figure 3.26:
Weighted Average Monthly Money Market Interest Rates

(January - June 2022) ..
..

..
..

Figure 3.27:
Daily Interbank Call Rate (January - June 2022)..
..

Figure 3.28:
Daily Open Buy Back Rate (OBB) (January - June 2022)

Figure 3.29: Daily Naira/US Dollar Exchange Rate (January - June 2022) 51
Figure 3.30:
Nominal and Real Effective Exchange Rates Indices


(July 2020 - June 2022) ..


Figure 3.31:
Monthly Foreign Exchange Flows through the CBN


(Jan 2021 – June 2022) ..


Figure 3.32:
Monthly Foreign Exchange Flows through the Economy

(Jan 2021 – Jun 2022) (US$ Million)..
..
..
..

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


(Jan 2021 – June 2022)..

..
..
..

Figure 3.34:
NSE ASI and MC (December 2021 – June 2022)
..

Figure 3.35:
NSE Market Capitalisation by Sector as at End-Jun 2022

Figure 3.36: NSE Market Capitalisation by Sector as at End-June 2021 .. 57
Figure 3.37:
10-Year U.S. Dollar-denominated Bond Yield for Nigeria

(Jun 2019 – June 2022)


Figure 3.38:
FGN Bonds Yield Curves: Dec 31, 2021 vs. Mar 31, 2021


vs. Jun 29, 2022


Figure 3.39: Structure of the Nigerian Capital Market (June, 2022) ..

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

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STATEMENT BY THE GOVERNOR
M
onetary policy in the first half of 2022 was targeted at easing the impact of
shocks from both the global and domestic economic and financial
environments. The Russia-Ukraine conflict, which complicated global
vulnerabilities, increased uncertainties, and upset growth trajectories. It sparked
food and energy insecurity in many countries, which further devitalised vulnerable
households and deepened poverty. Macroeconomic challenges along with
COVID-19 infections in China also impaired global conditions.
Recent undercurrents exposed the output-inflation dilemma in many countries as
the inflation outcome and outlook soared strongly. The upshot of the Russia-Ukraine
war amplified the lingering effects of the pandemic; thus, worsening supply-chain
disruptions and accelerating inflation to levels far beyond the targets, especially in
advanced economies. Soaring inflation is triggering monetary tightening that could
push global interest rates upward and debilitate global demand. For Emerging
Market and Developing Economies (EMDEs), rising yields in advanced economies
could cause disruptive portfolio adjustments, thus heightening financial markets
fragilities, imbalances, and vulnerabilities.
In the domestic economy, uncertainties persisted around the path to containment
of the Pandemic, thus posing a challenge to the recovery of output growth. In
addition, the slow pace of vaccination across the country remained a source of
concern for monetary policy. Other factors were the lingering security challenges
including: the disruption of farming activities by herdsmen, insurgency and banditry,
legacy infrastructural deficits, high cost of energy, oil theft in the Niger Delta, as well
as exchange rate pressures from the rising capital outflows with pass-through to
domestic prices.
Nevertheless, the economy maintained a positive growth trajectory as data from
the National Bureau of Statistics (NBS) showed that Real Gross Domestic Product
(RGDP) grew by 3.11 per cent (year-on-year) in the first quarter and further improved
to 3.54 per cent in the second quarter of 2022, bolstered by the implementation of
Federal Government reforms and continuous policy support by the Central Bank of
Nigeria (CBN) to ensure adequate provision of credit to key sectors of the economy.
Inflationary pressure persisted while the foreign exchange market witnessed
significant pressure, arising from low accretion to external reserves.
The money market remained active despite the impact of external shocks on the
domestic economy, with market rates fluctuating slightly in response to changing
vii
liquidity levels in the banking system. The Nigerian capital market was generally
bullish in the review period, driven primarily by improved activities at the equities
segment of the market as investor confidence was gradually restored.
Consequently, the All-Share Index (ASI) increased by 21.31 per cent from 42,716.44
at end-December 2021 to 51,817.59 at end-June 2022.
In view of the foregoing global and domestic macroeconomic developments, the
monetary policy design and implementation was targeted at maintaining a
delicate balance between the competing objectives of mitigating inflationary
pressures and sustaining positive economic growth. Accordingly, monetary policy
assumed a tightening mode to anchor inflation expectations, while the Bank
sustained its various interventions in the real sector. During the first half of 2022, the
Monetary Policy Committee raised the MPR to 13.0 per cent; retained other policy
parameters at their extant levels, viz: asymmetric corridor of +100/-700 basis points
around the MPR; the CRR at 27.5 per cent and the Liquidity Ratio at 30 per cent.
Outlook for the domestic economy over the short-to-medium term indicates that
inflationary pressure would persist due to expectations of fuel subsidy removal,
lingering insecurity/banditry issues in agricultural producing areas of the country
causing food shortages, spillover effects from the Russian-Ukraine war, exchange
rate pressures, and increased spending in preparation for the 2023 elections.
Monetary policy will therefore aim at containing these challenges to achieve price
and financial system stability as well as inclusive growth.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
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CHAPTER ONE

1.0 OVERVIEW
his chapter presents the summary of
the entire document by highlighting
key
economic
and
financial
challenges that influenced monetary
policy as well as the attendant policy
responses by the Bank during the first half
of 2022. The challenges cover global
and domestic output, prices, monetary
policy and liquidity management as well
as the financial market.

Monetary
policy
design
and
implementation in the first half of 2022
was
influenced
by
various
developments
in
the
global
and
domestic
economic
and
financial
environments.

On the global front, while progress was
made in subduing the pandemic,
leading to the reopening of several
economies, the Russian-Ukraine war
posed new downside risks to the full
recovery of the global economy. In the
advanced
economies,
the
rise
in
inflation above the long run objectives of
some major central banks, re-enforced
the fear that central banks in this bloc
may soon return to a regime of
monetary policy normalization, which
may lead to capital outflow and
exchange rate pressures. There was
mixed inflationary pressure among the
Emerging
Market
and
Developing
Economies, with some of the economies
recording higher rates, compared with
their peers, due largely to exchange rate
pressures, capital flow reversals, high
energy costs, weak supply chains and
poor
response
to
policy
stimulus
targeted
at
alleviating
the
macroeconomic slowdown associated
with the pandemic.

In the domestic economy, uncertainties
persisted
around
the
path
to
containment of the pandemic thus
posing a challenge to the recovery of
output growth. In addition, the slow
pace of vaccination across the country
remained a source of concern for
monetary policy. Other factors were the
lingering security challenges including:
the
numerous
clashes
between
herdsmen and farmers, insurgency and
banditry; legacy infrastructural deficits;
high cost of energy; oil theft in the Niger
Delta;
as
well
as
exchange
rate
pressures from the rising capital outflows
with pass-through to domestic prices.

During the first half of 2022, the recovery
of
the
economy
which
gained
momentum in the second quarter of
2021, moderated but maintained a
positive growth trajectory. The recovery
of output growth was bolstered by the
implementation of Federal Government
reforms
including the Medium-Term
National Development Plan (MTNDP),
and the Economic Sustainability Plan
targeted
at
providing
support
for
businesses
and
households,
among
other schemes. In addition, the Central
Bank
of
Nigeria
(CBN)
provided
continuous policy support to ensure
availability of credit to key sectors of the
economy
through
the
effective
implementation of the Loan-to-Deposit
Ratio (LDR) policy; and other direct
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interventions in the Agriculture, Industry,
and Services sectors.

Data from the National Bureau of
Statistics (NBS) showed that Real Gross
Domestic Product (RGDP) grew by 3.11
per cent (year-on-year) in the first
quarter of 2022 compared with 0.51 and
3.98 per cent in the corresponding
period of 2021, and preceding quarter,
respectively. This was mainly driven by
the growth of 6.08 per cent in the non-oil
sector, an improvement from 0.79 and
4.73 per cent in the corresponding and
preceding quarters, respectively. The oil
sector, however, contracted further by
26.04 per cent in the first quarter of 2022,
compared with -2.21 and -8.06 per cent
in the corresponding period of 2021, and
preceding quarter, respectively.

On
price
development,
headline
inflation (year-on-year) increased by
3.00 percentage points to 18.60 per cent
in June 2022, from 15.60 per cent in
January 2022. Similarly, core inflation
rose by 1.88 percentage points to 15.75
per cent in June 2022, from 13.87 per
cent in January 2022. Food inflation also
rose by 3.47 percentage points to 20.60
per cent in June 2022 from 17.13 per
cent in January 2022. The prices of food
and non-alcoholic beverages were the
major drivers of headline inflation during
the review period.

During the review period, the foreign
exchange market was characterised by
strong demand pressures arising from the
sharp rise in capital outflows from the
Nigerian economy as external financial
conditions tightened. In response, the
Bank sustained its interventions in the
market to cushion demand pressures
and maintain relative exchange rate
stability. To enhance foreign exchange
inflows, the Bank introduced the RT200
Non-oil Export Proceeds Repatriation
Rebate Scheme to further diversify the
sources of foreign inflows and ensure
exchange rate stability. The Bank also
continued
the
following
schemes
targeted at improving foreign currency
liquidity: the Naira-4-Dollar Scheme;
payment of remittances in foreign
currencies
by
International
Money
Transfer Operators (IMTOs); Backward
Integration Programmes (BIP) on sugar
production;
and
the
Pan
African
Payments
and
Settlements
System
(PAPSS).

In the first half of 2022, the Nigerian
financial market witnessed heightened
uncertainties following the spill-overs
from the global economy, including the
outbreak of the Russia-Ukraine war and
receding
COVID-19
Pandemic.
Accordingly, the Bank deployed its
monetary policy toolkit to achieve its
objectives of price and macroeconomic
stability. These instruments were: The
Monetary Policy Rate (MPR); the Cash
Reserve Ratio (CRR); Liquidity Ratio (LR);
Open Market Operations (OMO) and
Discount
Window
Operations
(The
Standing
Deposit
Facility
and
The
Standing Lending Facility). In addition to
this, the Bank maintained interventions in
the foreign exchange market to improve
the effectiveness of monetary policy
instruments. The MPR remained the
Bank’s key instrument for signalling its
monetary policy stance in the review
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period.
The
MPC
adopted
a
contractionary stance by raising MPR by
150 basis points to 13.00 per cent at its
May 2022 meeting, while maintaining
the asymmetric corridor at +100/-700
basis points. This increase reflected the
Bank’s commitment to rein-in inflationary
pressures.

Open Market Operations (OMO) was
the primary instrument for Liquidity
Management in the first half of 2022.
Total OMO sales decreased substantially
by 89.11 per cent to N688.12 billion in the
first half of 2022 from N6,319.46 billion in
the
preceding
half
of
2021.
The
development was a decrease of 61.63
per cent compared with N1,793.25
billion in the corresponding period of
2021.

The money market remained active
despite the impact of external shocks on
the domestic economy. Money market
rates fluctuated slightly in the first half of
2022 with changing liquidity levels in the
banking system. This was driven by
injections such as the statutory monthly
disbursement of funds to both States and
Local governments from the Federation
Account Allocation Committee (FAAC);
maturities of government securities; as
well as the sale of OMO bills and various
CBN
interventions.
The
interbank
segment
of
the
market,
however,
witnessed few trading days compared
with the collaterized OBB segment,
signposting the continued perception of
counterparty risk.

The performance of the Nigerian capital
market in the first half of 2022 was
generally bullish, driven primarily by
increased activities in the
equities
segment
of
the
market
reflecting
sustained
investor
confidence.
The
positive
performance
was
largely
attributed to improved foreign investor
participation in the Nigerian capital
market
on
account
of
increased
corporate
earnings
and
foreign
exchange liquidity. In the bond market,
real
yields
declined
progressively,
particularly for corporate, States, and
Local government bonds, as inflation
trended upwards. Consequently, the AllShare Index (ASI) increased by 21.31 per
cent to 51,817.59 at end-June 2022 from
42,716.44
at
end-December
2021.
Market
capitalization
(MC)
also
increased by 25.29 per cent to N27.94
trillion at end-June 2022 from N22.30
trillion
at
end-December
2021.
Compared
with
the
corresponding
period of 2021, it increased by 41.40 per
cent from N19.76 trillion at end-June
2021.

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

In terms of outlook, the domestic
economy
is
expected
to
recover
through the second half of 2022. The
expectation is hinged on improved
growth prospects on the back of
sustained growth in non-oil GDP driven
by agriculture and a robust recovery in
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services, mainly telecommunications,
and financial services.. Additionally, the
effective
implementation
of
the
Medium-Term National Development
Plan
(MTNDP);
improvement
in
manufacturing activities; the positive
impact of CBN interventions on growthenhancing sectors; improvement in the
business confidence index; and an
average oil price of US100 per barrel, are
all expected to drive the expected
recovery in 2022. On the downside,
however, supply chain disruptions arising
from intermittent shortages of premium
motor spirit (PMS) and diesel, rising
energy prices owing to the RussiaUkraine war, and legacy challenges
such as poor power and transport
infrastructure, could affect domestic
production and distribution activities..
Based on these developments, staff
forecasts indicate that real GDP could
grow by 3.33 percent in 2022.

Staff
forecasts
also
indicated
that
inflation is likely to increase to 19.09
percent in July 2022, which is still above
the
upper
limit
of
the
indicative
benchmark of 6–9 percent. However,
the year-on-year headline inflation is
expected to decline to 18.89 percent in
October 2022 and 18.29 percent in
December 2022. Although upside risks to
inflation in the near term remain due to
a
combination
of
monetary
and
structural factors, the contractionary
monetary policy stance adopted is
expected to moderate the inflationary
outcome.
The
upside
risks
include
expectations of fuel subsidy removal,
lingering
insecurity/banditry
in
agricultural-producing
areas
of
the
country causing food shortages, spillover
effects from the Russian-Ukraine war,
and
increased
spending
for
the
upcoming 2023 general elections. Other
factors which could potentially induce
inflationary pressure are exchange rate
pressures, capital inflow reversals, and
an
increase
in
fiscal
deficits..
Nonetheless, as the Bank continues to
manage liquidity conditions through a
mix of conventional and unconventional
policies in the domestic economy,
inflationary developments would be
monitored to ensure that the risks to
inflation and growth are minimized.

Monetary
policy
formulation
and
implementation will therefore aim at
containing these challenges to achieve
objectives of price and financial system
stability supportive of inclusive growth.


CBN Monetary Policy Review

CHAPTER TWO
THE GLOBAL ECONOMY

2.1
Global Output
lobal growth projection was
revised downwards to 3.2 per
cent in 2022 from the earlier
figure of 4.4 per cent, compared with 6.1
per cent in 2021 (IMF WEO, July 2022).
The downward revision was on account
of several factors such as the continued
COVID-19 pandemic which resulted in
lockdowns in major industrial cities in
China. The outbreak of war between
Russia and Ukraine on 24th February 2022
and the sanctions imposed on Russia by
the United States and NATO member
countries, further aggravated supply
chain disruptions and introduced a new
dimension of risk to global output
recovery. The increased supply chain
disruptions and pent-up demand postCOVID-19 lockdown resulted in a sharp
rise in inflationary pressure across several
countries. In the meantime, policy
support
continued
across
several
economies to mitigate the downside
risks to the recovery. Fiscal policy
maintained a strong momentum leading
to rising public debt levels with growing
concern
by
monetary
authorities.
Consequently,
advanced
economy
central
banks
commenced
the
normalization of monetary policy in early
2022 to address these concerns.

Output
growth
in
the
Advanced
Economies was projected to slow to 2.5
per cent in 2022 from 5.2 per cent in
2021. The slowdown is anticipated on
account of supply chain disruptions and
rising inflation, which are progressively
weakening
the
global
economic
environment. The US was forecast to
grow by 2.3 per cent in 2022 down from
5.7 per cent in 2021, driven by slowdown
in
private
sector
inventory
and
contraction in residential investment. The
rise in interest rates as the Fed returned
to
aggressive
monetary
policy
normalization to curb the rising inflation,
is also expected to adversely impact
investment and consumption.

In the Euro area, output growth was
projected at 2.6 per cent in 2022
compared with 5.3 per cent in 2021. The
moderation
was
due
to
reduced
spending by households and businesses
as rising inflation weakened purchasing
power.

Real GDP in the United Kingdom was
projected to grow by 3.2 per cent in 2022
down from 7.4 per cent in 2021. The
moderation was informed by weakening
economic conditions as a result of
declining real wage growth and rising
energy costs. The Japanese economy
was forecast to grow by 1.7 per cent in
2022,
same
as
in

on
the
expectation
of
sustained
demand
driven by improvement in consumption
and investment expenditures.

In the Emerging Markets and Developing
Economies (EMDEs), growth is projected
at 3.6 per cent in 2022, down from 6.8 per
cent in 2021. This was premised on the
impact of the disruption to the global
supply chain due to Russia-Ukraine war
and the residual impact of the COVID-19
pandemic which continued to exert
G
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adverse effect on China. Others factors
included: the fiscal constraints faced by
oil importing countries from the rising
cost of crude oil and other commodities,
and rising interest rates exacerbating the
already huge public debt portfolios of
some economies in the group.

The Chinese economy was forecast to
grow by 3.3 per cent in 2022, a significant
decline from 8.1 per cent in 2021. The
development
was
premised
on
resurgence of the COVID-19 infections,
which led to the re-imposition of
lockdowns in some major industrial cities,
resulting in supply chain bottlenecks, as
well as increasing vulnerability in the
country’s real estate sector.The growth
of key economies in the group such as
India, Brazil and South Africa were
forecast to moderate by 7.4, 1.7 and 2.3
per cent in 2022 from 8.7, 4.6 and 4.9 per
cent,
respectively,
in
2021.
The
moderation in India was driven by less
favourable
external
conditions
and
rapid policy tightening, while in South
Africa, it was informed by legacy energy
and labour market crisis resulting in weak
economic
fundamentals.
In
Brazil,
extreme
weather
condition,
high
inflation
and
rising
interest
rates,
constrained
its
recovery
from
the
pandemic.

In sub-Saharan Africa, output growth
was projected at 3.8 per cent in 2022
from 4.6 per cent in 2021. This projection
was
largely
informed
by
adverse
inflationary
impact
resulting
from
disruptive global supply chains and
energy markets which continue to
constrain economic activities in most
countries
in
the
region.
The
development was further accentuated
by the limited fiscal space of most
countries in the region to support the
recovery.

2.2
GLOBAL INFLATION
In the first half of 2022, global inflation
remained elevated largely driven by
supply side factors. These include supplyside
constraints
associated
with
sanctions
imposed
on
Russia
and
blockage of access to grains and other
commodities from Ukraine; and the cut
in gas supply to Europe by Russia leading
to a sharp rise in energy prices.

In the advanced economies, the high
cost
of
energy
has
led
to
an
unprecedented rise in prices of goods
and services. In the emerging market
and developing economies, especially
among the oil importing countries, there
was a sharp rise in inflationary pressure,
transmitted through the rising cost of
importation
of
refined
petroleum
products. Other drivers of inflation
included
exchange
rate
pressures
associated with a rise in capital outflows
as well as the impact of legacy
infrastructural
deficits.
Accordingly,
global inflation was projected at 8.3 per
cent in 2022 and was forecast at 6.6 and
9.5 per cent for the advanced and
emerging
market
economies,
respectively.

Advanced economy central banks’
response to inflationary pressures was a
synchronized return to monetary policy
normalization,
further
aggravating
CBN Monetary Policy Review

exchange rate pressures in the emerging
market
economies.
EMDEs
equally
responded by hiking policy rates, though
at a slower pace, due to substantially
weak recovery from the COVID-19
Pandemic.

In the advanced economies, inflation in
the United States (US) averaged 7.68 per
cent in 2022 compared with 4.69 per
cent in 2021, reflecting rising cost of
energy, transportation, food and shelter.
Inflation in the Eurozone averaged 5.25
per cent in 2022 compared with 2.59 per
cent in 2021 on account of surging
energy and beverage prices, amongst
others. In the United Kingdom, inflation
averaged 7.40 per cent in 2022 from 2.59
per cent in 2021, driven largely by the
sustained increase in global energy
prices as well as rising cost of housing
and utilities. Inflation in Japan averaged
0.98 per cent in 2022 from -0.26 per cent
in 2021, as exchange rate pressure and
rising cost of energy pushed prices
upwards.

Among the Emerging Markets and
Developing Economies, the Chinese
inflation rose to 2.08 per cent in 2022
from 0.85 per cent in 2021. Average
inflation in India nudged up to 6.08 per
cent in 2022 compared with 5.52 per
cent in 2021. In Russia, the ensuing
depreciation of the currency as a result
of the impact of the war against Ukraine
led to a significant rise in inflation to 21.32
per cent in 2022 compared with 6.69 per
cent in 2021.

In Latin America and the Caribbeans,
the Brazilian inflation averaged 8.22 per
cent in 2022 compared with 8.3 per cent
in 2021, reflecting the stability of the
currency as oil prices remained upbeat
in the global market.

In Sub-Saharan Africa, inflation in South
Africa averaged 5.73 per cent in 2022
compared with 4.55 per cent in 2021,
driven by high energy prices and legacy
labour market issues. In Nigeria, average
inflation declined marginally to 16.14 per
cent in 2022 from 16.95 per cent in 2021,
driven by the impact of base effect. In
Ghana,
consumer
price
inflation
averaged 16.21 per cent in 2022 from
9.98 per cent in 2021, driven by sustained
exchange rate depreciation and rising
cost of transportation, housing & utilities.

2.3
Global
Financial
Market
Developments
In the review period, global financial
conditions
became
less
accommodative due to a multiplicity of
developments. In the early stages, the
post-COVID-19 lockdown expansionary
policies of various governments, resulted
in the build-up of a huge global debt
portfolio which, following the weakening
of recovery, created the risk of debt
distress. Subsequently, monetary policy
normalization by major central banks led
to rising interest rates thus limiting access,
particularly by the EMDEs, to the global
financial markets.

2.3.1 Money Market and Central Bank
Policy Rates
In the first half of 2022, major advanced
economy central banks commenced
CBN Monetary Policy Review

monetary
policy
normalisation
as
inflationary pressures, earlier thought to
be transitory, intensified. In response to
this, several emerging market central
banks also commenced policy rate
hikes to slowdown the outflow of
portfolio capital to advanced economy
assets, as well as tame inflationary
pressures. Most of the fourteen (14)
central banks surveyed in the review
period had commenced one form of
monetary policy tightening or the other,
with the US Federal Reserve Bank and
the Bank of England taking the lead.

In the advanced economies, the key
drivers of inflationary pressures which
informed
the
commencement
of
monetary policy normalization were: the
persistence of the COVID-19 Pandemic,
which continued to disrupt the smooth
functioning of the global supply chain
especially in China; the rise in energy
cost and further disruption of the global
supply chain, associated with the RussiaUkraine war; as well as the impact of
sanctions on Russia and associated
backlash, particularly on the price crude
oil and other commodities. In response
to these factors, the Bank of England
(BoE) raised its monetary policy rate in
February 2022 by 100 basis points, while
the US Federal Reserve Bank followed
suit in March 2022 with the policy rate
hike of 25 basis points, in addition to
tapering of liquidity injections. Other
advanced economy central banks such
as the European Central Bank (ECB) and
the Bank of Japan (BoJ) kept their policy
rates unchanged throughout the review
period, however, both Central Banks
began
their
monetary
policy
normalisation by significantly tapering
their bond purchase programme.

In the EMDEs, monetary policy tightening
became necessary to address the sharp
rise
in
inflationary
pressures
mostly
associated with depreciating currencies
as portfolio investors sought advanced
economy securities with improved yields.
The Reserve Bank of India, South African
Reserve Bank, the Central Banks of Brazil,
Egypt, Kenya and Nigeria all raised their
policy rates to address these concerns.
The Peoples Bank of China was the only
exception in this group, holding its policy
rate constant throughout the period
after it lowered in the previous half year.
The Central Bank of Russia commenced
the review period with a sharp policy
rate hike to address the impact of the
sanctions imposed on its economy, but
returned to an accommodative regime
mid-cycle.

Table 2.1
Policy Rates of Selected Countries December
2021 – June 2022


Source: cbrates.com
Country
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22 May-22
Jun-22
Egypt

Kenya

S. Africa

Ghana

Nigeria

Brazil

USA
0.00-0.25 0.00-0.25 0.00-0.25 0.25-0.50 0.25-0.50 0.75-1.00 1.50-1.75
Japan

Euro Area

India

Russia

China

UK

Indonesia

CBN Monetary Policy Review

2.3.2 Global Capital Markets
The
performance
of
major
stock
markets across the globe in the first half
of 2022, broadly reflected bearish trends.
This was driven by the series of shocks to
the global economy, necessitating the
commencement of monetary policy
normalization
which
resulted
in
improved
yields
on
fixed
income
securities as central banks raised their
policy rates.

In Europe, the United Kingdom FTSE 100,
French CAC 40, and German DAX
indices decreased by 3.2, 17.5 and 19.9
per cent, respectively, in the same
period.

In North America, the United States S&P
500, Canadian S&P/TSX Composite and
Mexican Bolsa indices all declined by
21.4,
11.7
and
10.9
per
cent,
respectively. The rise in policy rate by the
US
Fed,
strongly
improved
the
attractiveness of dollar denominated
fixed income securities, thus resulting in
the movement of capital from the stock
market to treasury instruments.

In South America, the Brazilian Bovespa
Stock and Colombian COLCAP indices
both decreased by 6.7 and 4.6 per cent,
respectively, while the Argentine Marvel
increased by 4.2 per cent.

In Asia, the Chinese Shanghai Stock
Exchange-A, Japanese Nikkei 225, and
Indian BSE Sensex indices decreased by
8.3, 6.6 and 9.0 per cent, respectively.

In Africa, the South African JSE All-Share,
Ghanaian GSE All-Share, Nairobi NSE 20
and Egyptian EGX Case 30 indices
declined by 10.0, 15.2, 22.8 and 8.9 per
cent, respectively, in the review period.
The Nigerian NGX All-Share, however,
grew by 21.3 per cent.


CBN Monetary Policy Review

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

Source: Bloomberg

2.3.3 Bond Market and Sovereign Yields
The 10-year U.S. Treasury Bond was used
as
a
benchmark
to
gauge
the
performance of similar bonds in other
countries. Their outcome of the yield
spread over the US treasury bond were
as
follows:
Ghana,
Nigeria,
Brazil,
Mexico, Canada, Greece and Italy with
yield spreads of 1,758, 965, 334, 222, 31,
26 and 23 basis points, respectively, were
considered higher credit risk countries
than the US.

In contrast, Japan, Germany, France,
UK, Portugal, Spain and China with yield
spreads of minus 280, 179, 111, 79, 62, 61
and 20 basis points, respectively, suggest
stronger credit worthiness than the US.

The yield spread of Nigerian sovereign
bonds of 965 basis points, higher than
the yield on the U.S 10-year benchmark
bond indicates a high-risk premium and
therefore attracts a high return for
investors. However, Ghana with a yield
spread of 1,758 basis points higher than
the yield on the U.S. 10-year benchmark
CBN Monetary Policy Review

bond suggests a higher risk premium
than the Nigerian sovereign bond.


Table 2.3: Sovereign Yields Spreads (Benchmark 10-Year Government Bonds) as at June 30, 2022


2.3.4 Global Commodity Prices
In
the
first
half
of
2022,
global
commodity prices increased sharply,
reflecting the continued impact of the
COVID-19 Pandemic, the Russia-Ukraine
war and tightening external financial
conditions
associated
with
the
commencement of monetary policy
normalization.

Consequently,
the
IMF
primary
commodity price index rose by 20.70 per
cent to 230.30 points at end-June 2022
compared with 190.80 points at endDecember
2021.
Nevertheless,
the
performance of the sub-indices under
the primary commodity index were
mixed. The sub-indices of energy, edibles
and non-fuel rose by 35.92, 9.29 and 4.36
per cent to 328.10, 152.90 and162.7
points at end-June 2022 from 241.40
,139.90
and
155.9
points
at
endDecember 2021, respectively. Those of
industrial inputs and metals, however,
decreased by 1.63 and 4.11 per cent,
respectively, to 180.40 and 200.30 points
at end-June 2022 from 183.40 and 208.90
points at end-December 2021.

In the oil sector, actual prices per barrel
of the OPEC Reference Basket rose by
27.34 per cent to US$108.55 per barrel at
end-June 2022 from US$85.24 per barrel
at end-December 2021.

The Food and Agriculture Organization
(FAO) Food Price Index rose by 14.08 per
CBN Monetary Policy Review

cent to 154.70 points at end-June 2022
from 135.60 points at end-December
2021. The sub-indices of vegetable oils,
sugar, cereals, dairy and meat all
increased, by 13.93, 4.08, 18.19, 13.27
and 12.31 per cent, respectively, to
211.80, 117.30, 166.30, 150.20 and 125.90
index points at end-June 2021 from
185.90,112.70, 140.70, 132.60 and 112.10
points at end-December 2021.

2.3.5 Global Foreign Exchange Market
In the first half of 2022, most currencies
surveyed depreciated against the US
dollar, following the commencement of
interest rate lift-off by the US Federal
Reserve Bank. This development resulted
in a sharp appreciation of US dollar
denominated assets, causing investors
to exit emerging markets in favour of
higher yield US and other advanced
economy
treasury
securities.
The
sustained increase in macroeconomic
risk around the globe, arising from the
continued spread of the COVID-19
Pandemic and the outbreak of war
between Russia and Ukraine, further
increased the desire by investors for low
risk-high yield securities. In generally,
there was a build-up of exchange rate
pressures as portfolio and other investors
moved into the US fixed income market.
In Europe, the Euro and the British pound
depreciated against the US dollar by
9.76 and 7.37 percent, respectively.
However, the Russian ruble appreciated
by
37.51
per
cent
following
the
Government’s policy to only accept
payments for its crude oil in Russian ruble
thus
spiking
the
demand
for
the
currency.

In North America, the Canadian dollar
depreciated by 2.33 per cent, while the
Mexican peso appreciated by 1.99 per
cent.

In South America, the Argentinian and
Colombian peso both depreciated by
17.94 and 2.13 per cent, respectively. In
contrast, the Brazilian real appreciated
against the US dollar by 5.89 per cent
due to the increase in crude oil prices.

In Asia, the Japanese yen, Chinese yuan
and the Indian rupee all depreciated by
15.20,
5.07
and
5.96
per
cent,
respectively.

In Africa, the Nigerian Naira, at the
Investors and Exporters (I&E) segment of
the
market,
appreciated
by
4.59
percent against the US dollar, while the
South African rand, Kenyan shilling, the
Egyptian pound, and Ghanaian cedi all
depreciated by 2.09, 4.04, 16.44 and
23.33 per cent, respectively.


CBN Monetary Policy Review

Table 2.4: Exchange Rates of Selected Countries (value in currency units to US$)
Continent
Currency
30-Jun-21
31-Dec-21
30-Jun-22
YTD* (% App/Dep)
YoY % App/Dep
AFRICA
a
b
c
d
YTD(%)
YoY(%)a/d
Nigeria
Naira (I & E)

South Africa
Rand

Kenya
Shilling

Egypt
Pound

Ghana
Cedi

NORTH
AMERICA
Canada
Dollar

Mexico
Peso

SOUTH
AMERICA
Brazil
Real

Argentina
Peso

Colombia
Peso

EUROPE
UK
Pound

Euro Area
Euro

Russia
Ruble

ASIA
Japan
Yen

China
Yuan

India
Rupee

Source: Bloomberg
Exchange Rates of Selected Countries (Value in currency units to US$)


CBN Monetary Policy Review

CHAPTER THREE
THE DOMESTIC ECONOMY

3.1
Output in the Domestic Economy
uring the first half of 2022, the
recovery of the economy which
gained
momentum
in
the
second quarter of 2021, moderated but
maintained a positive growth trajectory.
The recovery of output growth was
bolstered by the implementation of
Federal Government reforms including
the
Medium-Term
National
Development Plan (MTNDP), and the
Economic Sustainability Plan targeted at
providing support for businesses and
households, among other schemes. In
addition to this, the Central Bank of
Nigeria
(CBN)
provided
continuous
policy support to ensure adequate
provision of credit to key sectors of the
economy
through
the
effective
implementation of the Loan-to-Deposit
Ratio (LDR) policy; and other direct
interventions in the Agriculture, Industry,
and Services sectors.

Data from the National Bureau of
Statistics (NBS) showed that Real Gross
Domestic Product (RGDP) grew by 3.11
per cent (year-on-year) in the first
quarter of 2022 compared with 0.51 and
3.98 per cent in the corresponding and
preceding quarters respectively. This
was mainly driven by the growth of 6.08
per cent in the non-oil sector, an
improvement from 0.79 and 4.73 per
cent
in
the
corresponding
and
preceding quarters, respectively. The
key drivers of growth in the non-oil sector
were Services (7.45%), Industry (5.46%)
and Agriculture (3.16%). Accordingly,
the contribution of the non-oil sector to
real GDP rose to 93.37 per cent in the first
quarter of 2022 from 90.75 per cent in the
corresponding
period
of
2021.
It,
however,
declined
moderately
compared with 94.81 per cent in the
preceding quarter.

The oil sector, however, contracted
further by 26.04 per cent in the first
quarter of 2022, compared with -2.21
and -8.06 per cent in the corresponding
period
and
preceding
quarter,
respectively.
Consequently,
average
daily oil production fell to 1.49 million
barrels per day (mbpd) in the first quarter
of 2022, compared with 1.72 mbpd and
1.50 mbpd in the corresponding and
preceding quarters, respectively. This
decline
resulted
from
ongoing
operational
inefficiencies
and
production short-ins. In addition, poor
investment in the sector has affected
exploration and production in Nigeria.

In the second quarter of 2022, real Gross
Domestic Product strengthened to 3.54
per cent (year-on-year) compared with
3.11 per cent in the preceding quarter,
which was, however, lower than 5.01 per
cent in the corresponding period of
2021. The growth was mainly driven by
the non-oil sector which grew by 4.77 per
cent. The key drivers of growth in the
non-oil sector were Services (6.07%),
Industry (3.05%) and Agriculture (1,20%).
The non-oil sector contributed 93.67 per
cent to real GDP in the second quarter
of 2022 compared with 92.58 and 93.37
per cent in the corresponding and
preceding quarters, respectively.
D
CBN Monetary Policy Review

The oil sector, however, contracted by
11.77 per cent (year-on-year) in the
second
quarter
of
2022,
an
improvement,
compared
with
the
deeper contractions of 12.65 and 26.04
per cent in the corresponding and
preceding
quarters,
respectively.
Average daily oil production fell further
to 1.43 million barrels per day (mbpd) in
the review period from 1.61 and 1.49
mbpd
in
the
corresponding
and
preceding quarters, respectively.

Figure 3.1: Gross Domestic Product Growth Rate
(2020Q1 – 2022Q2)

Source: National Bureau of Statistics (NBS)


3.1.1 DOMESTIC ECONOMIC ACTIVITIES
In the first half of 2022, real GDP was
driven by activities in both the non-oil
and oil sectors. The non-oil sector grew
by 6.08 per cent in the review period,
5.29 percentage points above the
growth
of
0.79
per
cent
in
the
corresponding period of 2021 and 1.35
percentage points above the 4.73 per
cent growth in the preceding quarter.
The non-oil sub-sectors which drove
overall growth were: Financial and
Insurance
(23.24%);
Mining
and
Quarrying
(14.16%);
Water
Supply,
Sewage,
and
Waste
Management
(13.22%);
Information
and
Communication (12.07%); Trade (6.54%);
Human Health & Social Services (5.91%);
Manufacturing
(5.89%);
Livestock
(5.55%); and Construction (4.83%). These
compare
favourably
with
their
respective growth rates of -0.46, 3.79,
14.75, 6.47, -2.43, 4.65, 3.40, 1.65 and 1.42
per cent in the corresponding period of
2021.

Output in the oil sector, however,
recorded a deeper contraction of 26.04
per cent in the first quarter of 2022
compared with -2.21 and -8.06 per cent
in
the
in
the
corresponding
and
preceding
quarters,
respectively.
Consequently,
average
daily
oil
production fell to 1.49 mbpd in the first
quarter of 2022, compared with 1.72 and
1.50 mbpd in the corresponding and
preceding quarters, respectively.

In the second quarter of 2022, growth in
the non-oil sector moderated to 4.77 per
cent compared with 6.74 and 6.08 per
cent
in
the
corresponding
and
preceding quarters, respectively. The
drivers of growth in the non-oil sector
were: Transport & Storage (51.66%);
Water
Supply,
Sewage
&
Waste
Management
(23.73%);
Mining
&
Quarrying
(20.95%);
Financial
&
Insurance (18.48%); and Information &
Communication
(6.55%).
These
compare with their respective growth
rates in the corresponding period of
76.81, 18.48, 9.79, -2.48 and 5.55 per
cent.

Q1-2020
Q1-2021
Q1-2022
Per cent
CBN Monetary Policy Review

In the review period, the contraction in
the oil sector moderated to -11.77 per
cent (year-on-year) compared with -
12.65 and –26.04 per cent in the
corresponding and preceding quarters,
respectively. In the same vein, average
daily crude oil production fell further to
1.43 mbpd in the second quarter of 2022
from 1.61 and 1.49 mbpd in the
corresponding and preceding quarters,
respectively.

Figure 3.2: Non-oil Sector Performance (2020Q1 –
2022Q2)

Source: NBS

Figure 3.3: Performance of oil Sector (2020Q1 –
2022Q2)

Source: NBS

3.1.2 Sectoral Analysis
The key factors that contributed to
output growth in major sectors in the
review period are analysed in this
section.

3.1.2.1 Agriculture
In the first quarter of 2022, growth in real
agricultural output increased to 3.16 per
cent, compared with 2.28 per cent in the
corresponding period of 2021, but
represented a decline compared with
3.58 per cent in the fourth quarter of
2021. Output growth in the sector was
driven by livestock, which grew by 5.55
per cent in the first quarter of 2022,
compared with 1.65 and 0.14 per cent in
the
corresponding
and
preceding
quarters, respectively. This was followed
by fishing which grew by 3.14 per cent in
the first quarter of 2022, a moderation
compared with 3.24 per cent in the
corresponding quarter of 2021, but an
improvement compared with 1.69 per
cent in the preceding quarter. Crop
production grew by 2.97 per cent in the
first quarter of 2022, compared with 2.31
per cent in the corresponding period of
2021, but moderated relative to 3.87 per
cent in the preceding quarter. The share
of the agriculture sector in overall GDP
declined from 26.84 per cent in the
preceding quarter to 22.36 per cent in
the first quarter of 2022, which compares
with 22.35 per cent in the corresponding
quarter of 2021.

During the second quarter of 2022,
growth
in
real
agricultural
output
moderated to 1.20 per cent compared

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

Q1-2020 Q4-2020 Q3-2021 Q2-2022
Per cent
CBN Monetary Policy Review

with 1.30 and 3.16 per cent in the
corresponding and preceding quarters,
respectively. Crop production grew by
1.54 per cent in the second quarter of
2022 compared with 1.36 and 2.97 per
cent
in
the
corresponding
and
preceding quarters, respectively. This
was followed by Forestry which grew by
1.29 per cent compared with 1.06 and
1.37 per cent in the corresponding and
preceding quarters, respectively. The
fishing sub-sector also grew by 0.89 per
cent in the second quarter from 2.27 and
3.14 per cent in the corresponding and
preceding quarters, respectively. The
moderation in performance of the
sector
was
largely
driven
by
the
contraction of 2.87 per cent in the
livestock sub-sector in contrast to the
growth of 0.13 and 5.55 per cent in the
corresponding and preceding quarters,
respectively. The share of the agriculture
sector in overall GDP improved from
22.36 per cent in the preceding quarter
to 23.24 per cent in the second quarter
compared
with
23.78
in
the
corresponding quarter.

Figure 3.4: Sub-Components of Agricultural Sector
Growth (2020Q1 – 2022Q2)

Source: Statistics Department
3.1.2.2 Agricultural
Policies
and
Institutional Support
During the review period, the Bank
continued
its
interventions
in
the
agricultural sector to support economic
recovery using a variety of existing
policies, and institutional support, as
highlighted below:

3.1.2.2.1
Commercial Agriculture
Credit Scheme (CACS)
Under the Scheme, ₦28.30 billion was
disbursed to twelve beneficiaries across
large-scale agro-enterprises in the first
half of 2022, compared with ₦13.27
billion in the second half of 2021. A total
of ₦32.86 billion was, however, repaid in
the review period compared with ₦48.14
billion in the second half of 2021.

3.1.2.2.2
Micro, Small and Medium
Enterprises Development Fund
(MSMEDF)
Under
the
Fund,
there
was
no
disbursement in the first half of 2022,
compared with ₦686.20 million in the
second half of 2021. Repayments during
the review period totalled ₦2.52 billion,
compared with ₦2.82 billion in the
second half of 2021.

3.1.2.2.3
Anchor
Borrowers’
Programme (ABP)
In the first half of 2022, the sum of ₦35.52
billion
was
disbursed
to
28,876
smallholder farmers across the country to
produce selected commodities such as
rice, maize and wheat, compared with
₦246.67 billion to 679,776 smallholder
farmers in the second half of 2021. In
addition, a total of 128,579 hectares of

Per cent
Crop Production
CBN Monetary Policy Review

land was cultivated, compared with
1,123,684 hectares in the second half of
2021.
Repayments
under
the
Programme stood at ₦42.99 billion in the
review period, compared with ₦196.48
billion in the preceding period.

3.1.2.2.4
Accelerated
Agriculture
Development Scheme (AADS)
The Scheme disbursed the sum of ₦1.50
billion in the first half of 2022, compared
with ₦36.12 million in the second half of
2021. A total of ₦4.37 billion was repaid
in the period under review, compared
with ₦5.31 billion in the second half of
2021.

3.1.2.2.5
Agribusiness/
Small
and
Medium Enterprises Investment
Scheme (AGSMEIS)
In the review period, ₦1.60 billion was
disbursed to 2,720 projects under the
Scheme, compared with ₦22.92 billion
to 8,538 projects in the second half of
2021. Repayment in the review period
was ₦0.766 billion, compared with ₦1.16
billion in the second half of 2021.

3.1.2.2.6 Paddy Aggregation Scheme
(PAS)
The sum of ₦6.20 billion was channelled
to three (3) projects under the Scheme
in the first half of 2022, with no
disbursement in the preceding period.
Due to the extension of a moratorium to
beneficiaries of the intervention, there
was no repayment in the review period,
compared with the repayment of ₦4.67
billion in the second half of 2021.

3.1.2.2.7
National Food Security
Programme (NFSP)
Under the Programme, no disbursement
was made in the review and preceding
periods. Repayment in the first half of
2022 was ₦2.03 billion, compared with
₦2.30 billion at end-December 2021.

3.1.2.3 Industry
The industrial sector contracted by 6.81
per cent in the first quarter of 2022,
following a milder contraction of 0.05 per
cent in the fourth quarter of 2021. It,
however, grew moderately by 0.94 per
cent in the corresponding period of
2021. The contraction resulted from the
weak
performance
of
Mining
&
Quarrying which contracted by 25.89
per cent in the first quarter of 2022
following contractions of 2.19 and 6.16
per cent in the corresponding and
preceding
quarters,
respectively.
Electricity, Gas, Steam & Air conditioner
also contracted by 11.20 per cent in the
first quarter of 2021 in contrast to growth
of 8.66 and 2.78 per cent in the
corresponding and preceding quarters,
respectively. The contraction in the
sector was moderated by growth in
Water
Supply,
Sewage
&
Waste
Management, which grew by 13.22 per
cent in the first quarter of 2022,
compared with 14.75 and 28.84 per cent
in the corresponding and preceding
quarters, respectively. This was followed
by the Manufacturing, and Construction
sub-sectors which grew by 5.89 and 4.83
per cent in the first quarter of 2022, from
3.40
and
1.42
per
cent
in
the
corresponding period of 2021, and 2.28
CBN Monetary Policy Review

and 3.46 per cent in the preceding
quarter, respectively.

In the second quarter of 2022, the
industrial sector contracted by 2.30 per
cent compared with a contractions of
1.23 per cent and 6.81 per cent in the
corresponding and preceding quarters,
respectively. Electricity, Gas, Steam & Air
Conditioner led the contraction by 11.48
per cent in the review period and 11.20
per cent in the preceding quarter in
contrast to a growth of 78.16 per cent in
the corresponding quarter of 2021.
Mining & Quarrying also contracted by
11.09
per
cent
compared
with
contractions of 12.29 and 25.29 per cent
in the corresponding and preceding
quarters, respectively. Water Supply,
Sewage
&
Waste
Management,
however, grew by 23.73 per cent in the
second quarter of 2022 compared with
18.48 and 13.22 per cent in the
corresponding and preceding quarters,
respectively. This was followed by the
Construction and Manufacturing subsectors which grew by 4.02 and 3.00 per
cent in the second quarter of 2022
compared with 3.70 and 3.49 per cent in
the corresponding period of 2021 and
4.48 and 5.89 per cent in the preceding
quarter, respectively. The share of the
Industrial sector in overall GDP in the
review period was 19.40 per cent
compared with 20.57 and 21.47 per cent
in the corresponding and preceding
quarters, respectively.


Figure 3.5: Sub-Components of Industry Sector
Growth (2020Q1-2022Q2)

Source: Statistics Department

3.1.2.3 Industrial
Policies
and
Institutional Support
The industrial sector benefited from
several policy measures, incentives and
programmes during the review period,
some of which are highlighted below:

3.1.2.3.1 Real Sector Support Facility
(RSSF)
There was no disbursement under this
Facility in the review period, due to
discontinuation
of
the
intervention.
Repayments totalling ₦21.65 billion was,
however, made in the first half of 2022
compared with ₦6.62 billion in the
preceding period.

3.1.2.3.2 RSSF Using Differentiated Cash
Reserve Ratio (RSSF-DCRR)
The sum of ₦210.29 billion was disbursed
to 34 projects in the first half of 2022,
compared with ₦476.30 billion to 39
projects in the second half of 2021.
Repayments
of
₦18.50
billion
was
received in the first half of 2022,

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

compared with ₦80.72 million in the
preceding period.

3.1.2.3.3
Non-oil
Export
Stimulation
Facility (NESF)
The primary aim of the facility, amongst
others, is to support local companies to
enhance capacity and take advantage
of opportunities presented by the Africa
Continental
Free
Trade
Agreement
(AfCFTA). There was no disbursement in
the review period. Repayments totalling
₦2.00 billion was made in the first half of
2022, compared with ₦3.88 billion in the
preceding period.

3.1.2.3.4 Export Development Facility
(EDF)
The Facility was established to improve
access of exporters to concessionary
finance
towards
expansion
and
diversification of the non-oil export
basket. A disbursement of ₦17.08 billion
was made to 15 projects in the review
period, while no disbursement was
made in the preceding period. There
was also no repayment in the review
and preceding periods as some facilities
were under moratorium.

3.1.2.3.5 Presidential Fertilizer Initiative
(PFI)
Under this initiative, there was no
disbursement in the review period, the
sum
of
₦3.00
billion
was
repaid,
compared with ₦2.75 billion in the
preceding period.


3.1.2.3.6 Creative Industry Financing
Initiative (CIFI)
In the first half of 2022, there was no
disbursement under this initiative. The
sum of ₦280.24 million was, however,
repaid in the first half of 2022 compared
with ₦250.28 million in the previous half
year.

3.1.2.3.7 Targeted Credit Facility (TCF)
During the period under review, the sum
of ₦24.37 billion was disbursed to 50,302
projects, compared with ₦69.91 billion to
136,532 projects in the second half of
2021. There was no repayment in the
review or preceding period, as Facility
was under moratorium.

3.1.2.3.8
Shared
Agent
Network
Expansion Facility (SANEF)
Under the Facility, no disbursement was
made in the last two review periods. The
sum of ₦369.25 million was repaid in the
first half of 2022 compared with ₦136.88
million repaid in the second half of 2021.

3.1.2.3.9 Nigeria Youth Investment Fund
(NYIF)
Under
the
Fund,
there
was
no
disbursement in the review period
compared with ₦881.85 million in the
second half of 2021. Repayments,
however,
totalled
₦278.50
million
compared with ₦2.62 billion in the
preceding period.

3.1.2.3.10 Health Sector Intervention
Fund (HSIF)
The Fund disbursed the sum of ₦17.21
billion to 11 projects in the first half of
2022, compared with ₦11.05 billion to 23
CBN Monetary Policy Review

projects in the second half of 2021. No
repayment
was
made
on
the
intervention in both periods as the facility
remained under moratorium.

3.1.2.3.11 Healthcare Sector Research
and Development Intervention
Scheme (HSRDIS)
In the review period, the sum of ₦14.75
million was disbursed as additional
tranche to one (1) of the five (5)
projects/grants under the Scheme. This
was
in
addition
to
₦27.50
million
disbursed to several recipients in the
second half of 2021.

3.1.2.3.12 COVID-19 Intervention Facility
for the Manufacturing Sector
(CIMS)
In the review period, the sum of ₦413.89
billion was disbursed to 50 projects while
a repayment of ₦12.00 billion was
received. There were no disbursement or
repayment in the preceding period.

3.1.2.3.13
SME/Rediscounting
&
Refinancing Facility (SMERRF)
In the period under review, there was no
disbursement or repayment on the
facility.
In
the
preceding
period,
however, ₦2.00 billion was disbursed and
no repayment received.

3.1.2.3.14 CBN-BOI Industrial Facility
(CBIF)
In the first half of 2022, a disbursement of
₦50.00 billion was made to Bank of
Industry (BOI) as a single obligor for onlending to other borrowers, while there
was no disbursement in the preceding
half year. No repayment was received in
the current or preceding periods.

3.1.2.3.15 Textile Sector Intervention
Facility (TSIF)
There was no disbursement in the
review period under the Scheme, while
₦900.00 million was disbursed to two (2)
projects in the second half of 2021. A
repayment
of
₦8.62
billion
was,
however, made in the review period,
compared with ₦3.72 billion in the
preceding period.

3.1.2.3.16

for

Policy
for
Production and Productivity (100
for 100 PPP)
This initiative was introduced to reverse
the
country’s
heavy
reliance
on
imports, by creating an ecosystem to
target and supports projects with the
potential to catalyse and transform the
productive base of the economy. In
the review period, the sum of ₦69.13
billion was disbursed to 51 projects
across manufacturing, agriculture and
healthcare. A total repayment of ₦1.32
billion was received in the same period.

3.1.2.3.17
Tertiary
Institutions
Entrepreneurship Scheme (TIES)
This
intervention
was
recently
introduced to enhance access to
finance
for
undergraduates
and
graduates of Nigerian polytechnics
and universities, who have technology
driven innovative and entrepreneurial
ideas. The sum of ₦264.04 million has so
far been disbursed to 53 youth-led
entrepreneurial projects in the period
under review, compared with ₦29.13
CBN Monetary Policy Review

million disbursed to 6 beneficiaries in
the preceding.

3.1.2.3.18
Youth
Entrepreneurship
Development Fund (YEDP)
There was no disbursement under the
Fund in the period under review but the
sum of ₦116.94 million was repaid in the
period, compared with ₦1.52 million in
the preceding period.

3.1.2.3.19 Power and Airline Intervention
Fund (PAIF)
In the review period, no disbursement
was made under this facility compared
with ₦991.84 million in the preceding
period. The sum of ₦15.91 billion was
repaid in the first half of 2022 compared
with ₦6.57 billion in the second half of
2021.

3.1.2.3.20
Nigerian Bulk Electricity
Trading - Payment Assurance
Programme (NBET-PAF)
In the period under review, ₦26.93 billion
was disbursed under the Programme
compared with ₦301.36 billion in the
second half of 2021. A repayment of
₦322.87 billion was made in the review
period while no repayment was made in
the preceding period.

3.1.2.3.21
Nigerian
Electricity
Market
Stabilization
Facility
(NEMSF 1 & 2)
Under the Facility, the sum of ₦34.37
billion was disbursed in the first half of
2022, compared with ₦96.72 billion in the
second half of 2021. A total of ₦10.91
billion was repaid in the review period
compared with ₦14.54 billion in the
preceding period.

3.1.2.3.22
National Mass Metering
Programme (NMMP)
In the first half of 2022, the sum of ₦199.90
million
was
disbursed
under
the
Programme, compared with ₦11.79
billion in the second half of 2021. No
repayment was made as the facilities
were under moratorium.

3.1.2.3.23
Intervention Facility for
National
Gas
Expansion
Programme (IFNGEP)
Under the Programme, the sum of ₦26.00
billion was disbursed in the first half of
2022 to a total of four (4) projects,
compared with ₦24.00 billion to four (4)
projects in the second half of 2021.

3.1.3
Services Sector
During the first half of 2022, the Services
sector maintained an impressive growth
trajectory. The sector grew by 7.45 per
cent
in the
first
quarter
of

compared with 5.58 per cent in the
preceding
quarter.
It,
however,
contracted by 0.39 per cent in the
corresponding quarter of 2021. Growth
in the first quarter 2022 was driven by
sub-sectors
such
as
Financial
&
Insurance
(23.24%);
Information
&
Communication (12.07%); Trade (6.54%);
Human Health & Social Services (5.91%);
Real Estate (4.44%); Administration &
Support Services (3.73%); other services
(3.14%); Art, Entertainment & Recreation
(2.30%);
Accommodation
&
Food
Services (1.93%); Public Administration
(1.92%);
Education
(1.87%);
and
CBN Monetary Policy Review

Professional,
Scientific
&
Technical
Services (1.85%). These compare with
their respective growth rates of -0.46,
6.47, -2.43, 4.65, 1.77, -0.77, -2.95, -1.13, -
4.60, -0.88, -6.20, and -3.84 per cent in
the corresponding period of 2021.
Growth in the sector was, however,
moderated by a contraction in the
Transportation & Storage sub-sector of -
17.41 per cent from -21.89 per cent in the
corresponding period of 2021.

During the second quarter of 2022, the
Services sector moderated to 6.70 per
cent compared with 9.27 and 7.45 per
cent
in
the
corresponding
and
preceding
quarters,
respectively.
Growth in the sector was driven by
Transportation
&
Storage
(51.66%);
Financial
&
Insurance
(18.48%);
Information & Communication (6.55%);
Trade (4.51%); Real Estate (4.42%); Other
Services (3.05%); Accommodation &
Food Services (3.03%); Human Health &
Social Services (2.23%); Administration &
Support Services (2.06%); and Public
Administration (2.01%). These compare
with their respective growth rates of
76.81, -4.54, 5.55, 22.49, 3.85, 0.64, 1.97,
4.92, 4.79 and -1.68 per cent in the
corresponding period of 2021. The share
of the sector in overall GDP rose to 57.35
per cent in the second quarter of 2022
from 55.66 and 56.17 per cent in the
corresponding and preceding quarters.


Figure 3.6: Sub-Components of Services Sector
Growth (2020Q1-2022Q2)

Source: Statistics Department

3.1.4
Oil Sector
During the second half of 2022, oil
sector performance was influenced by
both
global
and
domestic
developments.
Crude
oil
prices
remained
relatively
high
in
the
international
market
driven
by
disruptions to the global supply chain
due to the ongoing war between Russia
and Ukraine and the backlash of
sanctions imposed on Russia by the
international community. Nigeria was,
however,
unable
to
fully
take
advantage of the rise in crude prices
due to incidences of oil theft, pipeline
vandalism and poor investment in the
sector.
Accordingly,
average
daily
crude oil production fell to 1.49 mbpd in
the first quarter of 2022, compared with
1.72 mbpd and 1.50 mbpd in the
corresponding and preceding quarters,
respectively.

In the second quarter of 2022, the
continued incidence of oil theft coupled

Q1-2020Q3-2020Q1-2021Q3-2021Q1-2022
Trade
Accommodation and Food Services
Transportation and Storage
Information and Communications
Arts, Entertainment & Recreation
CBN Monetary Policy Review

with vandalization of oil facilities in the
Niger Delta region affected oil output
and export. Consequently, average
daily crude oil production fell further to
1.43 mbpd from 1.61 and 1.49 mbpd in
the
corresponding
and
preceding
quarters, respectively.

Crude oil prices trended upwards during
the review period, primarily due to
supply disruptions following the RussiaUkraine war, alongside strong demand
from refiners. Consequently, the price of
Nigeria’s reference crude, the Bonny
Light 370API, stood at US$130.30 per
barrel (pb) at end-June 2022 up from
US$74.95 pb at end-December 2022,
and US$54.87 pb in the corresponding
period of 2021.

Overall, the average price of Bonny
Light in the first half of 2022 was
US$110.40 pb, which was above the
Federal Government of Nigeria’s 2022
budget benchmark of US$62.00 pb.

Figure 3.7: Quarterly Domestic Oil Production and
Export (2021Q1-2022Q2)

Source: NBS


Figure 3.8: Monthly Bonny Light Oil Price, January
2021 - June 2022
Source: Statistics Department


Q1-2020Q3-2020Q1-2021Q3-2021Q1-2022
Million Barrels Per Day

Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
CBN Monetary Policy Review

Table 3.1
Growth Rates of Real GDP by Expenditure (%), 2020Q1 - 2022Q2

Q1-2020
Q2-

Q3-

Q4-

Q1-

Q2-

Q3-

Q4-

Q1-

Q2-

GDP (Basic Price)

GDP (Market Price)

G5.36

Household Consumption


Gov. Consumption
Expenditures
6.80
148.2


Gross Fixed Capital
Formation

Net Exports


-
92.7

National Disposable
Income

Compensation of
Employees

Operating Surplus

Other Current Transfers
from RoW Net


23.4

1.40
Source: NBS

3.2
Domestic Price Developments
In
the
review
period,
inflationary
pressure intensified due largely to several
factors. A key factor that stoked prices
was the unexpected outbreak of war
between Russia and Ukraine which
significantly disrupted global supply
chains,
creating
considerable
uncertainties which spilled over to the
domestic economy. Consequently, all
three measures of inflation (headline,
food, and core), trended upwards in the
first half of 2022. Headline inflation
remained above the upper band of the
Bank’s indicative benchmark of 6-9 per
cent throughout the review period. In
general, price development in the
review
period
was
driven by the
combined impact of several supply- and
demand-side factors. The overriding
driver was, however, food inflation,
accentuated mainly by the continued
rise in food prices as a result of persisting
insecurity in food producing areas
amongst other legacy issues.

Foreign currency supply in the review
period fell short of demand due to rising
speculative demand pressures. This led
to a sharp depreciation of the currency
with
a
significant
pass-through
of
inflationary pressure to domestic prices.
Consequently, the naira weakened in all
segments
of
the
market,
with
a
significant divergence between the
official and parallel market rates. The
Bank
thus
maintained
its
foreign
currency interventions at the I&E window
to ease demand pressure and slowdown
CBN Monetary Policy Review

the rate of depreciation. This resulted in
increased pressure on the external
reserves. Policy reforms were introduced
to improve medium-term FOREX supply
to the economy. One of such reforms,
was the RT200 aimed at promoting the
repatriation of export proceeds through
official
channels.
The
Bank
also,
continued the policy on restriction of
access to foreign exchange for 43 items,
and suspension of sale of foreign
exchange to BDCs.

On the demand-side, the high level of
banking system liquidity resulted in
relatively low interest rates in both the
Inter-Bank Call and Open Buy Back
(OBB) segments of the money market.
This prevailing high level of liquidity
resulted
from
the
substantial
interventions by both the monetary and
fiscal authorities during the Pandemic. In
addition,
maturing
securities
and
Federation
Account
Allocation
Committee (FAAC) disbursements also
influenced liquidity conditions in the
banking system.
3.2.1 Trends in Inflation
The headline, core, and food measures
of inflation maintained steady upward
trajectories in the review period. The
three measures of the consumer price
index (CPI) stood at 455.4, 386.2, and
534.7 points, respectively, in June 2022
compared with 417.6, 360.4, and 484.7
points in January 2022, a remarkable
increase across all three measures.
Headline
inflation
(year-on-year)
increased by 3.00 percentage points to
18.60 per cent in June 2022, from 15.60
per cent in January 2022. Similarly, core
inflation rose by 1.88 percentage points
to 15.75 per cent in June 2022, from 13.87
per cent in January 2022. Food inflation
also rose by 3.47 percentage points to
20.60 per cent in June 2022 from 17.13
per cent in January 2022 (Table 3.2 and
Figure 3.9). The prices of food and nonalcoholic beverages were the major
drivers of headline inflation during the
review period (Table 3.2).

Table 3.2: Inflation Rates, January – June 2022
Month
Headline

Core
Food

CPI
YoY
12MMA
CPI
YoY
12MMA
CPI
YoY
12MMA
January

February

March

April

May

June

Source: National Bureau of Statistics (2022)
CBN Monetary Policy Review

Figure 3.9: Headline, Core and Food Inflation
Rates (January – June 2022)

Source: Nigerian National Bureau of Statistics data
base

3.2.1.1 Headline Inflation
The two major components of headline
inflation (food and core) increased
during the first half of 2022. The main
driver of headline inflation in the review
period was Food and Non-Alcoholic
Beverages, which increased to 12.20 per
cent in June 2022 from 10.07 per cent in
January 2022. Similarly, the prices of
housing, water, electricity, gas and other
fuels increased to 2.14 per cent in June
2022, from 1.72 per cent in January 2022.
The price of clothing and footwear rose
to 1.20 per cent from 1.07 per cent, while
the price of transport also rose to 0.97
per cent from 0.87 per cent over the
same period (Table 3.2 and Figure 3.10).
The prices of other components such as
education, health, furnishing recorded
mild increases during the period. In
general, headline inflation increased to
18.60 per cent in June 2022 from 15.60
per cent in January 2022.

The uptick in headline inflation resulted
largely from acute distortions to food
supply due to high levels of insecurity in
the country, especially in the farming
communities; perennial scarcity of PMS
and persistent rise in the price of
automated gas oil (AGO) and electricity
tariffs; and increased election-related
spending
as
most
political
parties
prepared for the 2023 general elections.
This was further exacerbated by the net
outflow
of
foreign
capital,
thus
heightening demand pressure in the
foreign exchange market.

Overall,
the
Bank
maintained
an
accommodative
monetary
policy
stance between January and May to
support the post-Pandemic recovery but
commenced
monetary
tightening
towards the end of May 2022 to rein-in
rising inflation.

Table 3.3a Major Components of Headline Inflation ((Y-on-Y), January - June 2022


Headline (Y-o-Y)
Month
Headline
Food &
NonAlcoholic
Bev.
Housing,
Water,
Elect.Gas
& Other
Fuel
Clothing
&
footwear
Transport
Furnishings,
Household
Equip &HH
Maint.
Education
Health
Miscellan
eous
Goods &
Services
Restaurant
& Hotels
Alcoholic
Bev.
Tobacco
& Kola
Recreation
& culture
Communi
cation
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

CBN Monetary Policy Review

Figure 3.10: Major Components of Headline
Inflation (Y-on-Y), January – June 2022

On a month-on-month basis, headline
inflation increased to 1.82 per cent in
June 2022 from 0.93 per cent in January.
The major drivers of month-on-month
headline inflation were: Transport, which
rose to 0.07 per cent in June 2022 from a
contraction of 5.09 per cent in January;
and Food & Non-alcoholic Beverages,
which increased to 1.30 per cent in June
2022 from 1.16 per cent in January 2022
(Table 3.3a and Figure 3.11).


Table 3.3b: Major Components of Headline Inflation (M-on-M), January - June 2022


Figure 3.11: Major Components of Headline
Inflation (M-on-M January – June 2022


3.2.1.2 Food Inflation
Food inflation (year-on-year) rose to
20.60 per cent in June 2022 from 17.13
per cent in January 2022. The main driver
was the price of processed food which
increased to 11.04 per cent from 8.59 per
cent. Similarly, farm produce rose to 9.57
per cent in June 2022, from 8.53 per cent
in January 2022. The increase in the price
of
processed
food
was
mainly
accounted for by increases in the prices
of garri, yellow and white (sold loose);
fish & sea food; meat; and oil & fats. The
increase in price of farm produce was
mainly due to increases in the price of
0.00
10.00
20.00
Headlin
e
Food &
NonAlcoholi
c Bev.
Housing
,Water,
Elect.Ga
s &
Other
Fuel
Month
Headline
Food &
NonAlcoholic
Bev.
Housing,
Water,
Elect.Gas
& Other
Fuel
Clothing
&
footwear
Transport
Furnishings,
Household
Equip &HH
Maint.
Education
Health
Miscellan
eous
Goods &
Services
Restaurant
& Hotels
Alcoholic
Bev.
Tobacco
& Kola
Recreation
& culture
Communi
cation
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

Headline
Food &
NonAlcoholic
Bev.
Housing,
Water,
Elect.Ga
s & Other
Fuel
CBN Monetary Policy Review

yam,
potatoes
&
other
tubers;
vegetables; maize grain, white (sold
loose); sorghum, white or brown (sold
loose) and fruits. The general rise in food
prices was attributed to acute food
shortages caused by the deteriorating
security situation, especially in the food
producing areas of the north as well as
the rise in cost of transportation.


Table 3.4: Major Components of Food Inflation (Y-on-Y), January - June 2022


Figure 3.12: Major Components of Food Inflation
(Y-on-Y), January - June 2022


Consistent with the increasing year-onyear
trend,
month-on-month
food
inflation increased to 2.05 per cent in
June 2022 from 1.62 per cent in January
2022. The price of processed food rose to
1.26 per cent in June 2022 from 0.82 per
cent in January 2022. On the contrary,
the price of farm produce fell to 0.79 per
cent from 0.80 per cent. Thus, the
increase in food inflation was due to the
increase in the prices of processed food.
The key drivers of the increase in the
processed food category were garri
yellow (sold loose); and garri white (sold
loose), which rose by 0.21 and 0.08
percentage points, respectively, while
that of farm produce were yam,
potatoes
&
other
tubers
(0.05
percentage point).


FOOD
Processed
Food
Meat
Fish &
Sea
Food
Oil &
Fats
Garri
White,
Sold
Loose
Garri
Yellow,
Sold
Loose
Farm
Produce
Fruits Vegatables
Yam,
Potatoes
& other
tubers
Maize
Grain
White Sold
Loose
Sorghum
White or
Brown,
Sold Loose
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

FOOD
Processe
d Food
Meat
Fish &
Sea Food
Oil & Fats
CBN Monetary Policy Review

Table 3.5: Major Components of Food Inflation (M-on-M), January - June 2022


Figure 3.13: Major Components of Food Inflation
January - June 2022


3.2.1.3 Core Inflation
Core inflation (year-on-year) rose to
15.75 per cent in June 2022 from 13.87
per cent in January 2022. The rise in core
inflation was driven by Processed Food
(0.79 percentage point); Housing, water,
electricity & other fuel (0.54 percentage
point);
Clothing
&
Footwear
(0.24
percentage
point);
Transport
(0.11
percentage point); and Furnishings,
Household Equipment & Household
Maintenance (0.11 percentage point).
In
addition
to
these,
all
other
components of core inflation increased
marginally (Table 3.6 and Figure 3.14).
The rise in core inflation may be
attributed to supply-side factors such as
the rising costs of energy and utilities.

Table 3.6: Major Components of Core Inflation (Y-on-Y) January - June 2022

FOOD
Processed
Food
Meat
Fish &
Sea
Food
Eko
(Agidi/
Kafa)
Garri
White,
Sold
Loose
Garri
Yellow,
Sold
Loose
Maize
Paste -
White
Yam
Flour,
Sold
Loose
Farm
Produce Vegatables
Yam,
Potatoes
& other
tubers
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

FOOD
Processe
d Food
Meat
Fish &
Sea Food
Eko(Agidi
/Kafa)
Garri
White,
Sold
Loose
Garri
Yellow,
Sold
Loose
Maize
Paste -
White
Month
Core
Processe
d Food
Housing,
Water,
Elect. Gas
& Other
Fuel
Clothing
&
footwear
Transport
Furnishings,
Household
Equip & HH
Maint.
Education
Health
Miscellan
eous
Goods &
Services
Restaurant
& Hotels
NonAlcoholic
Beverages
Alcoholic
Bev.
Tobacco
& Kola
Recreatio
n &
culture
Communi
cation
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

CBN Monetary Policy Review

Figure 3.14: Major Components of Core Inflation
(Y-on-Y) January - June 2022


On a month-on-month basis, core
inflation increased to 1.56 per cent in
June 2022 from 1.25 per cent in January,
driven
by
Processed
food
which
increased to 0.61 per cent in June 2022
from 0.46 per cent in January (Table 3.7
and Figure 3.15).


Table 3.7: Major Components of Core Inflation (M-on-M) January – June 2022


Figure 3.15: Major Components of Core Inflation
(M-on-M) January – June 2022


3.2.2
Seasonally Adjusted Inflation
Actual headline inflation maintained
an upward trajectory between January
and June 2022. On the other hand, the
seasonally
adjusted
measure
of
headline inflation trended downwards
between January and May before
increasing marginally in June 2022 (Table
3.8 and Figure 3.16). Actual headline
inflation continued to reflect the general
price level in the economy and trended
above the seasonally adjusted measure
between April and June 2022. The

Core
Processed
Food
Housing,
Water, Elect.
Gas & Other
Fuel
Clothing &
footwear
Transport
Furnishings,
Household
Equip & HH
Maint.
Education
Health
Month
Core
Processed
Food
Housing,
Water,
Elect. Gas
& Other
Fuel
Clothing
&
footwear
Transport
Furnishings,
Household
Equip & HH
Maint.
Education
Health
Miscellan
eous
Goods &
Services
Restaurant
& Hotels
NonAlcoholic
Beverages
Alcoholic
Bev.
Tobacco
& Kola
Recreati
on &
culture
Communi
cation
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Change

Core
Processed
Food
Housing,
Water, Elect.
Gas & Other
Fuel
Clothing &
footwear
Transport
Furnishings,
Household
Equip & HH
Maint.
CBN Monetary Policy Review

overall trend in both
actual and
seasonally adjusted measures of inflation
was
attributed
mainly
to
macroeconomic uncertainties arising
from food shortages, expansion in
money supply, exchange rate pressures,
shortage of petroleum products, and
the relatively loose monetary policy
stance of the Bank.

Table 3.8: Actual and Seasonally Adjusted
Headline Inflation (January – June 2022)
Year
Inflation
SA Inflation
Jan-22
15.60
16.87
Feb-22
15.70
16.73
Mar-22
15.92
16.54
Apr-22
16.82
16.45
May-22
17.71
16.45
Jun-22
18.60
16.54

Figure 3.16: Actual and Seasonally Adjusted
Headline Inflation (January – June 2022)


3.2.3
Key
Factors
that
Influenced
Domestic Prices
During the review period, inflationary
pressure was primarily influenced by the
net impact of cost-push, demand-pull,
and moderating factors. Some of these
factors include: the Russia-Ukraine war;
the unabating impact of the COVID-19
Pandemic; continuing insecurity; and
rising cost of energy. Other factors
include the continued pressure on the
exchange rate, as well as sustained
increase in food prices.

3.2.3.1 Demand-side Factors
In the review period, several demandside factors influenced the trend of
headline inflation. Some of these include
capital
releases
for
infrastructural
projects,
real
sector
intervention
programmes, government payment of
contractor obligations and the Bank’s
accommodative
monetary
policy
stance, the combination of which
boosted system liquidity and aggregate
demand. Foreign exchange demand for
transactions in tradable goods exerted
pressure on the exchange rate, leading
to mounting inflation pass-through to
domestic prices. The net impact of these
factors was considerable and led to high
inflationary pressures.

3.2.3.2. Supply-side Factors
The
supply-side
factors
which
contributed to headline inflation in the
review period were mainly: the residual
impact of the COVID-19 Pandemic and
the Russia-Ukraine war on the global
supply chains; scarcity associated with
seasonal nature of agricultural output;
and limited harvests in the foodproducing areas due to the high level of
insecurity. The cumulative impact of
these factors slowed down productivity
in the review period.

Inflation
SA Inflation
CBN Monetary Policy Review

3.2.3.3 Moderating Factors
The rise in energy prices and continued
pressure on the naira in the first half of
2022 were major contributory factors for
the rise in domestic prices in the review
period. A key moderating factor to the
upward movement of domestic prices
was the support provided by both the
fiscal and monetary authorities towards
year-round cultivation of farm produce
to ease the scarcity of agricultural
produce
associated
with
seasonal
output.
In
addition,
the
effective
implementation
of
the
Economic
Recovery and Growth Plan provided a
strategic roadmap for the economy and
helped restore investor confidence.
Other factors were the government’s
support for the real sector to improve the
ease of doing business as well as the
implementation of other policies to
boost
productivity
and
enhance
aggregate demand. This was targeted
at improving confidence in the Nigerian
economy as an avenue to tame
inflationary pressures.

3.3
Monetary
Policy
and
Liquidity
Management
Monetary
policy
design
and
implementation in the first half of 2022
was
influenced
by
various
developments
in
the
global
and
domestic
economic
and
financial
environments.

On the global front, while progress was
made
in
subduing
the
Pandemic,
leading to the reopening of several
economies, the Russian-Ukraine war
posed new downside risks to the full
recovery of the global economy. In the
advanced
economies,
the
rise
in
inflation above the long run objectives of
some major central banks, re-enforced
the fear that central banks in this bloc
may soon return to a regime of
monetary policy normalization, which
may lead to capital outflow and
exchange rate pressures. There was
mixed inflationary pressure among the
Emerging
Market
and
Developing
Economies, with some of the economies
recording higher rates, compared with
their peers, due largely to exchange rate
pressures, capital flow reversals, high
energy costs, weak supply chains and
poor
response
to
policy
stimulus
targeted
at
alleviating
the
macroeconomic slowdown associated
with the Pandemic.

In the domestic economy, uncertainties
persisted
around
the
path
to
containment of the Pandemic thus
posing a challenge to the recovery of
output growth. In addition, the slow
pace of vaccination across the country
remained a source of concern for
monetary policy. Other factors were the
lingering security challenges including:
the
numerous
clashes
between
herdsmen and farmers, insurgency and
banditry; legacy infrastructural deficits;
high cost of energy; oil theft in the Niger
Delta;
as
well
as
exchange
rate
pressures from rising capital outflows with
pass-through to domestic prices.


CBN Monetary Policy Review

3.3.1 Monetary Policy Response to
Evolving Economic Conditions
In the first half of 2022, monetary policy
formulation and implementation was
targeted at easing the impact of shocks
from both the global and domestic
economic and financial environments.
Some of these global shocks emanated
from the continued spread of new strains
of the coronavirus, thus prolonging the
COVID-19
pandemic;
supply-chain
disruptions associated with the RussiaUkraine war; as well as rising global
inflation. In the light of these headwinds,
the International Monetary Fund (IMF)
downgraded its forecast for global
output growth for 2022 to 3.6 per cent
from 4.4 per cent, reflecting the severity
of setbacks to the global recovery.

Major shocks impacting developments
in the domestic economy were rising
energy costs, exchange rate pressures
and high levels of insecurity. These
shocks resulted in slowing output growth,
rising inflation and high unemployment.
Consequently,
real
Gross
Domestic
Product (GDP) grew by 3.11 per cent in
the first quarter of 2022, compared with
3.98 per cent in the fourth quarter of 2021
and 0.51 per cent in the corresponding
period of 2021. This was the sixth
consecutive quarter of real output
expansion, following the economy’s exit
from recession in 2020. This steady
positive performance, was driven largely
by
the
growth
in
aggregate
consumption, arising from the continued
policy support at the onset of the
Pandemic and gradual recovery of
aggregate demand. Headline inflation
(year-on-year) ticked up to 16.82 per
cent in April 2022 from 15.92 per cent in
March 2022, a 90-basis point increase.
This was the third consecutive increase in
inflation since January 2022, attributable
to the rise in both the core and food
components to 14.18 and 18.37 per cent
in April 2022 from 13.91 and 17.20 per
cent in March 2022, respectively.

Broad
money
supply
(M3)
rose
significantly to 6.22 per cent in April 2022,
compared with 4.19 per cent in March
2022. This was largely driven by strong
growth in Net Domestic Assets (NDA) of
11.86 per cent in April 2022, compared
with 8.82 per cent in the previous month.
The growth in NDA was attributed to the
increase in claims on the Federal
Government and other sectors (public
non-financial
corporations,
private
sector,
and
state
and
local
governments).

The performance of the equities market
remained strong and positive in the
review period, with the All-Share Index
(ASI) and Market Capitalization (MC)
increasing significantly from 46,965.48
and N25.31 trillion on March 31, 2022, to
52,979.48 and N28.56 trillion on May 20,
2022, respectively.

Money market rates oscillated within
and outside the Standing Facilities
Corridor (SFC), reflecting the prevailing
liquidity
conditions
in
the
banking
system.
Consequently,
the
monthly
weighted
average
Open
Buyback
(OBB)
and
Interbank
Call
rates
increased to 7.49 and 8.67 per cent in
April 2022, from 6.62 and 4.50 per cent in
CBN Monetary Policy Review

March 2022, respectively. The increase in
rates was an indication of the tight
liquidity conditions in the banking system
in the review period.

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

During the first half of 2022, the Monetary
Policy Committee raised the MPR to 13.0
per cent; retained the asymmetric
corridor of +100/-700 basis points around
the MPR; retained the CRR at 27.5 per
cent and retained the Liquidity Ratio at
30 per cent.

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

3.3.2
Monetary
Policy
Committee
Meetings
In the first half of 2022, the Monetary
Policy Committee (MPC) met in January,
March and May to consider key
developments that shaped the course
of monetary policy during the period.

1 Details of the interventions in the review period
are contain in sections 3.1.2.2 and 3.2.2.2
At
its
January

meeting, the
Committee accessed the balance of
risks confronting the domestic economy
in the near term as they impact price
stability and output growth. While the
Committee
noted
the
continued
moderate recovery of the domestic
economy, members agreed that further
concerted policy effort was required by
both the monetary and fiscal authorities
to improve the momentum of the
recovery.

On
price
development,
Members
expressed concerns about the impact of
insecurity in farming communities on
food inflation. The Committee believed
that the recent uptick of headline
inflation was associated with increased
demand during the festive season and
was thus of the view that prices will
decline over time, given the Bank’s
ongoing interventions in the agriculture
sector.

Members noted the ongoing debate
around the removal of fuel subsidy,
suggesting a gradual approach to
moderate its impact on the cost of
transportation
and
energy.
The
Committee also noted the need to
encourage the take-off of private
refineries across the country to provide
alternative competitive local supply
sources. In addition to this, Members
called for the speedy conclusion of the
Government
Gas-Powered
Vehicle
CBN Monetary Policy Review

Conversion Scheme as an alternative to
PMS.

The Committee applauded the effort of
the Bank’s Management at maintaining
relative exchange rate stability even as
demand
pressure
increase
as
the
economy
continued
to
reopen.
Members noted the dwindling proceeds
from oil sales, despite rising crude oil
prices. They thus highlighted the need to
address the persistent reduction in
remittance
of
oil
revenue
to
the
Consolidated Revenue Fund. The MPC
welcomed the improvement in foreign
capital
inflow
through
diaspora
remittances and urged the Bank to seek
new policies to attract more remittances
through official channels.

The
Committee
noted
the
rising
government debt profile, stressing its
implications for fiscal sustainability and
macroeconomic stability. The MPC thus
urged the Government to reduce its
dependence on crude oil as a single
revenue source by exploring improved
avenues to generate tax revenues. In
addition, it called on the Government to
engage private sector infrastructure
financing entities, such as InfraCorp, to
ease the burden of its expenditure.

Members
welcomed
the
improved
performance of the equities market in
the review period, noting that this
signposts continued investor confidence
in the Nigerian economy.

The Committee also applauded the
Management’s efforts in ensuring the
continued downward trend of the NonPerforming
Loans
(NPLs)
ratio.
Nevertheless, Members emphasized the
need for the Bank to closely monitor
developments in the sector and swiftly
respond to any emerging challenges.

Based on the foregoing considerations,
the Committee thus decided by a
unanimous vote to retain the Monetary
Policy Rate (MPR) at 11.5 per cent; the
Asymmetric Corridor around the MPR at
+100/-700 basis points; the CRR at 27.5
per cent; and the Liquidity Ratio at 30
per cent.

During the March 2022 meeting, the
MPC noted with concern the impact of
the increase in crude oil price on all
economies. The MPC thus urged the
NNPC to take urgent steps to ensure
adequate supply of petroleum products
in Nigeria to mitigate the inflationary
implications. In addition to this, the
Committee noted with grave concerns,
the unprecedented rate of oil theft in
recent
times
and
its
impact
on
government revenue and accretion to
reserves.

Members also noted that the rising price
of
diesel
is
compounded
by
the
inadequate supply of electricity which
was
adversely
impacting
domestic
prices.

The Committee noted the marginal
decline in food inflation due to the
recent harvest. Although some food
scarcity is expected as the planting
season approaches, members were
optimistic
that
the
strategic
grain
CBN Monetary Policy Review

reserves of the CBN would improve food
supply.

The Committee thus decided by a
majority vote to retain the Monetary
Policy Rate (MPR) at 11.5 per cent; the
asymmetric corridor at +100/-700 basis
points around the MPR; the CRR at 27.5
per cent; and the Liquidity Ratio at 30
per cent.

At its May 2022 meeting, the MPC
observed that in addition to the risks
confronting price development in the
global economy, output growth was
also weakening.

The Committee observed that whereas
post-pandemic policy support remained
broadly expansionary, at least, from a
fiscal standpoint, the sharp rise in
inflation across both the Advanced &
Emerging
Market
Economies
was
generating growing concerns amongst
central banks. Consequently, major
central banks have provided strong
guidance for a progressive shift from
monetary
policy
accommodation,
which may ultimately lead to capital
outflow
from
Emerging
Market
Economies.

The MPC noted that the war between
Russia and Ukraine has resulted in
significant disruptions to the global
supply chains, at a time when the global
economy was still confronted with
downside
risks
from
the
COVID-19
Pandemic. In addition, global trade had
also been impacted by the series of
restrictions imposed on trade with Russia.
The
domestic
economy
remained
confronted with challenges such as
insecurity, poor infrastructure, high cost
of energy, rising unemployment and
dwindling oil receipts, but at this
meeting, the Committee’s key concern
was the sharp rise in inflation by almost
90 basis points in April 2022.

Based on the foregoing considerations,
the
Committee
decided
by
a
unanimous vote to raise the Monetary
Policy Rate (MPR). In summary, the MPC
voted to raise the MPR by 150 basis
points to 13.0 per cent; retain the
asymmetric corridor at +100/-700 basis
points around the MPR; the CRR at 27.5
per cent; and the Liquidity Ratio at 30.0
per cent.

The Communiques of the MPC meetings
held in the review period are contained
in the appendix.

3.3.3
Instruments
of
Liquidity
Management
During the first half of 2022, the Bank
deployed its monetary policy toolkit to
achieve its objectives of price and
macroeconomic
stability.
These
instruments were: The Monetary Policy
Rate (MPR); the Cash Reserve Ratio
(CRR); Liquidity Ratio (LR); Open Market
Operations
(OMO)
and
Discount
Window
Operations
(The
Standing
Deposit
Facility
and
The
Standing
Lending Facility). In addition to this, the
Bank maintained interventions in the
foreign exchange market to improve the
effectiveness
of
monetary
policy
instruments.
CBN Monetary Policy Review

3.3.3.1 Monetary Policy Rate (MPR)
The MPR remained the Bank’s key
instrument for signalling its monetary
policy stance in the review period. The
MPC adopted a contractionary stance
by raising MPR by 150 basis points to
13.00 per cent at its May 2022 meeting,
while
maintaining
the
asymmetric
corridor at +100/-700 basis points. This
increase
reflected
the
Bank’s
commitment
to
rein-in
inflationary
pressures.

3.3.3.2 Open Market Operations (OMO)
Open Market Operations (OMO) was
the primary instrument for Liquidity
Management in the first half of 2022.
Total OMO sales decreased substantially
by 89.11 per cent to N688.12 billion in the
first half of 2022 from N6,319.46 billion in
the preceding half of 2021 (Table 3.9).
The development was a decrease of
61.63 per cent compared with N1,793.25
billion in the corresponding period of
2021.

Table 3.9: OMO Bills Auction (January – June 2022)
(N’billion)

Source: CBN, Financial Market Department as at
July 27, 2022
Figure 3.17: OMO Bills Auction (January - June
2022)

Source: CBN, Financial Market Department as at
July 27, 2022

3.3.3.3 Reserve Requirements
During the first half of the year, the Bank
continued its use of the Cash Reserve
Requirement (CRR) and Liquidity Ratio
(LR) to manage banking system liquidity.
These were used to complement the
MPR and OMO for macro-prudential
and liquidity management. The CRR and
LR remained unchanged at 27.5 and
30.0 per cent, respectively, throughout
the period.

3.3.3.4 Standing Facilities Corridor
In the first half of 2022, the Bank
continued to use the Standing Facilities
Corridor
to
manage
daily
liquidity
requirements
of
Other
Depository
Corporations (ODCs). The two windows
of
the
Corridor
(Standing
Lending
Facility,
SLF
and
Standing
Deposit
Facility, SDF) remained asymmetric at
+100/-700 basis points around the MPR.
Requests for SLF increased by 32.68 per
cent to N4,519.68 billion in the first half of
Date

% Change
Jan
452.67 130.00
-71%
Feb
763.23 248.12
-67%
Mar
381.92 170.00
-55%
Apr
63.19 -
-100%
May
66.64 100.00
50%
Jun
65.60 40.00
-39%
1st Half
1,793.25
688.12
-62%
Jul
151.26
Aug
1,411.89
Sep
1,398.60
Oct
772.66
Nov
884.22
Dec
1,700.83
2nd Half
6,319.46
Cumulative Figure

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
N'Billions
OMO Sales
CBN Monetary Policy Review

2022 from N3,406.46 billion in the
preceding period of 2021, a decline of
53.61 per cent from N9,741.84 billion in
the corresponding period of 2021 (Table
3.10).

Similarly, the volume of deposits under
the SDF, increased by 73.21 per cent to
N2,116.52 billion in the first half of 2022
from N1,221.95 billion in the preceding
period of 2021, representing an increase
of 15.66 per cent when compared with
N1,829.90 billion in the corresponding
period of 2021 (Table 3.11).

Transactions at the Standing Facilities
Window resulted in a net lending of
N2,403.16 billion in the first half of 2022,
compared with a net lending of
N2,184.51 billion in the preceding half
year
and
N7,911.94
billion
in
the
corresponding half year of 2021. The
sharp rise in deposits at this Window is
indicative of declining transactions at
the Overnight Interbank Market.

Table 3.10: CBN Standing Lending Facility
(January 2021 – June 2022) (N’billion)

Source: CBN, Financial Market Department as at
July 27, 2022
Figure 3.18: Standing Lending Facility (January –
June 2022)

Source: CBN, Financial Market Department as at
July 27, 2022

Table 3.11: CBN Standing Deposit Facility (January
2021 – June 2022) (N’billion)

Source: CBN, Financial Market Department as at
July 27, 2022


Date

% Change
Jan
395.77
227.23
Feb
552.66
253.44
Mar
886.51
328.09
Apr
2498.55
725.76
May
4818.91
712.99
Jun
589.44
2272.17
1st Half
9,741.84
4,519.68
-53.61%
Jul
302.54
Aug
472.57
Sep
737.72
Oct
513.22
Nov
668.87
Dec
711.54
2nd Half
3,406.46
Total
13,148.30
4,519.68
Date

% Change
Jan
528.33
293.79
Feb
441.51
293.79
Mar
420.36
595.69
Apr
145.52
324.89
May
123.89
368.21
Jun
170.29
240.15
1st Half
1,829.90
2,116.52
15.66%
Jul
218.06
Aug
207.58
Sep
200.35
Oct
128.10
Nov
237.64
Dec
230.22
2nd Half
1,221.95
Total
3,051.85
2,116.52
CBN Monetary Policy Review

Figure 3.19: Standing Deposit Facility (January -
June 2022)

Source: CBN, Financial Market Department as at
July 27, 2022

3.3.3.5 Foreign Exchange Intervention
During the review period, the foreign
exchange market was characterised by
strong demand pressures arising from the
sharp rise in capital outflows from the
Nigerian economy as external financial
conditions tightened. In response, the
Bank sustained its interventions in the
market to cushion demand pressures
and maintain relative exchange rate
stability. To enhance foreign exchange
inflows, the Bank introduced the RT200
Non-oil Export Proceeds Repatriation
Rebate Scheme to further diversify the
sources of foreign inflows and ensure
exchange rate stability. The Bank also
continued
the
following
schemes
targeted at improving foreign currency
liquidity: the Naira-4-Dollar Scheme;
payment of remittances in foreign
currencies
by
International
Money
Transfer Operators (IMTOs); Backward
Integration Programmes (BIP) on sugar
production;
and
the
Pan
African
Payments
and
Settlements
System
(PAPSS).

Total
foreign
exchange
supply
decreased
by
12.47
per
cent
to
US$9,228.81 million in the first half of 2022
from US$10,543.51 million in the second
half of 2021 but increased by 58.26 per
cent from US$5,831.59 million in the
corresponding half of 2021 (Table 3.12).
The decrease in supply in the review
period was due largely to reduced
foreign
exchange
receipts
and
dwindling external reserves. Although
crude oil prices increased, the impact
on
reserves
was
minimal
due
to
production
challenges
as
Nigeria
regularly fell short of its OPEC quota as a
result of unprecedented levels of oil
theft.

Table 3.12: Foreign Exchange Supply by the CBN
(US$ Million)

Source: CBN, Financial Market Department as at
July 27, 2022


Jan Feb Mar Apr May Jun
N'Billion
SDF
Date

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

st Half
5,831.59
9,228.81
58.26%
Jul
1,764.80
Aug
1,641.32
Sep
1,405.29
Oct
2,133.54
Nov
1,717.77
Dec
1,880.79
2nd Half
10,543.51
CBN Monetary Policy Review

Figure 3.20: Total FX Supply (including Forward
Sales) January – June 2022

Source: CBN, Financial Market Department as at
July 27, 2022

3.3.4
Developments
in
Monetary
Aggregates
During the review period, the broad
measures of money supply performed
close to their indicative benchmarks for
the year. This was driven largely by the
efforts of the Central Bank of Nigeria to
moderate monetary accommodation in
the face of rising inflationary pressures.

In the review period, Net Domestic
Assets
(NDA) performed above its
benchmark. Its key component, Net
Domestic
Credit
(NDC)
grew
significantly, driven by growth in both
private sector and government credit. In
the review period, Net Foreign Asset
(NFA) contracted significantly below the
benchmark, driven by the decline in
foreign asset holdings of the Central
Bank, attributable to reduced foreign
receipts, primarily declining oil revenues,
due to production challenges in the
country.
This
resulted
in
increased
lliabilities to Non-residents during the
period.

3.3.4.1 Broad Money (M3, M2)
Both measures of broad money (M3 &
M2) grew in the review period. M3 grew
by 11.52 per cent to N48,865.82 billion at
end-June 2022 from N43,818.47 billion at
end-December 2021. Compared with
the level at end-June 2021 of N39,510.56
billion, it increased by 23.68 per cent.
The annualised growth rate of M3 of
23.04 per cent at end-June 2022 was
above the 2022 indicative growth target
of 14.92 per cent. This indicates an
expansion in the volume of money stock
in the economy.

Similarly, M2 grew by 11.37 per cent to
N48,797.87 billion at end-June 2022 from
N43,817.57 billion at end-December
2021. Compared with the level of
N38,863.05 billion at end-June 2021, it
increased by 25.56 per cent. The
annualised growth rate of 22.73 per cent
at end-June 2022 was above the annual
indicative benchmark of 14.92 per cent.
The increase in M2 was largely driven by
increases in its components, namely
narrow money (M1) and quasi money
(QM). While M1 increased by 12.24 per
cent from N18,169.30 at end-December
2021 to N20,392.54 at end-June 2022, an
indication of expansion in economic
activities, QM grew by 10.75 per cent
from
N25,648.26
billion
at
endDecember 2021 to N28,405.33 at endJune 2022.

The marginal difference between M2
and M3 reflects the shift by investors from

Jan
Feb Mar Apr May Jun
US$'Million
Total FX Supply (including Forward
Sales)
CBN Monetary Policy Review

OMO
bills
to
ODC
fixed
deposit
instruments in the half year.

Figure 3.21: Money Supply (M1), (M2) and (M3)
(January – June 2022)


Source: CBN, Statistics Department as at July 26,

Figure 3.22: Growth in Money Supply (M1), (M2)
and (M3) (January – June 2022)

Source: CBN, Statistics Department as at July 26,

3.3.4.2 Narrow Money (M1)
Narrow Money (M1) increased by 12.24
per cent to N20,392.54billion at endJune 2022 from N18,169.30 billion at endDecember
2021.
Year-on-year,
M1
increased by 27.26 per cent compared
with N16,024.39 billion at end-June 2021.
The annualised growth rate of 24.48 per
cent was above the annual indicative
benchmark of 15.48 per cent (Figures
3.21 and 3.22). The growth in M1, was
primarily driven by the increase in
transferable deposits over the review
period,
while
Currency-In-Circulation
(CIC),
a
key
component
of
M1,
witnessed a decline of 1.98 per cent as
the adoption of eNaira continued to
gain ground.

3.3.4.3 Net Foreign Assets (NFA)
Net Foreign Assets (NFA) decreased
significantly by 29.18 per cent to N
6,242.39 billion at end-June 2022 from
N8,814.45 billion at end-December 2021.
Compared with N7,292.25 billion in the
corresponding period of 2021, NFA
contracted by 14.40 per cent. Thus, in
the first half NFA contracted significantly
below the 2022 indicative growth target
of 0.89 per cent. This was due to the
decline in foreign asset holdings of the
Central Bank, as Liabilities to Nonresidents increased during the period.
Consequently, Claims on Non-residents
grew by 0.91 per cent while Liabilities to
Non-resident increased by 23.00 per
cent.


N''Billions
Jan-

Feb-

Mar-

Apr-

May-

Jun-

M3 44,40044,74445,66447,21448,57748,865
M2 44,29544,73945,66347,21348,57648,797
M1 18,58918,89719,61019,85920,61920,392

Jan-

Feb-

Mar-

Apr-

May-

Jun-

M3 Growth 1.33 0.77 2.06 3.39 2.89 0.59
M2 Growth 1.09 1.00 2.07 3.39 2.89 0.45
M1 Growth 2.31 1.65 3.77 1.27 3.83 (1.10
M3 Growth
M2 Growth
M1 Growth
CBN Monetary Policy Review

3.3.4.4 Net Domestic Assets (NDA)
Net Domestic Assets (NDA) increased
by 21.77 per cent to N42,623.43 billion at
end-June 2022 from N35,004.03 billion at
end-December 2021. Compared with
N32,218.32 billion in the corresponding
period of 2021, NDA grew by 32.30 per
cent. The annualised growth rate of
43.53 per cent at end-June 2022 was
significantly above the annual indicative
benchmark of 1.79 per cent. This was
attributed to the growth in Net Domestic
Credit (NDC), and Other Items Net (OIN)
of 18.02 and 20.92 per cent, respectively.
The growth in NDC was largely driven by
growth in Net Credit to Government
(NCg) and Credit to the Private sector
(CPs) of 35.04 and 11.58 per cent,
respectively. The continuous increase in
CPs reflects the operationalization of the
Bank’s policy on Loan-to-Deposit Ratio.
Credit to government has, however,
continued to expand due to declining
government revenue.

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

Source: CBN, Statistics Department as at July 26,

Figure 3.24: NDA, NDC and Other Assets (Net)
(January – June 2022)

Source: Statistics Department as at July 26, 2022

3.3.4.5 Credit to Government (Cg)
Credit to Government (Cg) increased
by 35.04 per cent to N17,996.69 billion at
end-June 2022 from N13,326.80 billion at
end-December 2021. Compared with
N11,593.88 billion in the corresponding
period of 2021, it grew by 55.23 per cent.
The annualised growth of 70.08 per cent
was remarkably above the annual
indicative benchmark of 12.26 per cent.
Government has continued to rely
heavily on borrowing to fund the 2022
budget deficit.

3.3.4.6 Credit to the Private Sector (Cp)
Credit to the private sector (Cp)
increased
by
11.58
per
cent
to
N39,270.49 billion at end-June 2022 from
N35,194.60 billion at end-December

Jan-22 Feb-

Mar-

Apr-

May-

Jun-22
Net
Domestic
Asset
36,014.636,655.38,101.039,792.241,444.342,623.4
Net Domestic Asset

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Net Domestic
Assets
36,014.6 36,655.1 38,101.0 39,792.2 41,444.3 42,623.4
Net Domestic
Credit
49,294.0 50,707.7 52,787.1 54,787.3 56,950.2 57,267.2
Other Assets
(Net)

NDA, NDC and Other Assets (Net) (January -
June 2022
Net Domestic Assets
Net Domestic Credit
Other Assets (Net)
CBN Monetary Policy Review

2021. Compared with N32,625.54 in the
corresponding period of 2021, it grew by
20.37 per cent. The annualised growth
rate Cp stood at 23.16 per cent, above
the annual indicative benchmark of
17.73 per cent. This increase in credit to
the private sector is the result of the
continued implementation of the policy
on Loan to Deposit Ratio (LDR).

Figure 3.25: Domestic Credit to Private Sector (July
– December 2021)

Source: CBN, Statistics Department as at July 26,

3.3.4.7 Monetary Base (MB)
The Monetary Base (MB) increased by
9.66 per cent to N14,579.57 billion at
end-June 2022 from N13,295.15 billion at
end-December 2021. Compared with its
end-June 2021 level of N12,333.85 billion,
MB increased by 18.21 per cent. The MB
at
end-June

was
above
its
provisional indicative benchmark for Q2
of N13,343.42 billion by N1,236.15 billion.
This was largely due to an increase in
total deposit liabilities of ODCs as
economic activities increased.

A List of the monetary aggregates and
their provisional outcomes as at endJune 2022 is presented in Table 3.13
below.


Jan-

Feb-

Mar-

Apr-

May-

Jun-

Credit to
Private
Sector
35,184.35,986.36,467.37,680.38,681.39,270.
Credit to Private Sector (January -
June 2022)
CBN Monetary Policy Review

Table 3.13a: The Performance of Monetary Aggregates and their Implications
Variables
Actual
Actual
Actual
Benchmark
H1:2022
Deviation
from
Benchmark
Change
in H1,
2022 over
H2, 2021
H1
H2
H1

M3 (N'b)

M3 (%)

M2 (N'b)

M2 (%)

M1 (N'b)

M1 (%)

MB (N'b)

MB (%)

NDC (N'b)

NDC (%)

Cg (N'b)

Cg (%)

Cp (N'b)

Cp (%)

NFA (N'b)

NFA (%)

NDA (N'b)

NDA (%)

Source: CBN, Statistics Department
CBN Monetary Policy Review

Table 3.13b: The Performance of Monetary Aggregates and their Implications
S/N
Monetary
Aggregates
Performance
Implication

Broad
Money
(M3, M2)
Above
the
annual
growth
target
Both M3 and M2 performed above their annual
benchmarks at end-June 2022, signifying a liquidity
surfeit. The growth in money supply was due to the
expansion in Transferable Deposits and Net Domestic
Assets.

Narrow Money
(M1)
Above the
annual
growth
target
Increase in Transferable deposits was the major driver
of the growth in M1 in the review period, indicating an
expansion in business activities.

Net
Foreign
Assets (NFA)
Significantly
below target
The poor performance of NFA, was mainly driven by
the contraction of foreign asset holdings of the
Monetary Authority especially in the second quarter
of 2022. This reflects reduced accretion to reserves
attributed to the increase in Liabilities to Non-residents
in the review period.

Net
Domestic
Assets (NDA)
Significantly
above target
The performance of NDA was largely driven by growth
in credit to government, which is crowding out credit
to the core private sector.

Credit to the
Govt (Cg)
Significantly
above target
The performance of Cg was significant in the review
period, arising from increased borrowings by the
government to fund the huge 2022 budget deficit.

Credit to the
Private
Sector
(Cp)
Above target
The improved performance of credit to the private
sector is attributed to the sustained implementation of
the Bank’s policy on Loan-to-Deposit Ratio, amongst
other interventions by the Bank.
Source: CBN, Statistics Department

3.4
Domestic
Financial
Market
Developments
In the first half of 2022, the Nigerian
financial market witnessed heightened
uncertainties following the spillovers from
the global economy, including the
outbreak of the Russia-Ukraine war and
receding
COVID-19
Pandemic.
This
resulted in disruptions to global supply
chains, weak growth, high energy cost,
and rising inflationary
pressures. In
response, many advanced economy
central banks commenced monetary
policy normalisation leading to the
tightening
of
external
financial
conditions. The resultant reversal of
capital as emerging market investors
sought to rebalance their portfolios in
favour of higher-yield-low-risk advanced
economy securities, led to a build-up of
exchange rate pressures among these
economies. Accordingly, the Nigerian
foreign exchange market witnessed
strong demand pressures arising from the
sharp rise in capital outflows from the
economy.

The stock market remained resilient,
owing to remarkable earnings postCOVID-19,
reflecting
investor
confidence. The All-Share Index and
CBN Monetary Policy Review

Market Capitalisation increased in the
first half of 2022, driven primarily by
improvements in economic activities
and investor confidence. The money
market was also active, with rates
fluctuating
within
and
outside
the
Standing Facilities Corridor, reflecting
liquidity
conditions
in
the
banking
system.
Specifically,
the
monthly
average Inter-bank Call rate fell to 11.10
per cent in June 2022 from 14.31 per
cent in January 2022, while the OBB rate
increased slightly to 10.89 per cent in
June 2022 from 9.07 per cent in January
2022.

3.4.1
The Money Market
In the review period, the money market
remained active despite the impact of
external
shocks
on
the
domestic
economy.
Money
market
rates
fluctuated slightly in the first half of 2022
with changing liquidity levels in the
banking system. This was driven by
injections such as the statutory monthly
disbursement of funds to both states and
local governments from the Federation
Account Allocation Committee (FAAC);
maturities of government securities; as
well as the sale of OMO bills and various
CBN
interventions.
The
interbank
segment
of
the
market,
however,
witnessed few trading days compared
with the collaterized OBB segment,
signposting the continued perception of
counterparty risk.

To curb the continued rise in inflation, the
MPC raised the Monetary Policy Rate
(MPR) by 150 basis points to 13.00 per
cent in May 2022 and retained the
asymmetric corridor at +100/-700 basis
points around the MPR. The Cash
Reserve
Requirement
(CRR)
and
Liquidity Ratio (LR) were retained at 27.5
and 30.0 per cent, respectively.

3.4.1.1 Short-term Interest Rate
Developments
Short term interest rate developments in
the review period were influenced by
banking system liquidity. This was driven
by: maturing government securities; CBN
real sector intervention programmes;
increased spending towards the 2023
general elections; amongst others. In
addition, the CBN intervention aimed at
moderating foreign exchange demand
pressures also played a significant role in
money market liquidity and short-term
interest rates.

Consequently, the interbank call rate fell
to 11.10 per cent in June 2022 from 14.31
per cent in January 2022 while, the OBB
rate increased slightly to 10.89 per cent
in June 2022 from 9.07 per cent in
January 2022. The NIBOR-30-day rate
which
mirrors
short-term
interbank
lending rates in Nigeria for some
selected banks, decreased marginally
to 8.52 per cent in June 2022 from 8.96
per cent in January 2022.


CBN Monetary Policy Review

Table 3.14: Weighted Average Monthly Money
Market Interest Rates (January-June, 2022)
Period
Interbank OBB SDF MPR
SLF
NI
B
O
Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Averag

Source: CBN, Statistics
Note: NIBOR figures are daily averages

Figure 3.26: Average Weighted Monthly Money
Market Interest Rates (January-June, 2022)

Source: Statistics Department, CBN

3.4.1.1.1
The Interbank Call Rate
As in preceding periods, the interbank
call segment was relatively inactive in
the first half of 2022, with several nontrading days, reflecting the lingering
perception of counterparty risks. This was
further evidenced by the higher rates in
the interbank segment compared with
the
collatererised
OBB
segment.
Accordingly, rates fluctuated during the
trading months, ranging between 4.50
and 14.31 per cent. The average
interbank call rate in the review period
was 9.38 per cent, higher than 8.23 per
cent in the OBB segment.

The weighted average interbank call
rate was 14.31 per cent in January 2022
but declined to 11.10 per cent in June
2022. Specifically, the monthly weighted
average interbank call rate declined by
5.01 percentage points from 14.31 per
cent in January 2022 to 9.30 per cent in
February 2022. The rate fell further to 4.50
per cent in March 2022 on account of
increased liquidity. The interbank call
rate, however, rose to 8.67 per cent in
April 2022 before falling marginally to
8.38 per cent in May 2022. In June 2022,
it rose to 11.10 per cent on account of
liquidity squeeze in the market following
OMO
sales,
foreign
exchange
intervention by the Bank and CRR debits.
The analysis of the daily interbank call
rate showed that for days where trading
activities took place, the call rate
ranged from 4.50 per cent recorded on
trading days in March and April 2022 to
16.0 per cent in January 2022. The peak
of 16.0 per cent in January 2022 was
largely due to the Bank’s mopping up
activities. The average interbank call
rate for the period January – June 2022
declined to 9.38 per cent compared
with 9.62 per cent in the corresponding
period of 2021 and 9.92 per cent in the
second half of 2021.

Percent (%)
Interbank (%)
OBB (%)
SDF (%)
MPR (%)
SLF (%)
NIBOR- 30 Days (%)
CBN Monetary Policy Review

Figure 3.27: Daily Interbank Call Rate (January –
June 2022)

Source: Financial Markets Department, CBN

3.4.1.1.2
The Open Buy Back (OBB)
Rate
The collaterised OBB segment of the
market was more active in the review
period, compared with the interbank
segment, due to the reduction of
counterparty risk in the segment. The
average rate in the segment in the
review period was 8.23 per cent,
compared with 9.38 per cent in the
interbank
segment.
The
monthly
average OBB rates fluctuated between
a tightened and an improved banking
system liquidity. Within a spread of 6.10
per cent and 10.89 per cent, the monthly
average OBB rate declined from 9.07
per cent in January 2022 to 6.10 per cent
in February 2022. The OBB rate then rose
to 6.62 and 7.31 per cent in March and
April 2022, respectively. The rate rose
consistently due to the impact of tight
liquidity from OMO sales, exchange rate
intervention of the Bank and tightening
financing conditions to 9.39 and 10.89
per cent in May and June 2022,
respectively.

The daily analysis showed that OBB rate
ranged from 0.57 per cent to 15.29 per
cent between January and June 2022.
The average OBB rate in the first half of
2022 stood at 8.23 per cent compared
with 12.19 per cent in the corresponding
half year and 11.81 per cent in the
second half of 2021 (Table 3.14).

Figure 3.28: Daily Open Buy Back Rate (January–
June 2022)

Source: Financial Markets Department, CBN

3.4.1.1.3
The
Nigeria
Interbank
Offered Rate (NIBOR)
The Nigeria Interbank Offered Rate
(NIBOR), the Nigerian money market
reference
rate,
witnessed
some
fluctuations in the review period. The 30day NIBOR rose from 8.96 per cent in
January 2022 to 9.24 per cent in February

4-Jan-22
12-Jan-22
20-Jan-22
28-Jan-22
5-Feb-22
13-Feb-22
21-Feb-22
1-Mar-22
9-Mar-22
17-Mar-22
25-Mar-22
2-Apr-22
10-Apr-22
18-Apr-22
26-Apr-22
4-May-22
12-May-22
20-May-22
28-May-22
5-Jun-22
13-Jun-22
21-Jun-22
29-Jun-22
Per cent (%)

4-Jan-22
12-Jan-22
20-Jan-22
28-Jan-22
5-Feb-22
13-Feb-22
21-Feb-22
1-Mar-22
9-Mar-22
17-Mar-22
25-Mar-22
2-Apr-22
10-Apr-22
18-Apr-22
26-Apr-22
4-May-22
12-May-22
20-May-22
28-May-22
5-Jun-22
13-Jun-22
21-Jun-22
29-Jun-22
Per cent (%)
CBN Monetary Policy Review

2022 but declined to 8.18 per cent in
April. Thereafter, it rose to 9.51 per cent
in May 2022 before declining to 8.52 per
cent in June. Over the review period, the
30-day NIBOR averaged 8.77 per cent,
compared with 10.97 per cent in the
preceding period and 6.07 per cent in
the corresponding period of 2021.

3.4.2
Foreign Exchange Market
In the review period, the foreign
exchange
market
experienced
considerable
pressures
arising
from
developments in the global environment
and the spillovers into the domestic
economy. The continued disruptions to
the global supply chains associated with
the
lingering
COVID-19
Pandemic,
slowed down the recovery of production
and trade. This was further aggravated
by the outbreak of war between Russia
and Ukraine which resulted in growing
scarcity of grains and other inputs for the
production of fertilizers. In addition, the
commencement of monetary policy
normalization by the US Fed and other
major
central
banks,
resulted
in
tightening external financial conditions.
As a consequence, energy prices
soared with crude oil prices reaching
historical highs. Nigeria’s dual role as an
oil exporter and importer of refined
petroleum
products,
exposed
the
economy to considerable shocks from
the external sector. This resulted in a
sharp rise in exchange rate pressure,
driven primarily by increase in the cost of
imports. The pressure on the exchange
rate was further accentuated by the
progressive exit of portfolio investors from
the Nigerian market in response to
higher
yields
in
the
advanced
economies.

To mitigate the impact of these shocks,
the Bank put in place policies to increase
foreign currency liquidity, aimed at
bridging the supply-demand gap. Some
of these included: the Naira-4-Dollar
policy; the RT200 policy on repatriation
of
export
proceeds;
as
well
as
interventions in the foreign exchange
market. In addition, the Bank continued
its development finance interventions to
boost domestic production and curb the
demand for foreign exchange to import
commodities which can be produced
locally.

Figure 3.29: Daily Naira/US Dollar Exchange Rate
July 2021 – June 2022

Source: CBN Statistics Department

3.4.2.1 Average Exchange Rates
The exchange rate at the I&E window
depreciated moderately by 1.10 per
cent to an average of N415.92/US$ in
the first half of 2022 from N411.36/US$ in
the preceding half (see table 3.15).

I&E (Monthly Average)
I&E (End Month)
CBN Monetary Policy Review

Table 3.15: Average Monthly Spot Exchange Rate
(N/US$), July 2021 – June 2022
Period
I&E
2021: July
410.13
August
410.15
September
410.56
October
411.25
November
411.74
December
414.34
Average
411.36
2022: January
415.96
February
416.95
March
415.72
April
415.53
May
415.95
June
415.40
Average
415.92
Source: CBN Statistics Department

3.4.2.2 End-Period (Month) Exchange
Rates
In the
period
under review,
the
exchange rate oscillated within the
range of ₦412.00/US$ to ₦417.00/US$.
However, despite the foreign exchange
demands
and
anticipated
foreign
capital flows due to the stance of
monetary policy globally, the naira
remained relatively stable at the I&E
window, depreciating only marginally.
Consequently,
the
end-period
exchange rate rose to ₦415.33/US$ at
the end of the first half of 2022 from
₦414.62/US$ in the second half of 2021,
a depreciation of 0.17 per cent.


Table 3.16: End-Month Exchange Rate (N/US$),
July 2021 – June 2022
Period
I&E
2021: July
410.10
August
410.32
September
410.80
October
411.50
November
410.00
December
435.00
Average
414.62
2022: January
412.00
February
417.00
March
416.00
April
415.00
May
417.00
June
415.00
Average
415.33
Source: CBN Statistics Department

3.4.2.3 Nominal
and
Real
Effective
Exchange Rates
The Nominal Effective Exchange Rate
(NEER) at the beginning of year 2022
stood at 197.81, compared with 197.89 in
December 2021. In terms of the half year
trend, the average NEER reflected a
depreciation of 2.15 per cent, dropping
to an average of 196.26 in the first half of
2022 from 200.57 in the preceding half. It
also fell below the average of 202.98 in
the corresponding half of 2021.

The Real Effective Exchange rate (REER)
analysis reveals that average REER
figures stood at 66.31 in the first half of
2022; a drop below the 69.23 recorded
in
the
preceding
half
and
74.40
recorded in the corresponding half of
2021 (Table 3.17 and figure 3.30).


CBN Monetary Policy Review

Table 3.17: Average Nominal and Real Effective
Exchange Rates Indices (July 2021 – June 2022)
Period
NEER
REER
Jan
196.63
74.42
Feb
204.42
76.43
Mar
200.07
73.94
Apr
204.14
74.93
May
207.93
74.18
Jun
204.70
72.47
2021: H1 Average
202.98
74.40
Jul
204.17
71.89
Aug
203.84
70.92
Sep
201.03
69.65
Oct
198.88
68.82
Nov
197.59
67.74
Dec
197.89
66.38
2021: H2 Average
200.57
69.23
Jan
197.81
68.18
Feb
200.86
68.60
Mar
200.41
68.18
Apr
193.07
65.16
May
194.82
65.00
Jun
190.61
62.73
2022: H1 Average
196.26
66.31
Source: CBN Statistics Department

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

Source: CBN Statistics Department

3.4.2.4 Foreign Exchange Flows through
the CBN
Foreign exchange inflows through the
CBN totalled US$16,402.44 million at the
end of the first half of 2022. This falls
significantly below the US$26,007.93
million recorded in the preceding halfyear
(i.e.,
July-December
2021).
However, it represents a 16.66 per cent
increase
compared
with
the
corresponding period of 2021. Foreign
exchange outflows through the Bank
declined by 9.00 per cent to $16,888.19
million in the first half of 2022, from
US$18,558.74 million in the second half of
2021 (previous half). Thus, a net negative
foreign exchange flow of US$485.75
million was recorded in the first half of
2022; an improvement from a net
negative of US$3,585.74 million recorded
in the corresponding period of 2021, but
a
drastic
fall
from
the
credit
of
US$7,449.19 million in the preceding halfyear.
CBN Monetary Policy Review

Table 3.18: Monthly Foreign Exchange Flows
through the CBN (January 2021 – June 2022)
Date
s
CBN
Inflow
CBN
Outflow
Net
Flow
Jan1,739.28
2,832.54
-
Feb2,049.31
3,006.55
-957.24
Mar3,758.90
2,882.18
876.72
Apr1,686.73
2,586.14
-899.41
May2,418.38
2,614.58
-196.19
Jun2,407.78
3,724.15
-

14,060.3
17,646.1
-
Jul3,314.48
2,655.78
658.70
Aug5,427.65
2,888.68
2,538.9
Sep8,089.20
2,436.94
5,652.2
Oct3,247.73
3,547.67
-299.93
Nov3,048.99
3,852.52
-803.53
Dec2,879.88
3,177.15
-297.27

26,007.9
18,558.7
7,449.1
Jan1,823.21
2,601.21
-778.00
Feb2,492.77
2,288.37
204.40
Mar3,316.66
3,545.00
-228.34
Apr2,468.19
2,860.86
-392.66
May2,118.72
2,123.01
-4.29
Jun4,182.88
3,469.74
713.14

16,402.4
16,888.1
-485.75
Source: CBN Statistics Department

Figure 3.31: Monthly Foreign Exchange Flows
through the CBN (January 2021 – June 2022)

Source: CBN Statistics Department
3.4.2.5 Foreign Exchange Flow through
the Economy
Total foreign exchange inflow to the
economy dropped sharply by 25.48 per
cent to US$37,846.36 million in the first
half of 2022 from US$50,785.23 million in
the second half of 2021. It decreased by
13.11
per
cent
compared
with
US$43,559.02 million recorded in the
corresponding half of 2021. Similarly,
foreign exchange outflows in the first half
of 2022 dropped by 2.54 per cent to US$
22,006.41
million
from
US$22,581.43
million in the second half of 2021.
Compared with the corresponding half
of 2021, it increased by 15.57 per cent
from US$19,041.59. Net inflows thus stood
at US$15,839.95 million in the first half of
2022 compared with US$28,203.80 million
in the second half of 2021 and
US$24,517.43 million in the first half of
2021.

The observed decline in gross foreign
exchange flows in the economy can be
attributed to several shocks to the global
economy, principal amongst which
include: the decline in oil receipts due to
production challenges in the oil sector,
the commencement of monetary policy
normalization by several advanced
economy
central
banks,
causing
portfolio investors to seek higher yield
fixed
income
securities
in
these
economies and the overall tightening of
global financial conditions.
-8
-4

Billion US$
Inflow (CBN)
Outflow (CBN)
CBN Monetary Policy Review

Table 3.19: Monthly Foreign Exchange Flows through the Economy
(January 2021 – June 2022) (US$ Million)

Source: CBN Statistics Department

Figure 3.32: Monthly Foreign Exchange Flows
through the Economy (January 2021 – June 2022)
(US$ Million)

Source: CBN Statistics Department

3.4.3

The Capital Market
The performance of the Nigerian
capital market in the first half of 2022 was
generally bullish, driven primarily by
increased activities in the
equities
segment
of
the
market
reflecting
sustained
investor
confidence.
The
positive
performance
was
largely
attributed to improved foreign investor
participation in the Nigerian capital
market
on
account
of
increased
corporate
earnings
and
foreign
exchange liquidity. In the bonds market,
real
yields
declined
progressively,
particularly for corporate, state, and
local government bonds, as inflation
trended upwards.
PERIOD
Inflows (CBN)
Inflows
(Autonomous)
Total
Inflows
Outflows
(CBN)
Outflows
(Autonomous)
Total Outflow
Net Flow
Net Flow
(CBN)
Net Flow
(Autonomous)
Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

2021 H1 Total

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

2021 H2 Total

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

2022 H1 Total


Total Inflows
Total Outflow
Net Flow
CBN Monetary Policy Review

3.4.3.1 Equities Market
The All-Share Index (ASI) increased by
21.31 per cent to 51,817.59 at end-June
2022 from 42,716.44 at end-December
2021.
Market
capitalization
(MC)
increased by 25.29 per cent to N27.94
trillion at end-June 2022 from N22.30
trillion
at
end-December
2021.
Compared
with
the
corresponding
period of 2021,MC increased by 41.40
per cent from N19.76 trillion at end-June
2021.

Table 3.20: NSE All-Share Index (ASI) and Market
Capitalization (MC) (June 2021 – June 2022)
Date
ASI
MC(Equities)
N’Trillion)
Jun-21
37,907.28
19.76
Jul-21
38,547.08
20.08
Aug-

39219.61
20.43
Sep-21
40,221.17
20.96
Oct-21
42,038.60
21.94
Nov-

43,248.05
22.57
Dec-

42,716.44
22.30
Jan-22
46,624.67
25.12
Feb-22
47,394.53
25.54
Mar-

46,965.48
25.31
Apr-22
49,638.94
26.76
May-

52,990.28
28.57
Jun-22
51,817.59
27.94
Source: Nigerian Exchange Group


Figure 3.33: NSE All Share Index (ASI) and Market
Capitalization (MC) (June 2021 – June 2022)

Source: Nigerian Exchange Group

Figure 3.34: NSE ASI and MC (December 2021 –
June 2022)

Source: Nigerian Exchange Group

3.4.3.1.2
Market Turnover
Aggregate stock market turnover in the
first half of 2022 stood at 76.52 billion
shares, valued at N831.83 billion in
616,334
deals.
This
represents
an
increase of 79.20 per cent compared
with 42.70 billion shares, valued at
N428.74 billion in 500,858 deals in the
second half of 2021. Aggregate stock
market turnover also increased by 58.20
per cent on a year-on-year basis from
48.37 billion shares, valued at N483.57
CBN Monetary Policy Review

billion in 553,828 deals as at end-June
2021.

3.4.3.1.3
Sectoral Contribution to
Equity Market Capitalization
In
the
review
period,
market
capitalization was dominated by the
telecommunications sector whose share
of market capitalization increased to
41.45 per cent at end-June 2022 from
17.98 per cent at end-December 2021.
The
dominance
of
‘Telecommunications’ can be attributed
to the listing of telecommunication
companies on the exchange. Other
sectors that contributed significantly to
overall
market
capitalization
were
Dangote Cement, Building Materials
and Food & Beverages, with market
shares of 16.77 per cent, 11.55 per cent,
8.78 per cent and 8.21 per cent
respectively, at end-June 2022.

Figure 3.35: NSE Market Capitalization by Sector
as at End-June 2022

Source: Nigerian Exchange Group


Figure 3.36: NSE Market Capitalization by Sector
as at End-June 2021

Source: Nigerian Exchange Group

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

3.4.3.2.1 FGN Bonds
The 10-year dollar-denominated bond
yield for Nigeria was positive in the first
half of 2022. It increased by 594 basis
points to 12.44 per cent at end-June
2022, from 6.50 per cent at endDecember 2021. It also rose by 713 basis
points compared with 5.31 per cent at
end-June 2021 (Figure 3.37).


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

NSE Market Capitalization by Sector as at June 30, 2021
Rest of Food and Beverages
Construction
Banking
Insurance
Breweries
Conglomerates
Oil and Gas
industrial goods
Dangote Cement
Dangote Sugar
NASCON (Dangote Salt)
Rest of Building Materials
Agriculture
Personal Household products
Services
MTN Nigeria
Other Sectors
CBN Monetary Policy Review

Figure 3.37: 10-Year U.S. Dollar-denominated
Bond Yield for Nigeria (June 2019 – June 2022)

Source: Bloomberg

In the review period, the yield at endJune 2022 increased at the short end of
the curve, but decreased at the long
end, compared with end-March 2022.
While the returns on long-term bonds
reported at end-June 2022 dipped
below that at the preceding periods of
end-December 2021 and end-March
2022, they were higher than the shortterm yields. The Central Bank of Nigeria
raised the monetary policy rate by 150
basis points to 13.0 per cent in May 2022
which
led
to
increase
in
bond
yields. Nevertheless,
the
positive
development at the short end of the
curve reflects a high liquidity level within
the banking system.


Figure 3.38: FGN Bond Yield Curves: December
31st, 2021, vs. March 31st, 2022, and June 29th,


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

Data Source: FMDQ

3.4.3.2.2 State/Local Government Bonds
The
sub-national
bonds
market
recorded moderation in activities during
the review period. The total value of
outstanding
state/local
government
bonds decreased by 28.25 per cent to
N148.91 billion at end June 2022 from
N207.55 billion as at end-December
2021. The moderation in activities in this
segment of the market signifies further
slowing of economic activities at the
sub-national levels.

3.4.3.2.3 Corporate Bonds
Activities
in
the
corporate
bond
segment improved during the review
period.
The
value
of
outstanding
corporate bonds increased by 2.88 per
cent to N739.01 billion at end-June 2022
from N718.30 billion in December 2021
driven by increased trading in the
sovereign bond market.


Per cent
CBN Monetary Policy Review

3.4.3.3 Overall Analysis of the Nigerian
Capital Market
The value of FGN bonds increased by
13.39 per cent to N21.34 trillion at endJune 2022 from N18.82 trillion at endDecember 2021 and higher than N16.46
trillion at end-June 2021. FGN bonds
accounted for 42.53 per cent of
aggregate market capitalization at endJune 2022.

The value of state/municipal bonds and
corporate bonds were N148.91 billion
and N739.01 billion accounting for 0.30,
and 1.47 per cent of aggregate market
capitalization, respectively.

In
general,
the
equities
market
contributed 56.70 per cent of aggregate
market capitalization at end-June 2021,
while the bonds market accounted for
the balance of 43.30 per cent (Figure
3.40).
Figure 3.39: Structure of the Nigerian Capital Market (June 2022)

MARKET CAPITALISATION (N' MILLIONS)
FGN Bonds
State/Municipal bonds
Corporate bonds
Equities

Source: Nigerian Exchange Group


CBN Monetary Policy Review

CHAPTER FOUR
ECONOMIC OUTLOOK AND RISKS

4.1
Outlook for Global Output
lobal output is projected to slow
from 6.1 percent recorded in
2021 to 3.2 percent in 2022. The
slump
in
growth
performance
is
predicated on downturns in China and
Russia, further accentuated by the
lower-than-expected performance of
U.S. consumer spending. Several other
shocks to global growth include: higherthan-expected
global
inflation
outcomes, particularly in the United
States and major European economies,
which
triggered
tighter
financial
conditions; a resurgence of COVID-19
outbreaks
and
lockdowns
that
precipitated a slowdown in China; and
further negative spillovers from the war in
Ukraine.

In the United States, reduced household
purchasing power and tighter monetary
policy underlie the declining growth rate
from the beginning of this year, resulting
in
a
downward
revision
of
1.4
percentage
points.
In
China,
r
lockdowns and the deepening real
estate crisis have led to downward
growth revision by 1.1 percentage
points, with implications for major global
spillovers.
In
Europe,
significant
downgrades reflect spillovers from the
war in Ukraine and tighter monetary
policy.
With
a
few
exceptions,
employment and output will typically
remain below pre-pandemic trends
through 2026. Moreover, the war in
Ukraine has increased the probability of
broader social tensions because of
higher food and energy prices, which
would further weigh on the outlook (IMF
WEO, July 2022 update).

In
Advanced
Europe,
growth
was
revised downward to 2.5 percenton
account of the negative terms-of-trade
shock from global energy prices and
energy insecurity resulting from the war
in Ukraine and sanctions on Russia.
Economies such as Germany and Italy,
with
relatively
large
manufacturing
sectors and greater dependence on
energy imports from Russia, witnessed
the most significant downgrades.

In emerging markets and developing
economies, growth is projected to
contract to approximately 3.2 percent in
2022, with a prospect of expanding by
0.3 percent in 2023. The main drivers of
the contraction are the impact of higher
energy prices on domestic demand and
trade disruption, especially for Baltic
states, whose external demand will
decline along with the contraction in
Russia’s economy.

Developments in China continue to
dominate the outlook for Asia, especially
emerging Asia. The combination of more
transmissible variants and the strict zeroCOVID strategy in China has led to
repeated
mobility
restrictions
and
localized lockdowns that have weighed
on
private
consumption.
Recent
lockdowns in crucial manufacturing and
trading hubs such as Shenzhen and
Shanghai will likely compound supply
disruptions in the region and beyond.
Moreover, real estate investment growth
G
CBN Monetary Policy Review

has
slowed
significantly.
External
demand is also expected to be weaker,
considering the war in Ukraine.

Growth in Latin America and the
Caribbeans is expected to moderate to
3.0 and 2.0 percent in 2022 and 2023,
respectively. This is predicated on the
back
of
spiraling
inflation
and
associated policy tightening. Brazil, for
instance, responded to higher inflation
by increasing interest rates by 975 basis
points over the past few years since the
emergence of the pandemic, which is
weighing down on domestic demand.
This is also the case in Mexico although
to an extent lesser.

Growth
in
sub-Saharan
Africa
is
projected at 3.8 percent in 2022. Food
prices are the most crucial transmission
channel, although in slightly different
ways. Higher food prices will hurt
consumers’
purchasing
power,
particularly
among
low-income
households, and weigh on domestic
demand. Social and political uproar,
most notably in West Africa, also weighs
on the outlook.

Table 4.1 Global Output and Inflation Outlook

*

*
A. World
Output


World Output
3.

3.

2.

-
3.

6.

3.

2.

Advanced
Economies
2.

2.

1.

-
4.

5.

2.

1.

USA
2.

2.

2.

-
3.

5.

2.

1.

Euro Area
2.

1.

1.

-
6.

5.

2.

1.

Japan
1.

0.

0.

-
4.

1.

1.

1.

UK
1.

1.

1.

-
9.

7.

3.

0.

Canada

1.

-
5.

4.

3.

1.

Other
Advanced
Economies
2.

2.

1.

-
1.

5.

2.

2.

Emerging &
Developing
Economies
4.

4.

3.

-
2.

6.

3.

3.

Latin America
and the
Caribbean
1.

1.

0.

-
6.

6.

3.

2.

Middle East and
Central Asia
Africa
2.

2.

0.

-
2.

5.

4.

3.

Sub-Saharan
Africa
2.

3.

3.

-
1.

4.

3.

4.

B. Commodity
Prices (US
Dollars)


Oil

3.

9.

-

0.

-

2.

7.

.4
-

.3
Non-fuel
6.

1.

0.

6.

6.

.1
-
3.

C. Consumer
Prices


Advanced
Economies
1.

1.

0.

3.

6.

3.

Emerging &
Developing
Economies
4.

4.

5.

5.

5.

9.

7.

Source: IMF WEO, April 2022
*Forecast

CBN Monetary Policy Review

4.2
Outlook for Global Inflation
Global inflation is projected to continue
to
be
high
owing to
war-related
commodity price rises and spreading
pricing
pressures.
Markets
expect
inflation to peak in mid-2022 and then
decline but remain elevated even after
these
shocks
subside.
Inflation
is
projected to revert to pre-pandemic
levels by the end of 2024. Several factors
could allow it to sustain momentum and
enhance
long-term
hopes.
Further
supply-related shocks to food and
energy prices from the Ukraine inversion
might
dramatically
raise
headline
inflation and flow through to core
inflation,
causing
further
monetary
policy tightening.

Near-term
inflation
expectations
in
advanced
economies
have
risen
dramatically, while longer-term inflation
pressures remain more restrained. If the
current stagflation pressures worsen,
EMDEs will confront new challenges due
to
weaker
inflation
expectations,
increased financial vulnerabilities, and
declining growth prospects.

Table 4.2 Global Inflation Outlook

2*

3*


Advanced Economies
3.1
5.7
2.3

USA
4.7
7.7
2.9

Euro Area
2.6
5.3
2.3

Japan


Emerging & Developing
Economies
5.9
8.7
6.5

China
0.9
2.1
1.8

Russia
6.7
21.

14.

India
5.5
6.1
4.8

Sub-Saharan Africa
11.

12.

9.6

Nigeria
17.

16.

13.

Ghana
10.

16.

13.

Angola
25.

23.

13.

LIC
11.

13.

11.

Ethiopia
26.

.5
30.

Source: IMF WEO, April 2022
*Forecast


4.3
Outlook for Domestic Output
Growth
The domestic economy is expected to
recover through the second half of 2022.
This is hinged on improved growth
prospects on the back of sustained
growth
in
non-oil
GDP
driven
by
agriculture and a robust recovery in
services, mainly telecommunications,
and financial services. Additionally, the
effective
implementation
of
the
Medium-Term National Development
Plan
(MTNDP);
improvement
in
manufacturing activities; the positive
impact of CBN interventions on growthenhancing sectors; improvement in the
business confidence index; and an
average oil price of US $100 pb are all
expected to drive growth in 2022.

On
the
downside,
supply
chain
disruptions
arising
from
intermittent
shortages of PMS and diesel, rising
energy prices owing to the RussiaUkraine war, and legacy challenges
CBN Monetary Policy Review

including poor infrastructure in power
and transport could affect domestic
production and distribution networks.
These
factors
signpost
significant
headwinds to Nigeria’s expected output
growth. Based on these developments,
the Central Bank of Nigeria (CBN)
forecasts real GDP to grow by 3.33
percent in 2022. The projection for real
GDP growth was predicated on crude
oil prices of US$100 per barrel.

Table 4.3: Possible Variations in Nigeria’s GDP
growth outlook
PERIOD/INDICATO
R
PESSIMISTI
C
BASELINE
OPTIMISTI
C
2021Q1
0.51
0.51
0.51
2021Q2
5.01
5.01
5.01
2021Q3
4.03
4.03
4.03
2021Q4
3.98
3.98
3.98

3.38
3.38
3.38
2022Q1
3.11
3.11
3.11
2022Q2f
1.21
3.34
4.96
2022Q3f
0.64
3.2
5.49
2022f
1.62
3.33
4.68
Crude oil price
US$73/b
US$100/
b
US$120/b
Crude
oil
production
1.3mbpd
1.5mbp
d
1.8mbpd
Govt Expenditure
10% lower
than
budget
MTEF
(N17.31
trillion)
5% lower
than
budget
Economic Activity
1 index
point
decline in
PMI
1 index
point
increase
in PMI
2 index
point
decline in
PMI
Source: CBN Staff Estimates

4.4 Outlook for Domestic Inflation
Headline inflation accelerated in the
first half of 2022, from 15.60 percent in
January to 18.60 percent in June 2022,
the highest inflation rate since January
2017. Food inflation surged to 20.6
percent
in
June

from
17.13
percent, while core inflation rose from
13.87 percent to 15.75 percent.
Estimates from the forecast showed that
inflation is likely to increase to 19.09
percent in July 2022, which is still above
the
upper
limit
of
the
indicative
benchmark of 6–9 percent. However,
the year-on-year headline inflation is
expected to decline to 18.89 percent in
October 2022 and 18.29 percent in
December 2022. Although upside risks to
inflation in the near term remain due to
a
combination
of
monetary
and
structural factors, the contractionary
monetary policy stance adopted by the
Bank
is
expected
to
moderate
inflationary pressure in the near term. The
upside risks include expectations of fuel
subsidy
removal,
lingering
insecurity/banditry issues in agriculturalproducing areas of the country causing
food shortages, spillover effects from the
Russian-Ukraine war, and increased
spending in preparation for the 2023
general elections. Other factors which
could potentially induce inflationary
pressure
are
exchange
rate
depreciations, capital inflow reversals,
and an increase in fiscal deficits. Some
attenuating
factors,
however,
may
include increase in the monetary policy
rate and increased intervention in the
agricultural
sector.
As
the
Bank
continues to manage liquidity conditions
through a mix of conventional and
unconventional policies in the domestic
economy,
inflationary
developments
would be monitored to ensure that the
risks to growth and financial system
stability are minimized.
CBN Monetary Policy Review

Table 4.4: Inflation Forecasts
YEAR-ON-YEAR INFLATION RATE
12-MMA INFLATION RATE
Status
Mont
h
Headlin
e
inflation
Food
inflatio
n
Core
inflatio
n
Statu
s
Mont
h
Headlin
e
inflation
Food
inflatio
n
Core
inflatio
n
Actual
Jan-

15.60
17.13
13.87
Actual
Jul-21
1.47
1.62
1.25
Feb-

15.70
17.11
14.01
Aug-

1.63
1.87
1.33
Mar-

15.92
17.20
13.91
Sep-

1.74
1.99
0.98
Apr-

16.82
18.37
14.18
Oct-

1.76
2.00
1.22
May-

17.71
19.50
14.90
Nov-

1.78
2.01
1.87
Jun-

18.60
20.60
15.75
Dec-

1.82
2.05
1.56
Forecast
Jul-22
19.09
21.48
15.97
Forecast
Jan-

1.35
1.60
1.50
Aug-

19.18
21.57
15.81
Feb-

1.10
1.14
0.63
Sep-

19.10
21.71
15.52
Mar-

1.08
1.37
0.99
Oct-

18.89
21.44
15.25
Apr-

0.80
0.69
0.56
Nov-

18.64
21.25
14.87
May-

0.87
0.92
0.93
Dec-

18.29
20.95
14.48
Jun-

1.51
1.94
0.78
Figure 4.1: Fan Chart of Inflation Forecast

Source: CBN Staff Estimates

CBN Monetary Policy Review

4.5
The Outlook for Monetary Policy
in The Second Half of 2022
Monetary
Policy
formulation
and
implementation by the Bank in the
second half of 2022 would continue to
be
anchored
on
the
Federal
Government of Nigeria's Medium-Term
Expenditure
Framework
(MTEF).
The
ultimate objective remains to achieve
price and financial system stability with
inclusive growth. In line with the MTEF,
the CBN would manage expectations,
provide time-consistent policies , react
to temporary shocks to strengthen the
ongoing recovery and maintain the
external and internal balance of the
economy.

As customary, the Bank will continue to
observe global developments as they
affect the Nigerian economy. Prospects
for global economic growth remain
confronted by growing headwinds. The
International
Monetary
Fund
(IMF)
revised its global growth forecast for
2022 downwards by 0.8 percentage
point to 3.6 percent (WEO, April 2022).

The revision in the projections was mainly
due to the resurgence in COVID-19, the
unabating war in Ukraine and the
resultant disruption to the global supply
chain, and rising food and energy prices.
Although
most
countries
have
continued to relax COVID-19-related
restrictions on the premise that they
have moved past its acute phase,
however,
the
re-introduction
of
restrictions
in
some
key
countries,
continues to impose a drag on the
global supply chain and economic
recovery.

The
uncertainties
surrounding
the
pandemic and the war in Ukraine
portend a bleak outlook for the recovery
of the global economy in 2022. The
development has exacerbated policy
trade-offs between global growth and
price stability. While most central banks
in
both
advanced
and
emerging
economies are prioritizing price stability
by opting for a tight monetary policy
stance and the withdrawal of monetary
accommodation in a bid to fight rising
price
levels,
fiscal
policy
remains
saddled with driving the economic
recovery process.

Equally, the uncertainty around crude oil
prices, given the complex interplay of
political and economic factors at the
global level, has implications for reserve
accretion and exchange rates.

With regards to the domestic economy,
monetary policy may face challenges
including
unabating
inflationary
pressures;
security
challenges
that
continue to pose significant risks to
medium-term growth with potential
effect on other critical macroeconomic
indicators; rising level of domestic debt
which
could
dampen
investor
confidence, uncertainty around fuel
subsidy and rising energy and logistics
costs with potential implications on
prices.

Monetary
policy
formulation
and
implementation will therefore aim at
containing these challenges to achieve
CBN Monetary Policy Review

price and financial system stability as
well as inclusive growth.

4.6 The Risks to the Outlook

4.6.1
Risks
to
The
Global
Output
Projection
The outlook is vulnerable to adverse
risks. Although a quick resolution of the
Russian-Ukrainian conflict would boost
confidence,
relieve
pressure
on
commodities markets, and eliminate
supply bottlenecks, it is more likely that
growth would drop further, and inflation
would
be
higher
than
predicted.
Overall, the risks are significant and
generally akin to the scenario at the
onset of the pandemic.. Many of the
hazards outlined below are a ratcheting
up of factors previously present in the
baseline. Furthermore, recognizing nearterm hazards might induce mediumterm risks, making it more difficult to
handle longer-term challenges.

The direct and indirect effects in the
baseline
forecast
would
be
exacerbated if the war worsened. These
primarily
include
an
escalation
of
Ukraine's humanitarian problems and a
flood of refugees into neighboring
countries.
Furthermore,
tougher
sanctions
may
result
in
additional
economic disruptions, including critical
energy ties between Russia and Europe,
with negative consequences for crossborder investment. This would result in
more significant supply interruptions,
worldwide price increases, commodity
market
instability,
and
significant
decreases in regional and global output.
During the pandemic, most economies'
inflation expectations remained wellanchored. Despite recent increases,
investors anticipate that inflation will
moderate in the medium term as central
banks worldwide respond. Only a few
emerging
markets
and
developing
economies have significantly increased
inflation expectations. However, with
high inflation and rising energy and food
prices, increased inflation expectations
may become more significant, leading
to further price hikes. Furthermore, with
nominal wage growth currently trailing
price inflation in most countries, there is
a possibility that previously unrealized
wage rises will emerge, adding to total
price
pressures.
In
such
a
case,
monetary policy would have to act
more aggressively than anticipated,
further weighing the outlook.

Higher interest rates cause widespread
debt distress. As interest rates rise, public
budgets will face difficult choices about
fiscal consolidation in the medium term,
as pressures for social and, in some
cases, defense spending remain high.
Credible budgetary structures will be
required for a smooth transition. If
adjustment fails and the credibility of
these frameworks is compromised, a
confidence crisis may occur, resulting in
associated capital outflows, particularly
from emerging countries, and the
emergence of concurrent debt crises.
The probability of this outcome would
increase significantly if the monetary
policy in advanced economies reacted
even more strongly to inflation pressures
CBN Monetary Policy Review

than anticipated. Higher interest rates
could lead to a disorderly correction of
currently
stretched
asset
prices,
including housing.

If this risk materializes, the global
economy will likely suffer through an
unpredictable
transition
to
a
new
political reality, with financial volatility,
commodity
price
fluctuations,
and
dislocation of production and trade.

The
risks
to
the
outlook
are
predominantly on the negative side. The
war in Ukraine could result in a sudden
stoppage of European gas imports from
Russia; inflation could be more difficult to
bring down than expected, either
because labour markets are tighter than
expected or inflation expectations are
unanchored; tighter global financial
conditions could cause debt distress in
emerging
market
and
developing
economies;
renewed
COVID-19
outbreaks and lockdowns, as well as an
escalation of the property sector crisis,
could further stifle Chinese growth.

4.6.2 Risks to Domestic Output
The
continuous
growth
in
the
economy’s real GDP has driven positive
sentiments
by
economic
agents,
policymakers,
and
international
economic institutions. Staff estimates by
the Bank, International Monetary Fund,
and the World Bank indicated that real
GDP would grow by 3.33, 3.40, and 4.20
percent in 2022, respectively. This is an
upward revision from the initial estimates
of 3.24, 2.7, and 2.8 percent in 2022,
respectively. This is hinged on improved
growth prospects on the back of
sustained growth in non-oil GDP driven
by agriculture and a robust recovery in
services.

Consequently, activity in the domestic
economy is expected to expand, albeit
at a moderate pace, given identified
downside risks to the growth outlook.
Thus, on the downside, supply chain
disruptions
arising
from
intermittent
shortages of PMS and diesel, rising
energy prices owing to the RussiaUkraine war, and legacy challenges
such as poor power and transport
infrastructure could affect domestic
production and distribution networks.
These
factors
signpost
significant
headwinds to Nigeria’s output growth.

Additionally,
the
effective
implementation
of
MTNDP;
improvement
in
manufacturing
activities; the positive impact of CBN
interventions
on
growth-enhancing
sectors; improvement in the business
confidence index; an average oil price
of US100 pb are all expected to drive
growth in 2022.

4.6.3 Risks to Domestic Inflation Outlook
Headline inflation remained above the
upper band of the Bank’s implicit
inflation target range of 6.0-9.0 percent
at 18.60 percent in June 2022and is
expected to persist in the near term.
Based on Staff projection, inflation is
expected to accelerate further in the
second half of 2022 given current trends
in the global and domestic economy.
From the global side, the continued
CBN Monetary Policy Review

impact of the Russian-Ukraine war on the
price and supply of wheat, fertilizer, and
oil; and the effect of monetary policy
normalizations on capital flows.

On the domestic front, headline inflation
forecast is anchored on the expected
increase in production costs associated
with the disruptions to the power supply
and
petroleum
products;
sustained
security
challenges
in
the
foodproducing areas; the burgeoning fiscal
deficit, and foreign exchange pressures.
These factors continue to undermine
expectations of price stability and exert
upward pressures on the general price
level. Measures to address these factors
would
considerably
moderate
inflationary pressures in the domestic
economy.


CBN Monetary Policy Review

APPENDICES

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ
NO.

OF
THE
MONETARY POLICY COMMITTEE MEETING
HELD ON MONDAY 24th AND TUESDAY 25th
JANUARY, 2022

1.0
Background
The Monetary Policy Committee (MPC)
held its first meeting for the year 2022 on
the 24th and 25th of January 2022 in the
light of waning optimism for a robust
rebound in global recovery in 2021. This
resulted from the persistence of the
COVID-19 pandemic and emergence of
new variants of the virus; persisting
supply bottlenecks; global inflationary
pressures;
and
the
imminent
commencement of monetary policy
normalization by some major central
banks. In the domestic economy, output
growth recovery was relatively strong in
2021.
It
is
however,
expected
to
continue reasonably in 2022, following
considerable improvement in the third
quarter of 2021 and a positive outlook for
the fourth quarter. This was hinged on
the continued support of the monetary
and fiscal authorities to sustain the
current momentum. The Committee
reviewed the developments in the
global and domestic economic and
financial environments in 2021, as well as
the outlook and risks for 2022.

Ten (10) members of the Committee
attended this meeting.


Global Economic Developments
The Committee noted that while the
recovery of the global economy in 2021
fell below the initial forecast, final
estimates
showed
considerable
improvements over the 2020 outcome,
evidence that the global economy was
pulling out of the doldrum associated
with the pandemic. Consequently, the
recovery is gaining momentum with
increasing consumer spending, upswing
in
investments
and
soaring
world
merchandise
trade,
above
prepandemic
levels.
This
reflects
the
resilience of economic agents in the
face of new strains of the virus and rising
infection
rates.
The
Committee,
however, took cognizance of significant
headwinds
confronting
the
global
economy in 2022, largely associated
with the persisting threats of new variants
of the coronavirus. The Advanced
Economies are however, in a strong
position to offset the impact of these
headwinds with stronger policy support
and
better
access
to
COVID-19
vaccines. Consequently, this group of
economies have shown better resilience
towards disruptions to the recovery. In
the medium term however, the rising
inflationary pressures and the gradual
withdrawal of both monetary and fiscal
stimuli may dampen the recovery in
2022.

In the Emerging Market and Developing
Economies (EMDEs), poor access to
vaccines and limited policy support
meant that this group of economies
have been harder hit by the Covid-19
health
crisis
and
its
associated
CBN Monetary Policy Review

macroeconomic downturn. In China,
one of the few countries that stayed out
of recession in 2020, output weakened in
the third quarter of 2021 and has
continued to weaken as the Covid
infections continue to rage amid power
supply
shortages
and
a
turbulent
property
market.
Following
the
containment of the infections in India,
the economy has commenced a sharp
recovery and is set to continue on an
upward trajectory. Overall, growth in the
EMDEs is expected to slow in 2022 due to
the low level of vaccination and limited
policy support in several economies in
this group.

On
price
development,
the
MPC
observed
that
inflation,
in
most
Advanced Economies remained high
and unlikely to abate in the short to
medium term. This is driven by the
persistence of supply side disruptions
and pent-up demand associated with
economic recovery. In the EMDEs,
inflation has remained high due to a
combination of persisting exchange rate
pressures
and
supply
bottlenecks
associated
with
the
lockdown
restrictions. With the US Fed and central
banks of other advanced economies
now moving towards monetary policy
normalization, the eventual interest rate
hike may likely trigger huge capital
outflow from the EMDEs which will further
aggravate exchange rate pressures with
a pass-through to domestic prices.

Global financial markets data show
significant sell-off, as investors continued
to rebalance their portfolios with the shift
from assets such as gold and emerging
market
securities
to
securities
of
Advanced
Economies
suggesting
market response to the impending
interest rate hike. Thus, global financial
conditions are expected to tighten as
risk averse portfolio investors reassign
their portfolios from perceived riskier
emerging market securities, to less risky
advanced economy securities with the
expectation of improved yields.

Domestic Economic Developments
Staff projections showed that the
economy is expected to remain on a
path of positive growth, given the
impressive performance in the third
quarter of 2021 and continuing rebound
in economic activities. The Committee
noted with satisfaction, the significant
improvement
in
the
Manufacturing
Purchasing
Managers’
Index
(PMI),
which rose to 52.0 index points in
December 2021, compared with 50.8
index points in November reflecting the
continuing economic recovery. This
expansion
was
driven
largely
by
increasing business activities in the
economy, leading to increase in new
orders and uptrend in employment and
production
levels.
The
NonManufacturing PMI, however, declined
marginally to 48.0 index points in
December 2021 from 48.6 points in
November, largely reflecting a decline in
services.

The Committee noted with concern, the
slight increase in headline inflation (yearon-year) to 15.63 per cent in December
2021 from 15.40 per cent in November
following seven consecutive months of
CBN Monetary Policy Review

decline. The unexpected increase was
attributed to both the food and core
components, which rose to 17.37 and
13.87 per cent in December 2021 from
17.21 and 13.85 per cent in November,
respectively. The Committee, however,
expressed confidence in the Bank’s
sustained
intervention
programmes,
noting that inflation will continue to
abate
as
food
supply
improves.
Members also noted that the seasonal
drive in price development associated
with the December festive period was
largely contributory to the marginal
increase in price levels, and as such,
believe that this episode of increase
may be temporary.

Reviewing
the
developments
in
monetary aggregates, the Committee
noted that broad money supply (M3)
rose further to 13.77 per cent in
December 2021, compared with 10.10
per cent in November 2021. This upthrust
was largely driven by the growth in Net
Domestic Assets (NDA) of 15.58 per cent
in December 2021, compared with 9.40
per cent in November 2021. Net Foreign
Assets (NFA), however decreased to 6.06
per cent in December 2021, compared
with 14.98 per cent in November 2021.
The sharp growth in Net Domestic Assets
(NDA) was largely attributed to an
increase in claims on the Federal
government and other sectors. The
slowdown in growth of Net Foreign
Assets (NFA) resulted from a decrease in
foreign assets holdings of the banking
system in favour of more domestic
investments.

The
Committee
reviewed
the
performance of the Bank’s intervention
programmes
aimed
at
stimulating
productivity in manufacturing/industries,
agriculture,
energy/infrastructure,
healthcare
and
Micro,
Small
and
Medium Enterprises (MSMEs). Between
November and December 2021, under
the
Anchor
Borrowers’
Programme
(ABP), the Bank disbursed N75.99 billion
to support the cultivation of over 383,000
hectares of maize, rice and wheat
during the 2022 dry season, bringing the
cumulative disbursements under the
Programme to ₦927.94 billion to over 4.5
million smallholder farmers cultivating 21
commodities across the country. All
excess output aggregated from the
financed farmers will be released to the
Nigeria Commodity Exchange (NCX) to
help moderate the prices of food in the
market. The Bank also released N1.76
billion to finance two (2) large-scale
agricultural
projects
under
the
Commercial Agriculture Credit Scheme
(CACS).

In addition, the Bank disbursed the sum
of ₦151.23 billion under the Real Sector
Facility to 15 additional projects in
agriculture, manufacturing, mining, and
services. The funds were utilized for both
greenfield and brownfield (expansion)
projects under the Covid-19 Intervention
for the Manufacturing Sector (CIMS) and
the Real Sector Support Facility from
Differentiated Cash Reserve

Requirement (RSSF-DCRR). Cumulative
disbursements under the Real Sector
Facility currently stood at ₦1.40 trillion
disbursed to 331 projects across the
CBN Monetary Policy Review

country. As part of its effort to support
the resilience of the healthcare sector,
the Bank also disbursed ₦498.00 million
to two (2) healthcare projects under the
Healthcare Sector Intervention Facility
(HSIF),
bringing
the
cumulative
disbursements to ₦108.85 billion for 118
projects,
comprising
of

pharmaceuticals, 82 hospital and 4
other services.

To support households and businesses
affected
by
Covid-19,
the
Bank
disbursed
N20.29
billion
to
40,521
beneficiaries,
comprising
35,340
households and 5,181 small businesses
under the Targeted Credit Facility (TCF)
within
the
period.
The
cumulative
disbursements under the TCF stood at
N369.78 billion to 777,666 beneficiaries,
comprising 648,052 households and
129,614 small businesses. To further
promote
entrepreneurship
development among Nigerian youths,
the Bank disbursed N293 million to 59
beneficiaries
under
the
recently
introduced
Tertiary
Institutions
Entrepreneurship Scheme (TIES).

Under the National Mass Metering
Programme (NMMP), the sum of ₦47.83
billion
was
disbursed
for
the
procurement and installation of 858,026
electricity meters across the country
under
the
Scheme’s
Phase-0.
The
Committee also noted the improved
collections by DisCos as a result of
increased meter installations. The Bank
released ₦274.33 billion to power sector
players, as part of its effort to support the
sector under the Nigeria Bulk Electricity
Trading
Payment
Assurance
Facility
(NBET-PAF). This was in addition to the
₦20.58 billion released to Distribution
Companies (DisCos) under the Nigeria
Electricity Market Stabilisation Facility –
Phase 2 (NEMSF-2). To further support the
development of enabling infrastructure
in the gas industry, the Bank released
additional
₦3.00
billion
for
the
augmentation
of
an
existing
infrastructure, bringing the cumulative
disbursements under the Intervention
Facility for National Gas Expansion
Programme (IFNGEP) to ₦42.20 billion for
six (6) projects.

Furthermore, under the 100 for 100
Policy on Production and Productivity
(PPP), which was introduced to stimulate
the flow of finance and investments to
enterprises and projects with potential to
kick-start
a
sustainable
economic
growth trajectory, accelerate structural
transformation, promote diversification,
and improve productivity, the Bank has
received 224 applications, valued at
₦294.91 billion for real sector projects in
agriculture,
energy,
healthcare,
manufacturing
and
services.
The
applications
are
currently
being
processed and the first batch of
beneficiaries under the intervention will
be announced on 31st January 2022,
with their names published in national
dailies.
These
projects
have
been
carefully selected in line with the
approved
selection
criteria
as
contained in the guidelines.

Money market rates fluctuated within
and above the asymmetric corridor,
reflecting prevailing liquidity conditions
in the banking system. The monthly
CBN Monetary Policy Review

weighted average Open Buyback (OBB)
rate increased to 12.75 per cent in
December 2021 from 10.61 per cent in
November 2021. The increase in the
Open Buyback (OBB) rate reflected the
tight liquidity conditions in the banking
system.

The MPC noted the continuing positive
performance in the equities market in
the review period, with the All-Share
Index (ASI) and Market Capitalization
(MC) increasing by 1.61 and 1.63 per
cent to 42,716.44 and N22.30 trillion on
December 31, 2021, from 42,038.60 and
N21.94 trillion on October 29, 2021,
respectively. This positive performance
reflected improved corporate earnings
as investors participation increased in
the market.

The MPC also noted the sustained
resilience
of
the
banking
system,
following the progressive improvement
in the Non-Performing Loans (NPLs) ratio
from 5.10 per cent in November 2021 to
4.85 per cent in December 2021- a first in
a long time. The Committee also noted
that the liquidity ratio remained well
above its prudential limit at 41.3 per
cent, though Capital Adequacy Ratio
(CAR) declined marginally to 14.53 per
cent in December 2021 from 14.90 per
cent
in
the
previous
month.
The
Committee thus, urged the Bank to
sustain its firm regulatory surveillance.

Members also noted the continued
improvement in the external reserves
despite
ongoing
foreign
exchange
market pressures. The reserves stood at
US$40.20 billion as at December 2021.
Outlook
The broad outlook for the recovery in
both
the
global
and
domestic
economies is clouded with uncertainty
such as the resurgence of the COVID-19
pandemic, driven by new and mutating
strains of the coronavirus; persisting
supply bottlenecks; high and rising
inflationary pressures; and dwindling
monetary and fiscal stimuli.

The Emerging Markets and Developing
Economies are likely to experience a
sharp downturn as a result of the
identified headwinds confronting the
outlook. This is hinged on the back of the
ongoing two-speed recovery of the
global economy, driven by continued
disparities
in
the
administration
of
vaccines
between
the
Advanced
Economies and the Emerging Markets
and Developing Economies. While the
Advanced
Economies
will
also
experience a downturn in 2022, this
group of economies are expected to
take a less severe hit as most of them
have achieved significant high levels of
vaccination.

Staff forecast project output growth at
3.10 per cent in 2021 with an expected
better outcome in 2022, consistent with
the
expected
improved
macroeconomic
performance.
The
economic
recovery
is
therefore
expected to progress gradually with the
ongoing support by the monetary and
fiscal authorities, progress in COVID-19
vaccinations and continued high crude
oil prices.

CBN Monetary Policy Review

After a moderate increase in December
2021, headline inflation is expected to
trend marginally upwards in the shortterm before moderating towards the
end of the first quarter of 2022. This is
expected as food harvests progress
towards the end of the first quarter of
2022 and improve food supply. In
general, with the Bank sustaining its
intervention programmes through the
year, food inflation is expected to trend
downwards in 2022.

Available
forecasts
for
key
macroeconomic
variables
for
the
Nigerian economy, indicated expected
rebound in output growth for most of
2022, sustained by ongoing broad
monetary
and
fiscal
stimuli.
Accordingly, the Nigerian economy is
forecast to grow in 2022 by 2.86 per cent
(CBN), 4.20 per cent (FGN) and 2.76 per
cent (IMF).

The Committee’s Considerations
The Committee accessed the balance
of
risks
confronting
the
domestic
economy in the near term as they
impact output growth and price stability.
Members noted the unrelenting effort by
the monetary and fiscal authorities in
mitigating the impact of the virus on the
economy. It observed the continued
moderate recovery of the domestic
economy but requires further concerted
policy effort by both the monetary and
fiscal
authorities
to
improve
the
momentum
and
strengthen
the
recovery. Members were thus of the
view that, building on the improved
growth in the third quarter and the
positive PMIs in the fourth quarter of
2021, output growth is expected to
strengthen into 2022.

On the Pandemic, the MPC reviewed its
continued impact on the domestic
economy
as
Members
collectively
agreed that the downside risks were still
hindering the recovery. In this light, it
commended
the
efforts
of
the
Presidential Task Force on COVID-19 for
procuring vaccines and continuing the
drive to ensure that most Nigerians are
fully vaccinated.

On
price
development,
Members
continued to express concerns about
the impact of insecurity in farming
communities on food inflation. Whereas
headline inflation had been moderating
for several months, the committee
believed that its recent uptick was
associated with increased demand
during the festive season and was thus of
the view that prices will return to the
downward trajectory given the Bank’s
ongoing interventions in the agriculture
sector.
On
this
note,
Members
applauded the efforts of the Bank with
the recent launch of the rice pyramids,
noting that these efforts to increase food
supply and stem food inflation were in
the right direction. Members, however,
reiterated the key role of the Federal
Government in providing the necessary
security
around
the
country,
and
particularly in the farming communities,
to ensure that farmers and their produce
remain safe, and food supply is both
boosted
and
uninterrupted.
The
Committee noted that the ongoing dry
CBN Monetary Policy Review

season farming would further improve
food supply and dampen prices.

Members noted the ongoing debate
around the removal of fuel subsidy and
suggested a robust engagement with
relevant groups in the country, and
afterward follow a stepwise and gradual
approach, to ensure its moderate
impact on cost of transportation and
energy for individual, households and
firms. The Committee also noted the
need to encourage the take-off of
private refineries across the country to
provide alternative competitive local
supply source and reduce the need for
government intervention to manage
fuel prices for domestic consumption. In
addition to this, the Committee called
for the speedy conclusion of the
government
gas-powered
vehicle
conversion
scheme
and
other
alternative sources of fuel.

On the exchange rate, the Committee
applauded the Management’s efforts at
maintaining stability over the short term
with
increasing
demand
as
the
economy
continues
to
reopen.
Members noted the dwindling proceeds
from oil sale, despite rising crude oil
prices. They further noted the need to
address the persistent reduction in
remittance
of
oil
revenue
to
the
Consolidated Revenue Fund and urged
the NNPC to urgently address this
anomaly.

The
improved
foreign
exchange supply will thus support the
Bank’s demand management strategy
in the foreign exchange market and
consolidate
macroeconomic
performance,
especially
those
that
promote export, reduce dependence
on import and reduce foreign exchange
demand pressure. The MPC welcomed
the improvement in foreign capital
inflow through diaspora remittances and
urged the Bank to further extend the
incentive
scope
to
attract
more
remittances to official channels.

The
Committee
noted
the
rising
government
debt
profile
and
the
concentration of the funding sources
and its implications for fiscal sustainability
and macroeconomic stability, including
its
impact
on
financial
system
performance and growth. The MPC
continued to urge the Government on
the need to harness other sources of
revenue to reduce its dependence on
oil as a single revenue source. In
addition, it reiterated the need for
government to seek alternative, more
viable,
and
efficient
infrastructure
financing sources, in order to ease its
expenditure
burden.
To
this
end,
Members called on the fiscal authorities
to take advantage of InfraCorp, the
private
sector
driven
infrastructural
vehicle and transfer viable infrastructure
projects
for
consideration
by
the
Corporation as this would ease pressure
on Government. that would otherwise
have to raise revenue through taxes
from an already burdened private and
household sector.

The improved performance of the
equities market in the review period,
signposted
continued
investor
confidence in the Nigerian economy.
This in the view of Members was a
positive
sign
that
the
economy
CBN Monetary Policy Review

remained on a path to a more robust
medium-term recovery.

The banking sector indices, in the
consideration of Members, showed no
less resilience as other macroeconomic
indicators reviewed; even as obvious
downside risks associated with the
Pandemic continued to impact the
business environment. Members thus
applauded the Management’s efforts in
ensuring the continued downward trend
of Non-Performing Loans (NPLs) ratio,
signifying improving conditions in the
banking system. Nevertheless, Members
emphasized the need for the Bank to
closely monitor developments in the
sector and swiftly respond to any
emerging challenges.

The Committee’s Decision
The MPC observed with concern the
moderate rise in inflation in December
2021, noting that this was typical of
increased
aggregate
demand
associated with the end of year festive
activities. Members, however, expressed
their continued commitment to drive
down domestic prices by putting in
place relevant policy measures to curb
the rise in inflationary pressures, while
also
supporting
the
fragile
growth
recovery.

In its determination as to whether to hold
or loosen or tighten its policy stance, the
MPC was mindful that, whereas the US
and some Advanced Economies have
signaled their intention to commence
policy normalisation which may result in
capital flow reversal for EMDEs, the major
focus at these climes were targeted
mainly at reining in the high level of
inflation which had been unprecedent
in the last four decades in those climes.
For Nigeria, members were of the view
that Nigeria is confronted with, not only
inflation but also fragile output growth.
As a result, MPC believes that its current
stance of price and monetary stability
conducive for growth remain desirable.
The MPC is convinced that various
measures being implemented were
helping, not only in boosting output
growth, but also in moderating inflation.
The
MPC
therefore,
enjoyed
Management to continue to use its
development
finance
tools
to
accelerate output growth, which will
also help in boosting manufacturing
output
that
would
ultimately
aid
moderation in prices. It also requested
Management to continue its use of
administrative
measures,
including
discretionary tools at its disposal through
CRR to control money supply in the
economy.

In its final consideration, the Committee
was clear that a loosening option was
not desirable because it would trigger
liquidity surfeit and fuel inflationary
pressure as available funds may outstrip
the economy absorptive capacity or
domestic capacity utilization. It also feels
loosening
could
trigger
foreign
exchange demand pressure, as the
excess liquidity would be channeled to
either
frivolous
importations
or
speculative holding of foreign exchange
as
alternative
investment
channels
narrow; leading to foreign exchange
depreciation and or inflation.
CBN Monetary Policy Review

The MPC also dropped a tightening
option at this meeting in view of the
fragile state of the current GDP growth
rate
and
potential
external
and
domestic headwinds confronting the
economy. The Committee opined that
tightening could truncate the steady
improvement in credit performance,
including
other
financial
soundness
indicators, and reverse the declining
trend in NPLs. Moreover, tightening
could counteract the CBN’s credit
expansion
motive
as
a
necessary
condition
for
improved
economic
growth and employment generation.

The MPC, therefore, concluded that a
HOLD stance remains desirable at this
time,
as
this
would
indicate
a
conservative
but
cautious
and
consistent policy choice given the
prevailing economic conditions and
outlook,
thus
strengthening
policy
credibility and focus. It also feels that a
hold would signal MPCs realisation of the
fragility of the growth recovery and its
sensitivity to emerging global and
domestic uncertainties. Hence the need
to sustain the current policy trajectory.

After a careful balancing of the benefits
and downsides of each policy option,
the MPC decided to hold all policy
parameters constant; believing that a
hold stance will enable the continued
permeation of current policy measures
in supporting the recorded growth
recovery and further boost production
and productivity, which would ultimately
rein-in inflation in the short to medium
term.
The Committee thus decided by a
unanimous vote to retain the Monetary
Policy Rate (MPR) at 11.5 per cent.

In summary, the MPC voted to retain:
I.
The MPR at 11.5 per cent;
II.
The Asymmetric Corridor of +100/-
700 basis points around the MPR;
III.
The CRR at 27.5 per cent; and
IV.
The Liquidity Ratio at 30 per cent.

Thank you.

Godwin I. Emefiele
Governor, Central Bank of Nigeria
25th January 2022


CBN Monetary Policy Review

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ NO. 141 OF THE
MONETARY
POLICY
COMMITTEE
MEETING HELD ON MONDAY 21ST
MARCH 2022

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 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
CBN Monetary Policy Review

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 riskaverse portfolio investors adopt a waitand-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
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
CBN Monetary Policy Review

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.

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 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
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.

CBN Monetary Policy Review

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 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

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 agroprocessing.

In addition to these, the Bank disbursed
the sum of ₦428.31 billion under the ₦1.0
trillion
Real
Sector
Facility
to

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.

CBN Monetary Policy Review

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

pharmaceuticals, 56 hospitals, and 37
other services. An additional tranche of
N14.7
million
was
disbursed
to

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
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 COVID19 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 liftCBN Monetary Policy Review

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
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.

CBN Monetary Policy Review

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.

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 supplyside 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 employmentgenerating 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 RussiaUkraine 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
CBN Monetary Policy Review

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.

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


CBN Monetary Policy Review

CENTRAL
BANK
OF
NIGERIA
COMMUNIQUÉ
NO.

OF
THE
MONETARY POLICY COMMITTEE MEETING
HELD ON MONDAY 23rd AND TUESDAY
24th May 2022

The Monetary Policy Committee (MPC)
met on the 23rd and 24th of May 2022
confronted with declining global growth
and
heightened
uncertainties
associated
with
adverse
price
developments across the world. These
developments
partly
reflect
the
aftermath of the ongoing war in Ukraine,
the
backlash
from
the
numerous
sanctions imposed on Russia by major
Advanced
Economies,
as
well
as
persisting supply chain disruptions in
major trading routes. At the same time,
the
Chinese
economy
remained
confronted with the lingering impact of
the
COVID-19
pandemic,
total
lockdown of major cities, significant
distortions in the property market and
modest
inflationary
pressures.
Consequently, Advanced Economy and
Emerging
Market
Economy
central
banks alike, are switching to monetary
tightening to curb the sharp rise in
inflation globally.

Even as global output growth recovery
moderates, the domestic economy is
expected to remain on the current path
of recovery through 2022. This is hinged
on the continued impact of stimulus by
both the monetary and fiscal authorities
to support the economy following the
outbreak of COVID-19 pandemic. The
Committee
assessed
these
developments and the outlook for the
rest of the year.
Eleven (11) members of the Committee
attended this meeting.

Global Economic Developments
Global output growth commenced a
broad slowdown in the first quarter of
2022, as a result of the conflict between
Russia and Ukraine, after recovering
considerably in 2021. This led to massive
supply constraints, with the backlash of
sanctions against Russia creating huge
macro-economic
imbalances
for
several countries. Consequently, the
uncertainties that have arisen are
buoyed by the resumption of the spread
of the COVID-19 pandemic in China, a
key hub of global manufacturing. This
has given rise to upside risks to inflation
and downside risks to growth.

In addition, the huge amount of stimulus
deployed by various countries to ease
the
downsides
of
the
COVID-19
pandemic, particularly in 2021, has
predisposed the global economy to
huge
debt
levels,
considering
the
current burgeoning global private and
public debt portfolios. Central banks in
both the Advanced and Emerging
Market
Economies
have
thus
commenced
monetary
policy
tightening to curb rising prices. This could
impact the recovery negatively and
result in a rise in debt default as global
financial
conditions
tighten.
Furthermore,
China
has
also
reintroduced constraining measures to
mitigate the spread of a new wave of
the COVID-19 pandemic within its major
industrial cities, resulting in a slowdown in
production. In light of these headwinds,
CBN Monetary Policy Review

the International Monetary Fund (IMF)
downgraded its forecast for global
output growth for 2022 and 2023 to 3.6
per cent apiece from 4.4 and 3.8 per
cent, respectively, reflecting the severity
of setbacks to the global recovery.

Inflation continued to rise unabated
across several Advanced Economies
and is projected to remain high, at least
in the medium term, as food and energy
prices pushed higher to levels not
previously recorded in four decades. This
is due to tightening supply amidst closure
of major trade routes that supply inputs
for food and fertilizer, as well as the high
price of energy. In the Emerging Market
and Developing Economies (EMDEs),
inflation also remained high due to a
combination of persisting high food and
energy prices; supply chain disruptions
associated with the impact of sanctions
against Russia; exchange rate pressure;
capital
flow
reversals;
as
well
as
underlying legacy constraints.

In the global financial markets, investor
confidence is gradually being restored,
evidenced by portfolio rebalancing with
the gradual decline in gold price. The
demand
for
advanced
economy
equities and bonds has improved with
the commencement of interest rate liftoff led by the US Fed and the Bank of
England, resulting in the outflow of
capital from emerging market securities.
Global financial conditions are thus,
expected to tighten in the near term, as
risk-averse investors reassign substantial
portions
of
their
portfolios
from
perceived
riskier,
though
more
rewarding Emerging Market securities to
less risky advanced economy securities.
In general, the global economy and
financial markets, are confronted with
significant risks in the medium term as the
huge build-up of both private and public
debt
may
push
several
fragile
economies into a new era of recession.

Domestic Economic Developments
According to the National Bureau of
Statistics (NBS), Real Gross Domestic
Product (GDP) grew by 3.11 per cent in
the first quarter of 2022, compared with
3.98 per cent in the fourth quarter of 2021
and 0.51 per cent in the corresponding
period
of
2021.
This
is
the
sixth
consecutive quarter of real output
expansion, following the economy’s exit
from recession in 2020. This steady
positive performance, was driven largely
by
the
growth
in
aggregate
consumption, arising from the continued
policy support at the onset of the
pandemic and gradual recovery of
aggregate demand.

Headline inflation (year-on-year) ticked
up to 16.82 per cent in April 2022 from
15.92 per cent in March 2022, 90 basis
points
increase.
This
is
the
third
consecutive increase in inflation since
the commencement of the year 2022,
attributable to the rise in both the core
and food components to 14.18 and
18.37 per cent in April 2022 from 13.91
and 17.20 per cent in March 2022,
respectively. The rise in headline inflation
resulted
from
rising
energy
prices
associated with the epileptic supply of
Premium Motor Spirit (PMS), high cost of
CBN Monetary Policy Review

Automotive Gas Oil (AGO), mostly used
in transportation and production as well
as a progressive hike in electricity tariffs.
The increase in the food component was
driven
by
shocks
to
food
prices
associated
with
persisting
security
challenges in major food-producing
areas
and
legacy
infrastructural
problems which continue to hamper
food supply logistics and storage across
the country.

Broad
money
supply
(M3)
rose
significantly to 6.22 per cent in April 2022,
compared with 4.19 per cent in March
2022. This was largely driven by strong
growth in Net Domestic Assets (NDA) of
11.86 per cent in April 2022, compared
with 8.82 per cent in the previous month.
The growth in NDA was attributed to the
increase in claims on the Federal
Government and other sectors (public
non-financial
corporations,
private
sector,
and
state
and
local
governments).

Money market rates oscillated within
and outside the Standing Facilities
Corridor (SFC), reflecting the prevailing
liquidity
conditions
in
the
banking
system.
Consequently,
the
monthly
weighted average Open Buyback (OBB)
and Interbank Call rates increased to
7.49 and 8.67 per cent in April 2022, from
6.62 and 4.50 per cent in March 2022,
respectively. The increase in rates was
an indication of the tight liquidity
conditions in the banking system during
the review period.

The performance of the equities market
remained strong and positive in the
review period, with the All-Share Index
(ASI) and Market Capitalization (MC)
increasing significantly from 46,965.48
and N25.31 trillion on March 31, 2022, to
52,979.48 and N28.56 trillion on May 20,
2022, respectively.

In the Banking System, the Capital
Adequacy Ratio (CAR) and the Liquidity
Ratio
(LR)
remained
above
their
prudential limits at 14.6 and 43.7 per
cent, respectively. The Non-Performing
Loan (NPL) ratio stood at 5.3 per cent in
April 2022, compared with its prudential
limit of 5.0 per cent, reflecting sustained
stability in the banking system, though
there remains a need to bring this down
to the prudential limit.

Gross
external
reserves
declined
moderately to US$38.36 billion as at May
19th, 2022 from US$39.28 billion at endMarch 2022. This was attributed to the
weak accretion to the reserves from
exports and the high cost of importation
of refined petroleum products.

The
Committee
reviewed
the
performance of the Bank’s intervention
schemes
targeted
at
stimulating
productivity
in
agriculture;
manufacturing/industries;
energy/infrastructure;
healthcare;
exports; and micro, small and medium
enterprises (MSMEs).

Between April and May 2022, the Bank
released the sum of N57.91 billion under
the Anchor Borrowers’ Programme (ABP)
to
185,972
new
projects
for
the
cultivation of rice, wheat, and maize,
bringing the cumulative disbursement
CBN Monetary Policy Review

under the Programme to N1.01 trillion,
disbursed to over 4.2 million smallholder
farmers
cultivating

commodities
across the country.

The Bank further disbursed the sum of
N1.50 billion, under the Accelerated
Agriculture
Development
Scheme
(AADS), to one (1) new youth-led
project, piloted and funded through the
Government of Ondo State for the
acquisition
of
assets
for
oil-palm
cultivation and the establishment of
poultry farms. This brings the total
disbursement under the Scheme to
N21.23 billion for 10 state-led and three
(3) private sector-led projects.

In addition, the Bank released N21.73
billion to finance seven (7) large-scale
agricultural
projects
under
the
Commercial Agriculture Credit Scheme
(CACS). The funds were utilized for the
establishment of a ranch and milk
processing facility; procurement of feed
and
medication
for
livestock/dairy
production; construction of a 300 metrictonne per day oil mill in Gusau, Zamfara
State; acquisition and installation of an
agrochemical
factory;
as
well
as
purchase and stockpiling of homegrown
maize for animal feed production. This
brings the cumulative disbursement
under this Scheme to N741.05 billion for
674 projects in agro-production and
agro-processing.

Under the Paddy Aggregation Scheme
(PAS), N6.20 billion was disbursed by the
Bank to three (3) new projects for the
purchase and mopping-up of homegrown rice paddy. This brings the total
funds disbursed to 42 integrated rice
millers under the PAS to N106.39 billion.
To
support
the
growth
of
the
manufacturing
sector,
the
Bank
disbursed the sum of N436.85 billion to 34
new projects under the N1.0 trillion Real
Sector Support Facility (RSSF). This was
utilized for both greenfield (new) and
brownfield (expansion) projects under
the
COVID-19
Intervention
for
the
Manufacturing Sector (CIMS) and the
Real
Sector
Support
Facility
from
Differentiated
Cash
Reserve
Requirement (RSSF-DCRR). Cumulative
disbursement under the RSSF for the
financing of 402 real sector projects
across the country, currently stands at
N2.10 trillion.

The Bank disbursed N55.34 billion, under
the 100 for 100 Policy on Production and
Productivity (100 for100 PPP), to 44
projects,
comprising

in
manufacturing, 17 in agriculture, 2 in
healthcare, and 1 in the services sector.
In the healthcare sector, the Bank
disbursed N17.70 billion to four (4)
healthcare
projects
under
the
Healthcare Sector Intervention Facility
(HSIF),
bringing
the
cumulative
disbursements to N130.49 billion for 126
projects, comprising 58 hospitals, 31
pharmaceuticals
and

other
healthcare services.

The Bank released the sum of N21.00
billion Under the Export Facilitation
Initiative (EFI), for three (3) projects in
domestic production and value addition
of cocoa and sesame seed. This
intervention
is
targeted
at
further
expansion of the economy’s non-oil
CBN Monetary Policy Review

export basket towards improving foreign
exchange revenue earnings for the
country.

To support micro, small and medium
enterprises (MSMEs), the Bank disbursed
N1.50 billion to 2,718 new projects
through the Agri-Business Small and
Medium Enterprises Investment Scheme
(AgSMEIS) for activities in fish farming,
rice processing, wheat farming, poultry
farming, livestock farming, ICT and
tailoring amongst others. This brings the
cumulative
disbursements
under
AgSMEIS to N136.13 billion.

Under the Micro, Small, and Medium
Enterprises
Development
Fund
(MSMEDF), the Bank disbursed N2.79
billion to support youths engaged at
various nodes of the agricultural value
chain, bringing the total disbursement
under this intervention to N98.88 billion to
749 MSME projects across the country.

In
energy/infrastructure,
the
Bank
released N15.71 billion to power sector
players including generation companies
(GenCos)
and
gas
companies
(GasCos),
under
the
Nigeria
Bulk
Electricity
Trading
Plc
–
Payment
Assurance Facility (NBETPAF), bringing
the cumulative disbursement under the
facility to N1.30 trillion. The sum of N22.67
billion was also released to Distribution
Companies
(DisCos)
for
their
Operational Expenditure (OpEx) and
Capital Expenditure (CapEx), under the
Nigeria Electricity Market Stabilisation
Facility – Phase 2 (NEMSF-2). Cumulative
disbursement
under
the
NEMSF-2
currently stands at N251.93 billion.
Additionally, under the National Mass
Metering Programme (NMMP), the Bank
has disbursed N0.19 billion to DisCos for
the procurement of electricity meters,
bringing the cumulative disbursement
for the procurement and installation of
865,956 meters across the country to
N47.82
billion.
Interventions
in
energy/infrastructure are designed to
improve
investment
and
develop
enabling infrastructure in the Nigeria
Electricity Supply Industry.

Outlook
The broad outlook for both the global
and
domestic
economies
in
the
mediumterm, remains clouded with
uncertainties arising from the lingering
war between Russia and Ukraine, the
unfolding
impact
of the
extensive
sanctions imposed by several countries
on Russia, and the downside risks from
the continued spread of the COVID-19
Pandemic.

Global growth is thus confronted with
significant headwinds which may derail
the
current
projection
further.
The
persisting rise in inflation, is also set to
undermine the recovery of output
growth, due to the associated build-up
of uncertainties around the cost of
inventory and other production inputs.
The rise in global debt is also an
unfolding dilemma which policy makers
must carefully evaluate and address to
avert a near-term global financial crisis.
In summary, while global aggregate
demand remains strong and growing,
the numerous supply-side constraints will
continue to undermine the recovery
CBN Monetary Policy Review

effort, at least in the short to medium
term.

In the domestic economy, data on key
macroeconomic variables indicate that
the recovery of output growth will
continue, probably at a more subdued
pace,
considering
the
unfolding
domestic and external shocks to the
economy. Domestic price development
is, however, expected to maintain an
upward pressure in the light of the buildup of increased spending related to the
2023 general elections.

Consequently, the Nigerian economy is
expected to grow, in line with CBN
forecast of 3.24 per cent in 2022.
However, the FGN forecast is at 4.20 per
cent, while the IMF projects Nigeria’s
growth in 2022 to be 3.40 per cent.

The Committee’s Considerations
At this meeting, the MPC noted the risks
confronting the global economy, as
those associated with, not only inflation
and prices,
but
also
include risks
associated
with
weakening
growth
prospects across the world.

The Committee observed that whereas
post-pandemic
policy
support
has
remained broadly expansionary, at
least, from a fiscal standpoint, the sharp
rise in inflation across both the Advance
& Emerging Markets Economies has
generated growing concern amongst
central banks, as the progressive rise in
inflation, driven by rising aggregate
demand and wage growth, is putting
unsustainable upward pressure on price
levels.
Consequently,
major
central
banks such as the US Fed, Bank of
England, European Central Bank, and
Bank of Canada have provided strong
guidance for a progressive shift away
from monetary policy accommodation
to drive market interest rate upward,
which may ultimately impact capital
flow
away
from
Emerging
Market
Economies.

On another hand, MPC noted that the
war between Russia and Ukraine has
resulted in significant disruption of the
global supply chain, at a time when the
global economy is still confronted with
downside risks to growth associated with
the Covid 19 pandemic. In addition to
this, global trade has been impacted by
the series of restrictions imposed by
NATO countries and its allies against
trade with Russia. This has increasingly
fragmented
the
global
economy,
imposing huge strains on the tepid postpandemic
recovery.
Only
recently,
China, the USA, and South Africa are
seeing a renewed spike in COVID-19
infections. As a result, the Chinese
government
recently
re-introduced
lockdown in major industrial cities, to
forestall the spread of the pandemic:
further disrupting the supply chain crisis.
In the view of the MPC, these two risks
pose great challenges to rising inflation
globally.

For the domestic economy, the MPC
noted with delight that the GDP grew by
3.11
percent
in
Q1,

(y-o-y),
highlighting a steady recovery for the 6th
consecutive quarter. Quarter on quarter
real GDP grew by 9.36 percent, a slight
CBN Monetary Policy Review

moderation from 11.07 percent in the
previous quarter. The MPC however was
concerned
about
the
somewhat
aggressive rise in inflation by almost 90
basis points in April, 2022. To dampen the
expectation of the inflationary pressure,
MPC decided on the need to take a shift
from its historically cautious approach on
interest rate, to a policy rate hike, while
still
adopting
an
accommodative
approach to development finance
initiatives that have supported the
growth of the economy and sustained
recovery. The MPC is of the view that
rates on the development finance
initiatives of the Bank should remain at 5
percent till March, 2023.

Consequently, as regards the decision
on whether to hold. tighten or loosen,
MPC feels that loosening in the face of
the rising policy rates in Advance
economies may result in a sharp rise in
capital outflow and faster dry-up of
foreign credit lines. MPC also feels that
loosening could lead to further liquidity
surfeit and inflationary pressure. S to
whether to hold, MPC feels its stance
would strengthen the perception that
the CBN has abandoned its primary
mandate of taming inflation.

On the need to tighten, MPC feels that
tightening would help moderate the
inflationary trade-off from the steady
growth recovery so far. MPC also feels
that tightening would help rein in
inflation before it assumes a galloping
trend,
considering
the
progressive
increase in headline inflation (m-o-m),
particularly with the sharp 90 basis point
increase in April, 2022.
Furthermore, MPC feels that tightening
would narrow the negative real interest
rate margin, improve market sentiment
and restore investor confidence. Equally,
members
believe
tightening
would
moderate inflationary pressure passthrough to exchange rate depreciation
and moderate the speed of capital flow
reversal, provide incentives for foreign
capital inflows and sustain remittances.
Lastly,
tightening
could
moderate
government domestic borrowing, as
government debt servicing to revenue
ratio increased significantly in recent
times, threatening debt sustainability.

The Committee’s Decision
Members expressed deep concern
about
the
continued
uptrend
of
inflationary
pressure.
Despite
the
gradual improvement in output growth.
The Committee noted that the current
rise in inflation may be inimical to growth,
and thus hinder the full recovery of the
economy. While the MPC identified
several supply-side factors which may
be contributing to inflationary pressure,
emerging evidence shows that money
demand pressure is on the rise and is
unlikely to abate until the 2023 general
elections are concluded. The dilemma
confronting the Committee at this
meeting, therefore, is how best to drive
down domestic prices while continuing
to support the fragile recovery.

In
the
current
circumstance,
the
Committee was of the view that it was
confronted with the choice of either to
hold all policy parameters constant to
allow
previous
policy
measures
to
CBN Monetary Policy Review

continue to support growth or tighten
the stance of policy to curb money
demand
growth
and
upward
movement
of
domestic
prices.
A
loosening option would likely result in an
increased
liquidity
surfeit,
rise
in
inflationary pressure, and further pressure
on the exchange rate.

The choice of holding, in the view of
Members, would not only continue to
support
growth,
even
though
moderately, but will also allow the
growth of money demand to continue
at the current pace, leading to the
uptick in inflationary pressure. While
growth concerns remain paramount to
the Committee, the persistent uptick in
domestic price levels is clearly a
downside risk to growth, that must be
addressed urgently.

While it may seem contradictory to raise
rates in the face of fragile growth, this is
the dilemma that most Central banks
around the world are grappling with at
the moment. Yet, on balance, it is quite
clear and compelling that tackling
inflation is more urgent in the sequence
of policy objectives. In this regard, the
MPC urged the Bank to redouble its
efforts
at
supporting
the
priority
growthenhancing
sectors
of
the
economy while urging the Federal
government to do more to provide a
safe
and
secure
environment
for
economic agents to boost activities and
growth.

After
carefully
reviewing
the
developments of the last two months
and the outlook for both the domestic
and global economies, as well as the
benefits and downsides of each policy
option, the Committee decided to raise
the Monetary Policy Rate (MPR) to rein in
the current rise in inflation as Members
were of the view that the continued
uptrend would adversely affect growth.
The
Bank
further
reaffirmed
its
commitment to continue to provide
support to priority sectors as the need
arises to support growth until the current
upward pressure in price development
abates.

The
Committee
thus
decided
by
unanimous vote to raise the Monetary
Policy Rate (MPR). Six (6) members voted
to raise the MPR by 150 basis points, four
(4) members by 100 basis points, and
One (1) member by 50 basis points.

In summary, the MPC voted to:
I.
Raise the MPR to 13.0 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
24th May, 2022