Central Bank of Nigeria Communiqué’ No. 104 of the
Monetary Policy Committee Meeting of Monday and
Tuesday, November 23 and 24, 2015
The Monetary Policy Committee met on 23rd and 24th
November, 2015 against the backdrop of slowing global
growth
and
a
weakening
domestic
economic
environment, attributable largely to the down turn in oil
prices. In attendance were 10 out of 12 members. The
Committee appraised the global and domestic economic
and financial environments up to October 2015 as well as
the economic outlook for the first half of 2016.
International Economic Developments
The Committee noted the moderation in global output
recovery evidenced by the less-than-expected growth of
2.9 per cent in the first half of 2015. The development

was underpinned largely by deteriorating global trade,
reversal in output growth in the advanced economies
and a significant slowdown in growth in the emerging
and developing economies. The key drag on growth in
the advanced economies included unfavorable labor
market conditions, suppressed foreign demand and
weaker than anticipated domestic aggregate demand.
Consequently, growth in the U.S. slowed to 1.5 per cent
in the third quarter of 2015 as a result of a drawdown in
inventories; deceleration in exports; drag in private
consumption, government spending and residential fixed
investment. The outlook for the fourth quarter, however,
remains optimistic as consumption spending is expected
to drive growth, supported by low inflation.

The Bank of Japan continued with monetary easing,
through its asset purchase program, with a monthly

injection of ¥6.7 trillion ($54.27 billion); but this was
insufficient to restart output as third quarter growth is
projected to be weaker than the second quarter, thereby
increasing the likelihood of dampening growth and
pressure for higher stimulus. The European Central Bank
(ECB) in October 2015; reaffirmed its commitment to its
monthly asset purchase of €60 billion ($64.2 billion) until
September, 2016; although the package may fall short of
what is required for meaningful impact on growth.
Similarly, the Bank of England continued its ₤375 billion
($570 billion) monthly asset purchase program, as the
economy is expected to retreat from its performance of
0.7 per cent in the second quarter to about 0.5 per cent
in Q3 with the decline in foreign demand, potentially
dampening the prospects for an interest rate hike.
Growth in the emerging markets and developing
economies (EMDEs) continued to sag; reflecting the

protracted slowdown in China as well as recession in
Russia and Brazil. The slowdown among EMDEs has been
mainly due to weak import growth in China, low
commodity prices, capital flow reversals, rising debt
levels and other geopolitical factors. In effect, the poor
growth expectations could continue into the fourth
quarter with the likelihood of further dampening into
2016.

Overall, monetary policy in the most advanced and
emerging market economies appears oriented towards
easing to revive output and strengthen employment. No
substantial upswing is expected around the current tepid
global inflation, projected to remain moderate through
2016. The continuously bearish commodity prices and
stronger
consumer
sentiments
have
dampened
consumer prices in the advanced economies. In the

emerging and developing markets, the major risk to
domestic prices is mainly the increased pressure on
domestic currencies. However, in most emerging
markets, the low prices of oil and other commodities
continue to cushion consumer inflation pressures.

Domestic Economic and Financial Developments
Output
Data from the National Bureau of Statistics (NBS)
indicated that real GDP grew by 2.84 per cent in the third
quarter of 2015, compared with 2.35 per cent in the
second quarter. However, economic growth in Q3 was
lower than the 3.96 and 6.23 per cent in the first quarter
of 2015 and the corresponding period of 2014,
respectively. Both the oil and non-oil sectors contributed
to growth in the third quarter of 2015. In the non-oil

sector, the key drivers of output growth were Crop
Production,
Trade
and
Telecommunications
and
Information Services, contributing 0.91, 0.79 and 0.40
percentage points, respectively.

The overall outlook for economic activity is expected to
improve on account of sustained improvement in the
supply of power and refined petroleum products,
progress with counter-insurgency in the North-East and
targeted interventions in the real sector. In addition, the
inauguration of the Federal Executive Council and the
assumption of office of the Ministers, earlier this month,
are expected to add impetus to the growth momentum.
The Committee reiterated its commitment to support the
various ongoing initiatives of the Federal Government to
stimulate output growth.

Prices
The Committee noted with delight the slight decline in
year-on-year headline inflation to 9.3 per cent in
October, from 9.4 per cent in September, 2015. The
decline in headline inflation in October 2015, reflected
decreases in both the core and food components. Core
inflation declined for the second consecutive month to
8.7 per cent in October from 8.9 per cent in September,
while food inflation slowed to 10.1 per cent from 10.2
per cent over the same period. The Committee further
noted the continued moderation in month-on-month
inflation and reaffirmed its commitment to price
stability, stressing the need for complementary supply
side policies as part of an overall strategy to lock-in
inflation expectations.

Monetary, Credit and Financial Markets Developments
Broad money supply (M2) contracted by 3.75 per cent in
October, 2015, over the level at end-December, 2014.
Annualized, M2 declined by 5.0 per cent, which is
significantly below the growth benchmark of 15.24 per
cent for 2015. Net domestic credit (NDC) grew by 10.8
per cent, which annualizes to 14.35 per cent in the same
period. At this level, NDC fell below the provisional
benchmark of 29.30 per cent for 2015. Growth in
aggregate credit reflected mainly growth in net credit to
the Federal Government which grew by 96.66 per cent in
October, although lower than the 142.38 per cent in
September, 2015. The sharp moderation in credit to
government may be partly attributable to the lag effect
of implementation of the Treasury Single Account (TSA).
During the period under review, money market interest
rates were low but sometimes volatile, reflecting

fluctuations in banking system liquidity during the
period. Average inter-bank call and Open Buy Back (OBB)
rates, which stood at 15.50 and 35.00 per cent on
September 21 and 22, 2015, respectively, fell to 9.67 and
9.00 per cent on September 23, 2015. On October 19,
2015, OBB rate closed at 1.00 per cent with no
transaction at the interbank call segment. Following the
increase in net liquidity level, the interbank call and OBB
rates further declined and closed at 3.76 and 0.73 per
cent, on October 29 and 30, 2015, respectively. Between
the last MPC and end-October 2015, interbank call and
OBB rates averaged 6.66 and 6.72 per cent, respectively,
and were 0.41 per cent and 1.33 per cent on 19th
November, 2015.
The Committee also noted the bearish trend in the
equities segment of the capital market during the review
period. The All-Share Index (ASI) decreased by 9.9 per

cent from 31,217.77 on September 30, 2015 to 28,131.28
on November 20, 2015. Similarly, Market Capitalization
(MC) fell by 9.9 per cent from N10.73 trillion to N9.67
trillion during the same period. However, relative to endDecember 2014, the indices decreased by 18.9 and 9.5
per cent, respectively. These developments reflected,
largely the cautious approach to lending by the deposit
money banks.

External Sector Developments
The average naira exchange rate remained relatively
stable at both the inter-bank and Bureau-de-Change
(BDC) segments of the foreign exchange market during
the review period. The exchange rate at the interbank
market opened at N197.00/US$ and closed at N197.00,
with a daily average of N196.99/US$ between September
21 and October 30, 2015. At the BDC segment, the

exchange rate opened at N223.50/US$ and closed at
N225.00, with a daily average of N224.46/US$,
representing a depreciation of N1.50k for the period. The
relative stability in the foreign exchange market is
attributable to the sustained supply of foreign exchange
from autonomous sources as well as the effects of
various administrative measures taken by the Bank.
Gross official reserves increased from US$29.85 billion at
end-September, 2015 to $30.31 billion on 20th
November, 2015.

Committee’s Considerations
The Committee acknowledged the continued fragile
global economic environment, including the possibility of
monetary policy normalization in the United States; poor
outlook for commodity prices and further slowdown in
the Emerging Markets and Developing Economies. The

MPC also noted
the fragility
of the
domestic
macroeconomic environment; reflected partly in low
output growth, soft oil prices, low credit to the high
elasticity sectors of the economy and sustained
inflationary
pressure,
which
however,
softened
moderately in October. The MPC was, particularly,
concerned
that
the
previous
liquidity
injections
embarked upon through lowering of the Cash Reserve
Ratio (CRR), in the last MPC, has not transmitted
significantly to improved credit delivery to key growth
and employment in sensitive sectors of the economy.
Rather, credit went to sectors with low employment
elasticity.
The Committee restated its commitment to evolve and
implement measures that would be supportive of
consolidating
and
strengthening
output
growth,
however, with an eye on price stability. The Committee,

however, recognized the limits of monetary policy under
conditions of huge infrastructure gap and significant
global financial market fragilities. While noting the
imperative of complementary fiscal policies to augment
monetary policy, under the circumstance, monetary
policy must remain bold in charting the desired course
that would stimulate sustainable output growth in the
country.
Concerned about the state of unemployment in the
country, the MPC evaluated various options for ensuring
increased credit delivery to the key growth sectors of the
economy,
capable
of
generating
employment
opportunities,
and
improving
productivity.
The
Committee underscored the need for the Deposit Money
Banks to ensure that measures taken by the Central Bank
to inject liquidity and stimulate the economy adequately
translate into increased lending to the sectors with

sufficient employment capabilities and the potential to
generate growth. Accordingly, the MPC agreed that going
forward any attempt by the CBN at easing liquidity into
the system shall be directed at targeting real sector,
infrastructure, agriculture and solid minerals. The MPC
further directed the Bank’s Management to put in place
necessary
measures/regulations
to
ensure
strict
compliance by the DMBs. This is aimed at ensuring that
employment and productivity is stimulated while also
moderating prices.
The Committee noted with satisfaction the stability,
soundness and resilience of the banking system even
against adverse global financial conditions. Given the
situation, the MPC emphasized the necessity of focusing
on financial market stability and proactive engagement
of policy and administrative levers needed to support the
environment in which market institutions operate. On

their part, market institutions are encouraged to employ
more stringent criteria in evaluating their portfolio and
business decisions.
The MPC considered that although, headline inflation
had remained at the borderline of single digit, the
observed moderation, especially in the month-on-month
inflation, provided some room for monetary easing to
support output in the short to medium term, while
keeping in focus the primacy of price stability. In effect,
the Committee will continue to monitor developments
around the Naira exchange rate, interest rates, and
consumer prices, even as target measures are needed to
channel liquidity to the key sectors of the economy in an
attempt to drive growth.
The Committee noted that close coordination between
monetary and fiscal policy was imperative for sustainable
growth enhancing policies.

The Committee’s Decisions
In consideration of the weakening fundamentals of the
economy, particularly the low output growth, rising
unemployment and the uncertainty of the global
economic environment, the MPC, by a vote of 8 out of
10, reduced the MPR from 13.0 to 11.0 per cent while 2
members voted for a retention of the rate at 13.0 per
cent; 7 members voted to reduce the Cash Reserve
Requirement (CRR) from 25.0 per cent to 20.0 per cent
while 3 members voted to hold. In addition, 8 members
voted for an asymmetric corridor of +2/-7 per cent while
2 voted to retain the symmetric corridor of +/-2 per cent
around the Monetary Policy Rate (MPR).

The MPC emphasized that the liquidity arising from the
reduction in the CRR to 20 per cent, will only be released

to the banks that are willing to channel it to employment
generating activities in the economy such as agriculture,
infrastructure development, solid minerals and industry.

In summary, the MPC voted to:
(i) Reduce the CRR from 25.0 per cent to 20.0 per cent;
(ii) Reduce the MPR from 13.0 per cent to 11.0 per cent;
(iii) Change the symmetric corridor of 200 basis points
around the MPR to an asymmetric corridor of +200 basis
points and -700 basis points, around the MPR.


Thank you for listening.

Godwin I. Emefiele
Governor, Central Bank of Nigeria
24th November 2015