PERSONAL STATEMENTS BY
THE MONETARY POLICY COMMITTEE MEMBERS
MPC MEETING MARCH 25 – 26, 2024

1. AKU PAULINE ODINKEMELU
I vote to raise the Monetary Policy Rate (MPR) by 150 basis points from 22.75
per cent to 24.25 per cent, retain the cash reserve ratio at 45.00 per cent,
adjust the cash reserve ratio of merchant banks from 10.0 per cent to 14.0 per
cent, adjust the asymmetric corridor around the MPR to +100/-300 from
+100/-700 basis points, and retain the Liquidity Ratio (LR) at 30.00 percent.
My decision is influenced by the following developments:
1. Global Economic Developments
Growth in global output in 2024 is projected to remain at the 2023 level of 3.1
per cent, and expand further to 3.2 per cent in 2025, which is low by historical
average of 3.8 per cent for 2000-2019. The key drivers of global growth are
the greater than expected resilience in the United States, leading emerging
markets, and developing economies, as well as the fiscal stimulus in China.
Output growth in the United States is projected to fall from 2.5 percent in 2023
to 2.1 percent in 2024 and 1.7 percent in 2025, due to softening in labour
markets, gradual fiscal tightening, and the lagged effects of monetary policy
tightening. Output growth in Euro area is projected at 0.9 per cent in 2024
and 1.7 per cent in 2025. Euro area is projected to recover as the effects of
the shock to energy prices subside amid the major geopolitical tension
(Russia – Ukraine conflict) and disinflation.
Growth in emerging and developing economies is projected to remain at 4.1
per cent in 2024 and rise to 4.2 per cent in 2025, while growth in Sub-Saharan
Africa is projected to rise to 3.8 per cent in 2024 and 4.1 per cent in 2025, due
to gradual improvement in supply chain and subsiding negative effect of
weather shocks.

Global headline inflation is projected to fall to 5.8 per cent in 2024 and 4.4
per cent in 2024, signalling early indications of a disinflationary process amid
tight monetary policy stance. It is projected that about 80 per cent of the
world’s economies is expected to witness lower annual average headline
and core inflation in 2024, however, advanced economies are to witness
faster disinflation than emerging market and developing economies. IMF
inflation forecast is revised down for both 2024 and 2025 for advanced
economies, while it is revised up for 2024 for emerging market and
developing economies.
Though IMF projection on the risks to the global outlook are broadly
balanced, growth in Sub-Saharan African countries remains fragile due to
geopolitical tensions, climate change, tight financial conditions in advanced
economies, and disruption to global supply chain. The import dependent
nature of the Nigerian economy remains a major source of vulnerability to
external shocks. Nigeria’s importation of petroleum products exerts upward
pressure on domestic prices and erodes the gains of positive oil price for an
oil producing and exporting country.
2. Domestic Economic Developments and Outlook
Nigerian economy remains resilient as the economy maintained its growth
path. Real GDP grew by 3.46 per cent in the last quarter 2023, from 2.54 per
cent in the third quarter of 2023. CBN staff presentations during the MPC
meeting in March indicates that real GDP is expected to grow by 3.20 per
cent in the first quarter of 2024 and 3.22 per cent in the second quarter of
2024. Despite the growth path of the real GDP, growth still remained fragile
because of inflationary pressure, fiscal reforms, persistent structural rigidities,
and vulnerabilities from the external sector.
Rise in headline inflation from 29.90 per cent in January to 31.70 per cent in
February is attributed to the increase in food and core inflation. Growth in
money supply, naira depreciation, insecurity, and infrastructure deficit are
largely the drivers of inflation. CBN staff presentations during the MPC
meeting in March indicates that inflation would drift to 33.56 per cent in April
2024, hinged on persistent cost-push factors, including the lingering security
challenges in food-producing areas, rising energy prices, and the pass
through of exchange rate to domestic prices. My decision to vote for further
tightening is consistent with the need to effectively anchor inflation
expectation.
Broad Money grew year-to-date by 20.57 per cent to N95,557.26 billion in
February 2024, compared with N79,252.46 billion in December 2023. The
growth in broad money was driven by increase in the Net Domestic Assets.
Given the growth in broad money, it is imperative to vote for further

tightening to curtail credit growth and moderate aggregate demand.
However, the brevity of the period between the February and March 2024
meetings of the Committee and my understanding that inflation in Nigeria is
not purely credit led, influenced my decision to vote for further but gradual
tightening.
The underperformance of revenue in the 2023 budget brings to the fore, the
importance of improving revenue collection and blocking leakages.
Anticipated fiscal deficit of N9.18 trillion is swelling the already existing debt
stock of N87.91 trillion and N96.43 trillion by the end of 2024. Achieving
sustainable growth in 2024, therefore, entails a delicate balancing of
ambitious fiscal reforms with effective budget implementation, while the
monetary authority is expected to promote price stability.
The overall balance of payments recorded a surplus position due to
accretion to external reserves on account of third-party receipts. This could
be attributed to the efforts of CBN in offsetting verified past obligations and
stabilizing the foreign exchange market. However, the tight financial
conditions and macroeconomic uncertainties adversely affect the external
sector. The current account recorded deficit balance in the last quarter of
2023 due primarily to a deficit in the goods account and a higher deficit in
the services and primary income accounts.
While subscribing to the argument that the substantial hike in monetary policy
rate in February 2024 may still be permeating the real economy, the rise in
inflation rate from 29.90 per cent in January to 31.70 per cent in February
means that we cannot fold our arms and do nothing till the next Committee
meeting in May 2024. In my humble opinion, further, albeit, gradual hiking will
moderate inflationary pressures in the short to medium term.

2. ALOYSIUS UCHE ORDU
Economic outlook for the US and the global economy
As inflation recedes around the world, countries are experiencing very
different growth patterns. For the US, inflation has come down but remains
some distance from the central bank’s targets. This leaves the central bank
watching and waiting.
The US growth has surprised to the upside with demand supported by strong
household fundamentals. Housing and business investments have held up
despite elevated interest rates. On the supply side, potential output looks to
be growing briskly due to a surge in immigration. Potential output is also
bolstered by robust labor force participation and increased productivity
growth in recent quarters.
Despite stronger potential output growth, US disinflation looks to be slowing
broadly. So, the Fed will lower interest rate slowly, probably with only one rate
cut likely in the second half of 2024. A soft landing remains the most likely
outcome for the US economy this year.
Even as inflation declines, global growth will probably be 2.4 percent in 2024.
G7 economies are seeing softish landings, meaning disinflation without
recessions. While the US is experiencing robust growth, the Euro area is
showing much less momentum. Japan had a solid 2023 and economic
recovery is likely to continue this year. The United Kingdom will muddle along
as it struggles with post-Brexit drag.
As indicated in my personal statement last month, China’s growth target of 5
percent remains ambitious and fiscal spending by the central and local
governments will play greater roles in driving investments. But the intended
fiscal boost may fall short if local governments underspend their budgets
again this year. Household consumption will remain uncertain due to
challenges in the housing sector and weak private sector investments.
Emerging markets, excluding China, are projected to record increased
growth of 3.5 percent this year. India stands out; it is forecast to record 6.5
percent, the fastest growth of all major global economies, driven by

government investment and the continued strong performance of the
services sector. Growth in other export-oriented Asian countries will
accelerate, boosted by growth in domestic demand and regional supplychain diversification.
For Sub-Saharan Africa, the April 2024 edition of the World Bank’s Africa Pulse
shows that growth slowed to 2.6 percent in 2023 as many countries in the
region recorded slower growth in consumption due to high inflation rates,
particularly higher food and energy prices, and weaker currencies. Tighter
monetary policies to tackle inflation contributed to lower investments.
For 2024, the region’s economic growth is expected to rebound to 3.4
percent, on account of lower inflationary pressures in many African countries,
recovery in global trade and expected easing, albeit slowly, of global
financial conditions in the second half of 2024. In particular, the East African
community countries as well as Senegal, Cote D’Ivoire, Niger, Benin, and
Togo are projected to record growth performances of well over 6.0 percent
this year.
Nevertheless, the Africa Pulse suggests that post-Covid economic recovery
remains fragile and the region “still needs to overcome significant challenges
regarding low and unstable growth, high levels of extreme poverty and
inequality, and difficulty translating growth into poverty reduction”.
At the same time, the region faces debt sustainability problems with many
countries at moderate or high risk of debt distress. Notably, market borrowing
increased over time as concessional financing declined when donor
countries were having fiscal problems of their own. Further, weak fiscal
conditions, inadequate attention to value for money, and currency collapses
have increased the burden of repaying foreign currency debt. Continued
improvements in investment climate to attract foreign direct investments in
sectors other than natural resources are urgently needed to strengthen the
foundations for long-run growth and development in Sub-Saharan Africa.
Nigeria: Economic Indicators and Outlook
The MPC’s February meeting took place against the backdrop of a rapidly
depreciating Naira and rising inflation, driven by huge supply shocks and high
food prices. Tackling inflation and arresting the currency decline were key
imperatives and the MPC deployed tight money and high interest rates.
During the March 25 -26 meeting, available data showed that the domestic
GDP outcome for the fourth quarter of 2023 rose to 3.46 percent from 2.54
percent in the previous quarter, driven by the non-oil sector and expansions
in the services, agriculture, and industrial sectors. CBN Staff projection is that
economic growth will slow to 3.0 percent in 2024 due to inflationary pressures
and as monetary tightening leads to a contraction in domestic demand.

CBN Staff presentations also showed that inflation rose to 31.7 percent in
February from 29.9 percent in January and driven by a rise in food prices
(37.92 percent) with Core inflation rising to 25.13 percent. Food price inflation,
which has a particularly large impact on the living costs of lower-income
families due to its large share of these families’ budgets, remains high.
Following the MPC meeting, some green shoots are already sprouting: the
Naira has sustained its appreciation; foreign investment inflows have
increased; reserves have risen; and the FX backlog has been cleared. Close
observers of emerging markets developments have welcomed the CBN’s
tight policy stance.
Clearly, hiking interest rates impacts consumer spending and business
investments as reflected in the composite purchasing managers’ index in
February 2024. The Naira appreciation also makes imports cheaper which
should contribute to a reduction in inflation through household consumption
of imported goods and indirectly as imported products and services are used
by Nigerian firms in supply chains. Substantive progress in addressing the
supply-chain issues and other cost-push factors is needed to minimize the risk
that inflation might remain high for longer. Such an outcome will make life
difficult for Nigerians and damage the functioning of the economy. Inflation
erodes the value of people’s savings, negatively affects household budgets,
and makes it harder for small and medium scale enterprises and other
businesses to plan and invest. To allow higher inflation to become
entrenched in people’s expectations would make it much more expensive to
reduce later, through even higher interest rates, larger output losses and
higher unemployment.
We recognize that monetary policy operates with a lag and that the effect of
our February decisions is yet to be fully felt. Nevertheless, with current
inflationary pressures emanating from continued domestic shortages of key
food items, high transport costs, it is necessary to take further aggressive
monetary action to bring headline inflation down as soon as possible. It is
important to reiterate and encourage timely whole-of-government actions to
address the impact of persistent supply side pressures on food prices,
including improvements in security and infrastructure in food producing areas
and to support fiscal measures that ensure that government spending is used
for purposes intended to sustain growth and development. At the same time,
adjustment in the policy interest rate is vital for continued foreign exchange
inflows to further strengthen the Naira.
I therefore vote:
• to raise the MPR by 200 basis points

• to hold the CRR unchanged at 45 percent
• to narrow the corridor by +100/-300; and
• to retain the liquidity ratio unchanged at 30 percent.


3. BALA MOH’D BELLO mon
Opening Statement
The March 2024 Monetary Policy Committee (MPC) meeting provided an
opportunity for the Committee to assess immediate market responses to the
sustained hike in the monetary policy rate, foreign exchange management
and other complementary initiatives targeted at achieving macroeconomic
stability in Nigeria. An evaluation of recent developments in key global and
domestic macroeconomic indices such as inflation, output and financial
system aggregates, summarised in the ensuing sections, underscores the
need for continued policy interventions to guarantee desired results.

Global Economic Developments
Risks to global economic performance and price movements persist due to
disruptions to the global supply chain and continued geopolitical tensions
amidst other country-specific vulnerabilities. Given these headwinds, global
inflation, though decelerating (projected by the IMF in its January 2024
updated World Economic Outlook (WEO) to moderate to 5.8 per cent in 2024
from 6.8 per cent in the previous year), is expected to remain above the
long-run targets of major central banks. The monetary policy stance of many
advanced economy central banks is, thus, expected to remain tight in the
short to medium term.

The prolonged tight global financial conditions have adverse implications for
capital flows to emerging markets; external debt servicing, especially for
highly indebted developing countries; exchange rate stability; and global
output recovery. Central banks in Emerging Market and Developing
Economies (EMDEs), must, therefore, remain resolute in the pursuit of policies
that would engender domestic economic resilience and effectively manage
trade-offs
amidst
an
uncertain
and
constantly
evolving
economic
landscape. Overall, monetary authorities across the world, particularly in
EMDEs, currently face difficult policy choices.

The Domestic Economy
On the domestic front, economic prospects remain broadly positive, with a
3.46 per cent (year-on-year) growth in real gross domestic product (RGDP) in
the fourth quarter of 2023, according to data from the National Bureau of

Statistics. Output performance was driven mainly by higher crude oil
production, Finance & Insurance Services and increased investments in the
Information & Technology sub-sector - a development that points to the
efficacy of coordinated implementation of monetary and fiscal policy
reforms in growth-enhancing sectors.

Nonetheless, it is concerning to note that the Composite Purchasing
Managers' Index (PMI) declined sharply to 39.2 index points in February 2024
from 48.5 index points in the previous month. Economic activity has been
contracting for eight consecutive months, mainly due to exchange rate
pressures, rising input prices, security challenges, and other idiosyncratic
headwinds. This calls for well-nuanced policy decisions targeted at price
stability to forestall stifling economic activities and derailing output
performance.

Of greater concern is the rising inflationary trend despite sustained hikes in
the monetary policy rate with forecasts of further price increases in the near
term. Both food and core inflation rose in February 2024, underpinning
acceleration in headline inflation to 31.70 per cent in February 2024 from
29.90 per cent in the previous month. This continued rise in inflation was
mainly due to persisting high production costs, lingering security challenges
and exchange rate pressures. Inflation is currently unacceptably high and
requires decisive and coordinated efforts to curb it, given its adverse impact
on citizens’ purchasing power, investment decisions and broad output
performance. The Federal Government's initiatives at addressing food
insecurity, such as the release of grains from the strategic reserves, distribution
of seeds and fertilisers, and support for dry season farming, are important and
commendable.

However, the progressing and significant rise in broad money supply (M3) by
20.52 per cent at the end of February 2024, over the preceding month, is a
major headwind for inflation. This reinforces the importance of liquidity
management efforts of the monetary authority to help curb inflation.

Recent developments indicate that efforts by the monetary authority to
stabilize the exchange rate, are yielding positive outcomes. The reported
appreciation / relative stability in the naira exchange rate and accretion to
the external reserves over the last month is a welcome development. The
improved exchange rate position can be attributed to the policy rate hikes
by the MPC and other "non-interest rate" measures, such as re-engineering
the operational procedures for the Bureau de Change segment and
addressing illegal / speculative tendencies in the market, among others. In
view of the high pass-through effects of exchange rate appreciation, it is

expected that inflationary pressures would moderate over the medium term.
Sustained monetary policy rate hikes and other complementary measures
attracting capital inflows are, therefore, important in that regard.

I should emphasise that sustained resilience of the financial system is critical
in the pursuit of disinflation. It is, therefore, comforting to note that as of
February 2024, major financial soundness indicators (Capital adequacy, nonperforming loans, and liquidity ratios) remained strong. Given the strength of
the Banking system, I expect adequate funding of critical sectors of the
economy to preserve the positive output performance and mitigate the
aggregate supply-demand imbalances.

Policy Decision
Against the foregoing background, the MPC of the Central Bank of Nigeria
raised its benchmark rate, the Monetary Policy Rate (MPR), by 400 basis
points in February 2024. The Committee was clear on intent—principally to
anchor inflation expectations and attract foreign capital. By that decision,
the Committee signalled its discomfort with the forecast path of inflation. One
month later, at the March 2024 meeting, there is compelling evidence that
the monetary policy stance must be tightened further to communicate
unambiguously a commitment to disinflation.
However, with output trade-off concerns and the possible strain on financial
system stability, a less aggressive policy interest rate hike was considered
appropriate in my view. I, therefore, voted to;
• raise the MPR by 150 basis points from 24.75 per cent to 26.25 per cent;
• adjust the corridor around the MPR from +100/-700 to +100/-300
• retain the Cash Reserve Ratio at 45.0 per cent, and
• retain the Liquidity Ratio at 30.0 per cent.

4. BAMIDELE A.G. AMOO
1. International Economic Developments
Global growth estimate for 2024 by the International Monetary Fund (IMF)
remained unchanged at 3.1 per cent compared with 2023 but is expected to
inch up to 3.2 per cent in 2025. Growth in advanced economies is projected
to moderate to 1.5 per cent in 2024, but rise to 1.8 per cent in 2025, reflecting
stronger than expected growth in the US, partly offset by projected weaker
growth in the Euro Area. In the emerging markets and developing economies
(EMDEs), growth is projected to remain at 4.1 per cent in 2024, same as in
2023 despite the mixed performance across the various regions that make up
the group but may rise marginally to 4.2 per cent in 2025.

However, we still expect stronger growth in 2024 over 2023 levels in many
countries, despite deepening tensions in Israel/Palestine, Israel/Egypt, Russia/
Ukraine, USA/Russia, USA/China, China/Taiwan, and several others in Africa.
The war in Ukraine/Russia is poised to further cripple the global economy in
2024 as the EU and USA begin to target entities supporting Russia in the war
against Ukraine. Climate change and El Niño which is set to peak by mid2024 threaten food and water security in Africa, Middle East, causing
potentials for flood, drought, and heatwaves.

Disruptions in the Red Sea may escalate geopolitical tensions which may
drive up oil prices. Interest rates are unlikely to be cut until sometime in Q2/Q3
2024. However, new risks of rate hikes/hold are now emerging linked to
potential inflationary pressures and output cut associated with the crisis along
major trade routes on the Red sea. When these situations occur, expectation
of lower global inflation in 2024 and prospects of rate cuts by major Central
Banks, may not happen as the war and its negative impact on Red Sea may
incite inflation and higher cost of living during 2024. When this happens, the
global monetary policy environment may remain tighter for much longer.

During the month, some social-political developments emerged. In February,
the Russia-Ukraine war entered its third year with no end in sight and growing
concerns about the state of Western support for Ukraine. In the Middle East,
Israel continued military operations in the Gaza Strip following the surprise
attack on Israel in October 2023 by Hamas. The expansion of BRICS signals the
rise of a formidable economic alliance that could challenge the existing
western-centric economic order. General elections will happen in many
countries, and we should expect a crucial shift in the future trajectory of

geopolitics, foreign trade and development policies. Some of these
developments are putting upward pressure on global trade and inflation as
threats to the global supply chain are increasing. ECOWAS recently lifted the
sanctions earlier placed on Niger, Mali and Guinea, to improve food security,
border security and drive down inflation prospects in the sub-region.
Nevertheless, global inflation is expected to sustain its deceleration in 2024
due to the continued decline in global commodity prices and tight monetary
policy stance across several countries. Consequently, the International
Monetary Fund (IMF) projected global inflation to decline to 5.8 per cent by
end-2024 from 6.8 per cent in 2023.

The outlook for global trade and moderation of inflation is subject to various
downside risks, including:
i
The Red Sea crisis compounds the ongoing disruptions in the Black Sea
resulting from the war in Ukraine, resulting in shifts in oil and grain trade routes.
Additional burden to existing geopolitical and climate-related
challenges facing global trade and supply chains, have been compounded
by ongoing attacks on commercial vessels in the Red Sea which have
severely affected shipping through the Suez Canal, iii Additionally, the
Panama Canal, a critical artery linking the Atlantic and Pacific oceans, is
being confronted by a separate challenge. Dwindling water levels have
raised concerns about the long-term resilience of global supply chains,
underscoring the fragility of the world's trade infrastructure. iv Deepening
geopolitical fragmentation and uncertainty.
v Further rise in protectionist measures across countries may emerge as time
goes on.

Staff report indicates that the outlook for the recovery of global trade and
growth in 2024 and beyond is expected to continue at a moderate pace as
monetary policy tightening progress. The resulting tightening of global
financial conditions is thus expected to dampen investment and weaken
productivity, thus leading to rising unemployment. The persistence of new
and legacy global geopolitical tensions is also expected to contribute
significantly to the weakening of the recovery.

2. Domestic Economic Developments
Information from the NBS indicated that Nigeria’s real GDP grew by 3.46% in
Q4 2023 (year on year) from 2.54% in Q3 2023 driven by the non-oil sector. On
an annual basis, real GDP grew by 2.74% in 2023 from 3.1% in 2022.

Headline inflation (year on year) rose to 31.7% in February 2024 from 29.9% in
January 2024, due to persistent supply gap, lingering ripple effects of the PMS
subsidy removal, lingering security challenges and infrastructural deficits.
Core inflation increased to 25.13% compared with 23.59% in January 2024,
due to persisting high input costs, lingering effects of fuel subsidy removal and
exchange rate pass through. Consequently, food inflation rose to 37.92%
(yon-y) from 35.41% in January 2024. However, on a monthly basis, inflation
moderated to 2.17% from 2.24 per cent in the preceding month. The overall
economy witnessed contractions as composite PMI decreased to 48.5 points
in January 2024 from 49.1 points in December 2023.

The high naira exchange rate and high prices continue to put Nigeria into
cost-of-living crisis which comes on the heels of many economic and social
factors.
This phenomenon was accompanied with high unemployment rate and low
energy per capita, food poverty and social security challenges. Other issues
were: low capital importation; low foreign direct investment; low capacity
utilization by many local industries; surge in foreign exchange demand to
fund the import of consumer items and medical tourism; increased cost of
production occasioned by hike in prices of petrol, aviation fuel, kerosene and
diesel; lack of focus by the banks which promoted forex arbitrage and
speculation, manipulations of forex markets etc; and diversion of cargoes to
neighboring countries.

CBN policy responses have been timely and still on-going. They include lifting
restrictions on banned items, raising rates on 12-month Treasury Bills, transfer of
portion of NNPC’s earnings to CBN to stabilize the market and ease pressure
on the naira and payment of backlogs of forex forward obligations. Others
were: raising of CRR of banks to reduce system liquidity; increase in interest
rates to attract capital inflow into the country; revocation of inactive BDCs
which created more sanity in the subsector; clamp down on BINANCE and
other amorphous international currency manipulators and money launderers;
and the re-capitalization of Banks to reposition them for higher financial
intermediation efficiency for development.

On the fiscal side, the economy witnessed some major positive developments
and interventions recently. Some of these are: onslaught on illegal oil bunkers;
increase in international oil prices boosting national revenue; improvement of
Nigeria’s credit ratings; implementation of some reforms; successful
resuscitation of moribund local petroleum refineries and completion of brand
new private sector refinery; decrease in medical tourism; increase in diaspora
remittances; serious breakthrough in war against drug trafficking; increasing
prospects to reduce foreign exchange demand from airline operators as
proxy national carrier commenced business to the UK; and improved social
safety nets.

Growth in broad money supply (M3), stood at 20.52% at end-February 2024,
recording a 123.4% increase. M2 and M1 reportedly grew by 19.20 and 0.51%
respectively. Growth in M3 was reportedly due to high increased activity
recorded in securities other than shares, other deposits and transferrable
deposits which also grew by 30.76 and 0.66% respectively. When the growth
in money supply is decomposed, data showed that 3.68% growth in M1
indicate rising transactionary motive by consumers, which could further
worsen inflationary pressures in the economy. Also, the continued growth in
the level of money supply, M3, could heighten the current high inflation and
put pressure on the foreign exchange market.

The banking industry is adjudged relatively stable as solvency and liquidity
levels remained within regulatory requirements. Industry resilience however
remain vulnerable to the macroeconomic headwinds due to unfavorable
external conditions. Consequently, the key risk factors to watch are credit
default risk and concentration risk.

Available information on the Open Buy Back (OBB) facility showed a
worrisome development. During the review period, the OBB rate was outside
the set asymmetric corridor for a greater period, indicating the need to
review the policy rate as well as adjust the asymmetric corridor to anchor
overnight rates
(OBB) appropriately.

Capital market capitalization index fell at end-February 2024, driven by high
yields in the fixed income segment of the money market. The market effect of
the February 2024 MPC decisions swayed investors to switch asset classes
from the equities to the fixed-income market due to sharply improved yields.

The fiscal sector performance was mixed in February 2024. Federal
Government provisional federation revenue receipts improved in February
2024 by 22.9 per cent but stood at 38.8 per cent below the set target. Oil
revenue increased by 50.3 per cent relative to its level in January 2024. Nonoil receipts in February 2024 exceeded both target and preceding levels by
41.3% and 15.5% respectively. Provisional FGN expenditure was 33.5 per cent
higher than the level in the previous month and 13.8 per cent below the
target. Overall, fiscal deficit in February 2024 expanded by 33.7 per cent and
86.2 per cent compared with the preceding month and target respectively.
These operations recorded a fiscal deficit at 6.5 per cent of GDP driven by
expansion in government capital spending.

Nigeria’s Foreign reserves stood at US$32.87 billion as of March 19, 2024 from
US$33.68billion in the previous month. The decrease was majorly due to
foreign exchange swap transactions. In the foreign exchange market, the
average NFEM rate as at March 20, 2024 stood at N1410.90/USD, N
1,536.83/US$, N1,520/US$, at the Refinitiv, FMDQ and BDC market segments
giving an appreciation of 8.65, 3.65 and 1.94 per cent respectively.

The overall balance of payments recorded a surplus position relative to the
preceding quarter, due mainly to accretion to external reserves from third
party receipts. Apart from the higher inflow of diaspora remittances, the
economy recorded a higher capital inflow of US$1.24 billion by end-February
2024 relative to US$0.33 billion in January 2024. The capital inflow came from
foreign portfolio investments, specifically through money market instruments
and other investments from the loans sub-sector.

3. My Concern
My major focus currently is price stability. Unstable price levels comes with lots
of deviation from sector equilibrium levels, often causing distortions in the
market. Galloping Inflation, as noticed in the last few months in Nigeria, is
presenting an unacceptable dimension, as it poses a threat to investment
and output growth. Exchange rate fluctuations in recent past caused lots of
instability in production sectors and adversely affects people’s welfare in
every
sector
of
the
Nigerian
economy.
These
accentuate
high
unemployment, prevalent poverty, and high social insecurity. Consequently,
it presents a serious policy dilemma for the MPC given the imperative to
sustain the growth trajectory with limited tools at its disposal, low productive
capacity, high import dependence as well as the constricted fiscal
environment. In fact, the negativity in the real values of our financial rates

must be reduced if it cannot be eliminated now. Our short-term goal is to
attain a positive real policy interest rate soon.

It is therefore imperative that the current monetary tightening regime which
commenced at the February 2024 meeting of the MPC, should continue, to
allow complete policy pass-through in the Nigerian economy. Given the
above developments, and since Nigeria is competing for investment capital
with comparable EMDEs such as Egypt, Ghana Kenya and others, there is a
compelling need to further move the policy rate slightly upwards. Towards
this end, all possible legal inflows – whether “hot, cold or warm” – should be
explored and attracted into our carefully managed reserves.

The foreign exchange market was positively impacted by the last hike in MPR
and other rates. Consequently, further hike in MPR will still help to create the
right environment to moderate the volatility levels of naira exchange rate. To
prevent overheating the economy and enable the banks to contribute to the
nation’s development, further hike in CRR will still provide moderate liquidity
to fund the productive sectors by the banks. We must get banks to play by
the strict rules and apply heavy sanctions to observed infractions. The
situation where banks declare huge profits without evidently meeting targets
in financial intermediation to the productive sectors must stop.

High inflation and its attendant effects are not unique to Nigeria. All countries
of the world are basically addressing certain supply factors: energy prices;
food prices and weak domestic currency. The measures being taken are
similar to tighten monetary base. In Africa, Ghana, Egypt, South Africa, along
with their counterparts in emerging and developing countries have revised
their monetary policy rates upwards a couple of times since the beginning of
the year. It is also reiterated that monetary tightening regime must be
supported with other fiscal and social complimentary measures to achieve
price stability consistently.

From the foregoing, more collaboration with the fiscal authorities is inevitable
to restore macroeconomic balance through achieving price stability and
sustainable economic growth. There is also a need for increased education
and enlightenment to promote ethical behaviour by people and leaders to
ensure transparency and accountability across sectors. Improvement in
electricity generation and supply will also reduce the amount of fuel on
demand in the economy, thereby moderate energy prices as an input to the
local manufacturers. This feat, if achieved, will reduce the elasticity of
demand for foreign goods and create more employment in Nigeria.

4. My Vote
Given the above considerations, I hereby vote as follows:
A) Raise MPR by 200 basis points - from 22.75% to 24.75%
B) Maintain CRR for DMBs at 45.0% and raise CRR for Merchant Banks to14%.
C) Raise the Liquidity Ratio to 35%.
A) Move the asymmetric corridor around the MPR to +100/-300 basis points.

5. EMEM USORO
1.0 My Considerations
Headline inflation in Nigeria inched up to 31.70% in February 2024, driven by
accelerating food and core inflation. This resulted from ongoing exchange
rate pass-through, high inflation expectations and legacy structural issues. The
exchange rate depreciation in February was occasioned by speculative
activities, and insufficient liquidity in the foreign exchange market despite
substantial inflows at the Nigerian Autonomous Foreign Exchange Market
(“NAFEM”) from US$2,399.82million recorded in the preceding period of
January 2024, to US$5,349.51million in February 2024.
In addition, firms and households remain pessimistic due to lingering
imbalances and slow recovery in the macroeconomy as the relevant
agencies of Government work assiduously to address these imbalances such
as the high interest rate, poor infrastructure, and high insecurity leading to the
sustained high general price level in February 2024.
Furthermore, the deviation of broad money (M3) growth from its provisional
benchmark due to an increase in other deposits (which includes foreign
currency deposits) and securities other than shares, indicates that inflationary
pressures may persist in the short to medium This increase was attributed to
exchange rate revaluation and issuance of government securities during the
review period.
In addition to persistent inflation, the decline in the Composite Purchasing
Manager’s Index (PMI) to 39.2 index points in February 2024, from 48.5 index
points
in
January

suggests
weakened
demand
and
supply,
characterised by macroeconomic constraints and dwindling economic
activities in February. Notably, contraction was recorded in all sub-sectors of
the economy - agriculture, services, and industry.
While the financial system remains resilient, threats emanating from FX
revaluation might ensue in the short term, supporting the need to contain
exchange rate fluctuations and negative inflation expectations.
The outlook for the domestic economy remains cautiously optimistic as
growth is expected to expand in Q1 2024 and Q2 2024, respectively. The
outlook for growth in the domestic economy is however confronted with
downside risks driven by persisting structural issues such as high insecurity in
farming communities and poor infrastructure. Furthermore, expectations
around the external position remains optimistic, driven by favourable crude
oil prices and increased domestic production of crude oil. In addition, the
recent increase in capital inflows is expected to persist, and ultimately

support exchange rate stability. Inflation is, however, expected to remain
elevated in the near-term, partly on the account of lingering high import
costs, exchange rate pass-through, supply side constraints, high energy
prices, and growth in money supply.
A forward-looking assessment reveals existence of several risks to the global
economy including increasing geopolitical tensions and the impact of
climate change which might heighten uncertainties and disrupt global
markets.
Inferences from the foregoing highlight the detrimental role of rising inflation,
including erosion of real income and further dampening of economic
activity. It is, therefore, imperative to anchor inflation expectations using the
various tools available but most importantly enhance policy coordination
with the fiscal authorities.
From the foregoing, it is obvious that the continuous rise in inflation is
detrimental to the broad recovery of the economy. While the rise can be
attributed to both monetary and structural factors, unwavering collaboration
between the monetary and fiscal authorities is essential to effectively combat
upward price movement and restore macroeconomic equilibrium. Monetary
policy must thus focus on two key issues: moderating monetary demand and
stabilizing the exchange rate. A tight monetary policy stance is thus essential
to achieve optimal monetary demand and improve the attractiveness of
domestic assets to both domestic and foreign investors. It will also help
support the domestic currency and reduce the cost of imports significantly.
This is a huge plus in an import-dependent economy such as Nigeria.
While striving to attain price stability, I’m aware of the potential short-term
impact on borrowing costs, economic growth, and financial stability.
However,
de-anchoring
inflation
expectations
and
leaving
inflation
unchecked,
poses
a
more
significant
risk
to
long-term
economic
performance and the stability of the financial system.
2.0 My Decision
I remain unwavering in my support for the Committee’s efforts to bring about
macroeconomic stability and improve the well-being of ordinary Nigerians.
Consequently, I vote to:
i.
Raise the MPR by 200 basis points to 24.75%. This will further tighten
financial conditions, moderate money demand, and reduce the
negative interest gap to attract more capital inflow,
ii.
Adjust the asymmetric corridor to MPR +100/-300 from MPR +100/-700
basis points. This is targeted at improving the transmission mechanism
of monetary policy through improved efficiency of the overnight
interbank call market.

iii.
Adjust the CRR for Merchant Banks from 10% to 14% to help moderate
monetary demand.
iv.
Retain the CRR of Commercial Banks at 45% to moderate monetary
demand by moderating the credit creating capacity of deposit
money banks, and
a. Retain the LR at 30.0% to support the stability of the banking
system.

6. LYDIA SHEHU JAFIYA
The March 2024 Monetary Policy Committee meeting held against the
background of recovering global economic growth and slowly declining
inflation. At 3.1 per cent in 2023, growth was higher than envisaged,
considering the setbacks occasioned by geopolitical tensions, and the
slowdown in the Chinese economy. Prospects of improvement in 2024 is,
however, mixed. Tailwinds to growth include strong consumer spending in the
United States, a rebound in the manufacturing sector as indicated by recent
expansion in the Global Composite Purchasing Managers’ Index, and
indications that central banks may soon commence monetary policy easing.
The positive sentiments are threatened by weak global demand for
commodities, tight financing conditions, tensions in the Red Sea, and more
recently, the Baltimore bridge collapse which could course a shut down to
one of the United States largest ports.
The IMF in its January 2024 World Economic Outlook (WEO) forecasts global
growth at 3.1 per cent and 3.2 per cent in 2024 and 2025, respectively.
Growth in Advanced Economies is projected to moderate to 1.5 per cent in
2024 before rising to 1.8 per cent in 2025, while in Emerging Market and
Developing Economies (EMDEs), growth is expected to remain at 4.1 per cent
in 2024 and rise to 4.2 per cent in 2025.
Global inflation is declining, though remaining above central bank targets.
The IMF-WEO update, January 2024, projects inflation to moderate to an
annual average of 5.8 per cent in 2024, reflecting the impact of several
months of monetary policy tightening across the globe, and declining energy
and food prices. In 2025, global inflation is set to decline to 4.4 per cent.
Global trade growth is expected to rise to 3.3 per cent in 2024, from 0.4 per
cent in 2023, and further to 3.8 per cent in 2025 (IMF, WEO January 2024). The
outlook, is however, constrained by rise in protectionist measures, and
regional crisis, particularly in the Red Sea.
Oil prices are likely to remain stable, as the risk of geopolitical actions and
weak demand from China is offset by abundant production from both the US
and OPEC.
Financial conditions remain tight on account of rising interest rates in the
Advanced Economies which reflects the lagged effects of rate increases in
2023. This has resulted in continued capital outflows from EMDES as well as left
lower income countries with high debt service burdens. Several Advanced

Economy central Banks have given guidance of likely interest rate cuts from
the second quarter of 2024 as the deceleration in inflation progresses.
THE DOMESTIC ECONOMY
Real GDP (year-on-year) grew by 3.46 per cent in Q4 2023, driven by the nonoil sector which recorded a growth rate of 3.07 per cent, with a contribution
of 2.93 per cent to overall GDP growth. The oil sector also experienced robust
growth at 12.11 per cent, contributing 0.53 per cent to total GDP. Despite the
sharp decline in the Composite Purchasing Managers' Index (PMI), which
dropped to 39.2 index points from the previous month's 48.5 index points, the
economy remains on track for a projected output growth of 3.2 per cent in
Q1 2024, in view of the expected short-term impact of current monetary and
fiscal policy reforms.
Comparatively, Ghana’s growth increased by 3.8 per cent in Q4 2023 from
2.0 per cent in Q3 2023. Kenya’s output growth expanded by 5.9 per cent in
Q3 2023 and is forecast to moderate to 2.7 per cent in 2024. South Africa’s
economic growth improved by 1.2 per cent in Q4 2023 from a contraction of
-0.7 per cent in Q3 and is estimated to grow at 1.0 per cent in 2024.
Headline inflation (year on year) rose to 31.70 per cent in February 2024, from
29.90 per cent in January 2024. Food inflation (year-on-year) rose to 37.92 per
cent from 35.41 per cent in January 2024 on account of cost push factors
and other structural rigidities, while core inflation (Headline less farm produce
and energy) increased to 25.13 per cent, from 23.59 per cent in January
2023, due to exchange rate pass through, persisting high cost of inputs, and
inflationary expectations.
Monetary developments showed that at end-February 2023, Broad Money
Supply (M3) surpassed its 15.60 per cent benchmark for 2024. Over the
preceding December, M3 expanded by 20.57 per cent at end-February
2024, while M2 and M1 grew by 19.20 per cent and 0.51 per cent,
respectively.
On external sector developments, exchange rate volatility has stabilised on
account of policy measures by the Central Bank of Nigeria (CBN) to address
exchange rate pressures; as well as improved inflows from foreign portfolio
investors. A higher capital inflow of US$1.24 billion was recorded in February
2024, relative to US$0.33 billion in January 2024, as money market instruments
and other investments became attractive. As at March 19, 2024, the external
reserves stood at US$32.87 billion compared with US$33.68 billion in the
previous month due majorly to foreign exchange swap transactions offset in
the review period. The level of reserves could finance 4.5 months of import of
goods and services and 5.7 months of import of goods only.

According to the banking system stability report, the banking industry remains
stable, as solvency and liquidity ratios were within the regulatory
requirements.
CONSIDERATION FOR VOTING
At the February 2024 meeting, the Monetary Policy Committee took an
unprecedented step by raising the MPR by 400 basis points, as well as tighten
other policy parameters, in a bid to restrict the growth in money supply and
tackle the persistent rise in inflation. Despite these policy actions, inflation
outcome in February revealed strong persistence, on account of demand
and supply side factors, as well as sustained inflationary expectations. Whilst
monetary policy transmission comes with a lag, making it too early to assess
the impact on inflation, of the policy measures taken in February, there is no
doubting the fact that the risks to inflation remain skewed to the upside,
strengthening the resolve to further tighten policy.
It is noteworthy, that the policy decisions of the previous meeting and other
measures by the CBN to address foreign exchange volatility, have
contributed to stabilise the foreign exchange market, and to narrow the
negative real interest rates, leading to improvement in inflows, and expected
near-term moderation in domestic prices.
Domestic economic growth though positive, remains fragile. This is
corroborated by the 19.2 per cent decline in the Composite Purchasing
Managers' Index (PMI) in February 2024, a key measure of the level of
economic activity. Further policy tightening may weigh on the real sector by
discouraging investments, particularly in agriculture and manufacturing
which hitherto, were major drivers of growth and employment. Also, higher
borrowing costs will raise government borrowing requirements and debt
service costs, thereby widening the fiscal deficit.
To reduce public debt and deficit financing, the fiscal authority continues to
deploy innovative technological solutions to improve non-oil collections and
enhance measures to increase the rate of tax compliance, as well as
increased collaboration with other stakeholders to broaden the tax bracket.
The recent increase in the Federation Accounts Allocation Committee
(FAAC) reflects a positive shift in the nation’s revenue streams.
The government remains strongly committed to fighting insecurity to enable
improved agricultural harvests in farming communities and crude oil
production in the Niger Delta. Efforts are also being made to end the
smuggling of food to neighboring countries in a bid to address food scarcity.
Overall, deciding on an optimal policy choice remains a delicate balance
between output growth and low inflation. In the outlined circumstance, I

believe that the decisions taken at the February MPC are working their way
through the economy and evidence at the next meeting would provide
more insights for policy.
On this note, I voted for a hold on the Monetary Policy Rate at the current
22.75 per cent; an adjustment in the asymmetric corridor around the MPR by
+100/-300 basis points; a retention of the Cash Reserve Ratio of Deposit
Money Banks at 45.0 per cent; adjustment of the Cash Reserve Ratio of
Merchant Banks from 10.0 per cent to 14.0 per cent; and maintenance of the
Liquidity Ratio at 30.0 per cent.

7. LAMIDO ABUBAKAR YUGUDA
Global economic growth is forecast to hold steady at 3.1 percent in 2024, as
in 2023, with a slight uptick in 2025. Global Inflation is anticipated to continue
to decline, with advanced economies experiencing swifter disinflation
compared to EMDEs. Domestically, Nigeria's GDP grew by 2.74 per cent in
2023, slower than in the preceding year. Headline inflation rose to 31.70
percent in February 2024, with food inflation at 37.92 percent and core
inflation at 25.13 percent.
Global Economic Developments
In its January 2024 World Economic Outlook (WEO), the International
Monetary Fund (IMF) projected global economic growth to remain steady at
3.1 percent in 2024, mirroring the 2023 figure, with a slight uptick to 3.2
percent in 2025. However, this projected growth rate remains below the
historical average of 3.8 percent observed between 2000 and 2019, owing
primarily to the tight monetary policy stance in major economies.
Inflation is declining more rapidly than initially anticipated, with decline in
commodity prices and sustained restrictive monetary policy stance. The IMF
forecasts global headline inflation to decrease to 5.8 percent in 2024,
followed by a further decline to 4.4 percent in 2025. Advanced economies
are anticipated to experience swifter disinflation, with inflation expected to
decrease by 2.0 percentage points in 2024 to 2.6 percent, compared to a
more modest decline of 0.3 percentage point to 8.1 percent in EMDEs.
In March 2024, crude oil prices rebounded, with the OPEC basket surpassing
US$82 per barrel and Nigeria's Bonny Light crude exceeding US$85, driven by
voluntary production cuts and tensions in the Middle East. OPEC projects a
strong global oil demand, expecting a 2.25 million barrels per day increase in
2024 and an additional 1.85 million barrels per day in 2025. The OPEC daily
basket price stood at US$90.62 a barrel as at April 11, 2024.
Global equity markets have also continued to rally on the back of expected
rate cuts and higher stock earnings. The rally was across board, except in
China. The US dollar appreciated during the period
Domestic Economic Developments
Output growth at 3.46 per cent was strong in Q4 2023, driven mainly by the
robust performance of the non-oil sector. Year-on-year GDP growth
moderated from 3.10 percent in 2022 to 2.74 percent in 2023, as a result of
sluggish growth in agriculture and services.

In February 2024, headline inflation rose to 31.70 percent, up by 1.80
percentage points from January 2024, Month-on-month inflation was 3.12
percent, a 0.48 percent increase from January 2024. Similarly, food inflation
rose to 37.92 percent, while core inflation rose to 25.13 percent.
Gross Federation Account receipts at NGN 1,834.81 billion in February 2024
surpassed the level in January 2024 by 22.9 percent but fell short of the
budget target by 4.0 percent. The relatively improved performance reflected
significant increase in collections from companies’ income tax (CIT) and FGN
independent revenue. Oil receipts increased by 50.3 percent compared to
the previous month's collections, but still fell short of the target by 73.0
percent.
In February 2024, the Federal Government of Nigeria (FGN) recorded a 33.0
percent increase in retained revenue compared to January, primarily due to
higher receipts from independent sources. However, it fell short of the
monthly target by 29.5 percent, indicating a significant revenue shortfall. As a
result, relative to the budget target, revenue has been more constrained
than expenditure, leading to a fiscal deficit that was 86.2 percent higher than
the benchmark. The total public debt, at 39.1 percent of GDP, is only
marginally below the 40.0 percent threshold set in the Medium-Term Debt
Strategy 2020-2023.
Reserve money decreased by 14.17 percent, compared to the level at the
end of December 2023. However, currency in circulation (CIC) increased by
1.10 percent by the end of February 2024, which slowed down the rate of
contraction in the monetary base. Average banking system liquidity grew,
compared to the previous month, primarily due to injections from FAAC
disbursements, coupon payments for FGN bonds, CRR refunds, OMO
maturities, and NTBs maturities.
Broad money supply increased by 20.57 per cent relative to December 2023
owing to a 26.08 percent increase in net domestic assets (NDA) attributed
mostly to a rise in claims on the private sector.
The banking sector has remained safe and sound with the key indicators
within the prudential benchmarks. The CAR was above the 10 per cent mark
in February. Non-performing loans (NPLs) ratio at 4.5 percent was up
marginally by 0.3 percentage point compared to January 2024 but remained
below the prudential benchmark of 5.0 per cent. The Industry Liquidity Ratio
(LR) was 42.7 percent, exceeding the minimum regulatory requirement of
30.0 per cent and was higher than the 42.1 percent recorded in the previous
month.

The equites market was bearish in February 2024, owing in part to portfolio
switching to fixed income investments following the tight policy stance. This
resulted in a 1.2 percent decline in the All-Share Index (ASI) to 99,980.30 index
points. Market capitalisation also declined by 1.2 per cent relative to January.
There was a surplus of US$0.32billion in the overall balance of payments in
2023Q4, due mainly to third party receipts. However, the current account
switched from surplus in 2023Q3 to a deficit of US$3.48 billion. This was
attributed to the deficit in goods, services and primary income accounts. The
developments in the current account should be viewed as a wake-up call for
continued diversification of the economy, especially, towards exports of nonoil commodities. As of March 8, 2024, the external reserves stood at US$34.98
billion. This represents a cover equivalent to 6.8 months of import for goods
and services, or 9.7 months of import for goods only, highlighting a robust
buffer for the economy's external trade requirements.
Policy Decision
The key issues which confronted the MPC at this meeting remained the
rapidly rising inflation and the undervaluation of the naira, both significantly
aided by loose monetary conditions over an extended period. The sharp
increase in broad money (M3) in February 2024 will no doubt exert significant
pressure on aggregate prices and the naira exchange rate.
Headline and food inflation at 31.70 per cent and 37.92 per cent in February
2024, reflect accelerating inflation and require a robust policy response
through more tightening and mopping-up of banking system liquidity.
My Vote
In consideration of the foregoing, I voted to:
1. Raise the MPR by 100 basis points to 23.75 per cent from 22.75 per cent.
2. Adjust the asymmetric corridor around the MPR to +100/-300 basis
points.
3. Raise the CRR to 50.00 per cent from 45.00 per cent.
4. Adjust the CRR of merchant banks from 10.00 to 14.00 per cent.
5. Retain the liquidity ratio at 30.00 per cent.

8. MUHAMMAD SANI ABDULLAHI
My Vote
In considering voting for a further hike in the Monetary Policy Rate (MPR), I am
encouraged by the need to sustain the current momentum to curtail the
possible ascent to higher inflation and its insidious form. This decision remains
consequential as we cannot afford the luxury of taking our foot off the pedal
at this time as the credibility of monetary policy and the integrity of the
Monetary Policy Committee (MPC) would be impugned if we do not turn the
curve and achieve our headline inflation target. In the prevailing
circumstance, I am convinced that a further hike in MPR at this meeting will
be consistent with my stance at the February 2024 meeting of the
Committee. Consequently, I voted to:
1) Increase the MPR by 150 basis points to 24.25 per cent.
2) Adjust the asymmetric corridor to +100/-300 from +100/-700 basis points
around the MPR.
3) Retain the CRR at 45 per cent.
4) Adjust the CRR for Merchant Banks to 14.00 per cent from 10.00 per
cent; and
5) Retain the Liquidity Ratio at 30.00 per cent.
My Considerations
At the February 2024 meeting of the MPC, I expressed deep concerns about
the prevailing inflationary pressures and our resolve to urgently address it. This
urgency has not waned as empirical evidence suggests that we haven’t
reached the turning point. The February 2024 headline inflation figure of 31.70
per cent further substantiates this standpoint. The data shows that the
February headline inflation figure reduced the gains in real interest rate by
180 basis points. This is still high and signals that inflation has not yet been
defeated. Also, consumers expectations of inflation over the next three
months remain high. At that meeting, while the alternative of a gradual rate
hike was canvassed as a cautious approach to achieving our objective, I
voted for a significant rate hike in consideration of the need to shorten the
recovery period to low and stable inflation as well as close the wide gap
between the policy and inflation rate.
We have a responsibility to steer inflation towards our desired target of low
and stable inflation, and to continue to convey the message that we are
willing and determined to pursue this objective. It would be considered a loss
if inflationary pressure persists leading to continued rate hikes. That means
that monetary policy must change course, with the CBN keeping the policy
rate high to attract the much-needed inflows that would support foreign
exchange market liquidity and dampen exchange rate pass-through.

From available data, prices of domestic food items remain the major driver of
headline inflation because of supply shortages and high cost of logistics and
distribution. While this cannot be directly influenced using monetary policy
tools, the Bank’s response to the drivers of headline inflation is targeted at
addressing identified monetary drivers such as money supply growth,
exchange rate depreciation and Currency-Outside-Banks, the combined
impact of which will dampen inflationary pressure significantly. We must,
however, also strengthen the conversation with the fiscal authority around
combating food inflation, addressing food security and the entire food
production ecosystem. Growing the food economy will complement our
monetary policy actions as well as lead to job and wealth creation and push
the Nigerian economy to full recovery. To this end, I must applaud the efforts
of the Federal Government in boosting food production and supply through
deliberate and targeted interventions in the entire agricultural value chain.

The fiscal deficit expanded by 33.70 per cent and 86.20 per cent in February
2024 compared with the preceding month and target, respectively. The taxto-GDP ratio remains one of the lowest in the sub-region and could
compromise long-term fiscal sustainability, if not enhanced. Notwithstanding
the constrained fiscal space, the fiscal performance and overall outlook
appears positive with improved overall fiscal operations and crude oil
production.

As we review the impact of our decisions at the last MPC, it is incumbent that
we acknowledge the deserved respite and how it has improved foreign
portfolio inflows and stemmed volatility in the foreign exchange market with
greater potential for price discovery. As a forward-looking MPC, we will
remain resolute and committed to the inflation cause and will continue to
deploy our suite of policy tools to address developments in the domestic
price level. We would consolidate the process for the adoption of inflation
targeting as a strategic approach to addressing inflation concerns. This is in
addition to enhancing the Bank’s existing framework for monetary policy
communication to anchor expectations and ensure that monetary policy
delivers on its mandate of price stability conducive for growing the economy
and shaping economic outcomes for businesses, consumers and the
government.

Global and Domestic Developments
The global economy remains confronted with lingering downside risks despite
the International Monetary Fund (IMF) maintaining its global output projection
at 3.1 per cent in 2024 and 3.2 per cent in 2025. This is due to stronger than
expected resilience in the advanced, emerging market, and developing

economies. Globally, monetary, and fiscal policy continue to support the
recovery, and create jobs required to push the global economy to full
recovery. Global commodity prices are forecast to sustain their downwards
trend even though at a slower pace. The deceleration in global inflation is
thus, projected to continue at a faster pace in 2024, anchored on the
sustained decline in commodity prices. Global inflation is projected to
decline to 5.8 and 4.4 per cent in 2024 and 2025, respectively, from 6.8 per
cent in 2023.

Nigeria’s Gross domestic product (GDP) expanded by 3.46 per cent (year-onyear) in Q4 2023 compared with 2.54 per cent in Q3 2023, indicating twelve
(12) consecutive quarters of GDP growth. The improved performance in Q4
2023 was driven majorly by the services sector which recorded a growth of
3.98 per cent and contributed 56.55 per cent to aggregate GDP. On an
annual basis, GDP grew by 2.74 per cent in 2023 relative to 3.10 per cent in
2022. The composite Purchasing Managers Index (PMI), however, remained
below the threshold at 48.50 index points in January 2024 compared with
49.10 index points in December 2023.

Headline Inflation reached 31.70 per cent in February 2024, from 29.9 per
cent in January, the 13th consecutive month of increase. While the rise was
driven mainly by food inflation which rose to 35.41 per cent in January 2024
from 33.93 per cent in December 2023, both food and core components
have consistently risen over the past four (4) months. The recent re-opening of
the border with Niger may, however, improve food supply and dampen food
prices in the near-to-medium term.

The broad money supply (M3) rose by 20.57 per cent in February 2024
compared with the preceding December, rising to ₦93.72 trillion at endFebruary. The growth in broad money was driven by an increase in both Net
Domestic Assets (NDA) and Net Foreign Assets (NFA).

The performance of the external sector remained subdued by global
economic uncertainties amid tight financial conditions. The current account
posted a deficit of US$3.48 billion or 4.3 per cent of GDP in Q4 2023, against a
surplus of US$1.55 billion (1.9% of GDP) in the preceding quarter, due, mainly,
to higher import bills for goods and services, as well as higher claims of
dividends by non-resident investors. Notwithstanding, the overall balance of
payments recorded a surplus position of US$0.32 billion in Q4 2023, against a
deficit of US$0.69 billion in Q3 2023.

The Bank has remained focused on ensuring that the Banking system remains
stable due to its key role, not only in the transmission mechanism of monetary

policy, but also in the overall stability of the macroeconomy. Thus, using
extant regulatory and macroprudential measures, the Bank has continued to
ensure that the Nigerian banking sector remains safe, sound, and resilient.
Given the challenges of the operating environment, strengthening the Bank’s
surveillance and risk management framework, and plans to recapitalize
deposit money banks to support the FGN’s one-trillion-dollar economy
agenda by 2030, remain key to sustaining banking system stability.

9. MURTALA SABO SAGAGI
Context
The persistent rise in inflation rate, which was recently turbocharged by the
currency depreciation, remains Nigeria’s critical concern. The reasons for the
high inflation and currency volatility are not farfetched. The structure of the
Nigerian economy remains undiversified with crude oil representing 81.23% of
export earnings even though it contributes only 5.40% of the GDP (NBS, 2023).
The limited competitiveness of the non-oil sector due to years of neglect and
high cost of doing business engenders exclusive growth and inadequate
foreign reserve.
The
capacity
of
the
economy
to
achieve
inclusive
growth
and
macroeconomic stability is also constrained by the widespread informality in
the operations of a large percentage of Micro, Small and Medium Enterprises
(MSMES). The informal sector of the economy provides 92.3% of total
employment and over 40% of output (NBS, 2023; PwC, 2022). It is, therefore,
not surprising that Nigeria’s Tax-to-GDP ratio, which is about 10.6%, is below
the African average of 15.6% (FIRS, 2021; OECD, 2023). The low incentive for
businesses to formalize, grow, make profit and pay taxes has been worsened
by limited access to credit, government procurement, technical and logistic
support.
In the formal sector, manufacturers grapple with low productivity and profit
due to the high cost of energy which is estimated at N458.12 billion annually.
In contrast, the services sector, especially the financial and ICT sub-sectors,
continue to flourish and experience modest growth. The challenge is that the
skewedness of economic activities and the over-concentration of credit to
few large scale obligors, especially, in the oil and gas sub-sector, is unhealthy
to medium and long term macro-economic stability of the country.
The above notwithstanding, stabilizing exchange rate, which tends to worsen
inflation at the moment, is essential to permit the difficult task of rejuvenating
economic activities. Therefore, the tightening stance of the Bank needs to be
complimented with innovative fiscal interventions to achieve enduring
macro-economic stability.
Global, Regional and Domestic Developments
In 2024, the prospect for steady global economic recovery is discernable.
Global GDP is expected to be 3.1%, unchanged from 2023. Interestingly,
global trade is expected to rise from 0.4% in 2023 to 3.3% in 2024. Also, global
inflation is expected to slow down from 6.6% in 2023 to 5.8% in 2024. The
anticipated reduction in global commodity prices by 4.0% is associated with
the reduction in global inflation. Similarly, the normalization of cross border

trade among the Economic Community of West African States (ECOWAS) is
likely to increase movement of food and livestock among member states.
On the whole, the expected modest recovery in global economic activities,
reduction in global commodities prices and inflation as well as the
normalization of cross border trade in ECOWAS are indications of positive
domestic outlook for Nigeria where output is expected to increase from 3.20%
in Q1 2024 to 3.22% in Q2 2024. This outlook is even more promising when
inflation is tamed and if global conflicts do not escalate further and impact
the supply chains.
Overtime, the Nigerian approach to achieving price stability has been largely
ineffective. Headline inflation rose from 29.70% in January to 31.70% in
February 2024 with rising food prices worsening inflation in the country. This is
reflected in food inflation, which increased from 35.41% in January to 37.92%
in February in 2024. The recent wave of escalating food prices is not
unconnected to the delay in the implementation of the Federal
Government’s National Agricultural Technology and Innovation Policy
(NATIP), 2022-2027. Also, the persistent increase in the cost of energy, in
particular, the recent hike in electricity tariff, could further spike inflation
during the difficult adjustment period. Therefore, inflation in Nigeria, which is
mainly cost-push, should be approached holistically.
Taming Inflation
In a bold move to tame inflation, the 293rd meeting of the MPC voted in
favour of an MPR hike by 400bps from 18.75% to 22.75% from 18.75%. The
immediate outcome of this decision was the appreciation of the by about
25%. The confidence in the naira and the outlook for the foreign reserves are
projected to improve through 2024 due to fresh inflows of portfolio
investments and remittances as well as steady increase in oil revenues.
Nigeria’s external reserves, which stood at US$ 34.98 billion as of March 8,
2024 is estimated to reach about US$35.06 billion by end-April 2024. However,
attracting portfolio investment, which is short term and rather costly, and the
dominance of petrodollars as the main source of foreign exchange are
potential risk factors that should not be overlooked.

It is worth noting that several Emerging Markets and Developing Economies
such as Nigeria, Egypt, and Ghana have grappled with severe financial crisis.
Various response approaches were pursued by the three countries to exit the
crisis and restore stability and confidence. In the case of Ghana, its Central
Bank’s inflation targeting framework was complimented with efforts by the
Ghanaian fiscal authority in 2023 and 2024 to prioritize fiscal consolidation,
sound public financial management, domestic resource mobilization, and
private sector development. In Egypt, the Central Bank hiked its policy

benchmark rate by 600 basis points in February 2024 and devaluated the
currency. Simultaneously, a significant investment deal of $35 billion from the
UAE was finalized. It is expected that, in the medium term, the associated
chains of investments and financing in different sectors of the Egyptian
economy will reach about $200 billion. The synergy exhibited by the
monetary and fiscal authorities in Ghana and Egypt further demonstrated
renewed efforts by several central banks around the world to achieve
macro-economic stability.
In Nigeria, the Central Bank recently responded to the crisis by further
tightening. This coupled with efforts to reduce liquidity and discourage crypto
speculations have seen the naira gradually regaining strength. In spite of this,
inflation has not slowed down possibly due to the associated policy
transmission time lag, rising food prices and the fact that it is difficult to gauge
the correlation between money supply and prices in Nigeria. This is in addition
to the erstwhile limited synergy, which is however gradually improving,
between the monetary and fiscal institutions to pursue comprehensive
macroeconomic policies.

Decision Parameters
On the basis of the forgoing context, it is acknowledged that:
i.
Exchange rate fluctuation, as an important driver of inflation, has not
been effectively stabilized.
ii.
There is a risk of policy missteps if the policy pass-through is not properly
monitored and evaluated.
iii.
In Africa, Egypt is gaining momentum as a desirable location for foreign
capital inflows, suggesting that Nigeria must demonstrate a measure of
policy consistency in inflation targeting and foreign exchange stability
to sustain the capital inflows it really needs.

My Vote
I voted to maintain the current tightening approach as follows:
• Raise the Monetary Policy Rate (MPR) by 100 basis points.
• Adjust the Asymmetric Corridor around the MPR to +100/-300 basis
points.
• Retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per
cent.
• Adjust the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to
14.0 per cent.
• Retain the Liquidity Ratio at 30.0 per cent.

Recommendations
• Research: The Bank should critically examine the underlying shocks to
help understand the transmission of exchange rate movements to
inflation.
• Debt Management Strategy: With increasing debt stock and debt
services obligations (Debt Service-to-Revenue ratio reaching 179.0%, is
way above the international benchmark of 50.0%, with the risk of
further exposure to international indebtedness. The Bank and fiscal
authority should therefore formulate effective debt management and
possible debt exit strategies.
• Competitiveness: To augment the current portfolio capital inflows, the
Bank should be deliberate in partnering with the relevant arms of the
fiscal policy authority, especially state governments, to attract the
much needed investments/financing, in the form of Foreign Direct
Investment, Impact Investments, Public Private Partnership, SUKUK etc.,
into agriculture, MSMEs, mining and infrastructure.
• Wealth Creation: Instead of palliative measures, MSME Development
interventions and their formalization should be prioritized to generate
economic growth, jobs and tax revenues.

10. MUSTAPHA AKINKUNMI
Context
Since Monetary Policy has a lagged effect on inflation and Nigeria’s inflation
rate is too high, I recommend continued tightening of monetary policy for as
much and as long as would be necessary. I also advocate raising the policy
rate until there is a substantial decrease in the underlying trend of month-onmonth inflation. Considering the delayed impact of monetary tightening on
inflation, I recommend that we achieve the necessary level of monetary
tightness to set a course for disinflation and maintain it for as long as
necessary. Therefore, it is essential to address these elevated inflation rates
without compromise. There may be some cost in the short run, but over the
long run tighter monetary policy should also significantly improve the
purchasing power of ordinary Nigerians.
While higher interest rates may slow growth in the short run, they will also
bolster confidence among foreign investors by providing positive real
investment returns. Tighter monetary policy should also limit domestic price
increases due to exchange rate pass-through especially in food and the
retail energy sector. Hence, I support my colleague's proposal to raise the
Monetary Policy Rate (MPR).
The Global Economy
Projected global economic growth is poised to reach 3.1 per cent in 2024
and 3.2 per cent in 2025, propelled by advancements in monetary policy
tightening. However, this tightening may precipitate tight financial conditions,
potentially impeding investment and diminishing productivity, thus leading to
a decline in employment. Anticipated growth in advanced economies is
slated to hit 1.5 per cent in 2024, with a subsequent rise to 1.8 per cent in
2025, buoyed by robust economic expansion in the United States. Conversely,
growth in the Emerging Markets and Developing Economies (EMDEs) is
projected to reach 4.1 per cent and 4.2 per cent in 2024 and 2025,
respectively, approximately three times higher than that of the Advanced
Economies.
In Q4 2023, the US economy decelerated to 3.4 per cent from 4.9 per cent in
Q3 2023, mainly due to a slowdown in consumer spending and residential
investment. However, IMF projections indicate that the US economy is
expected to grow by 2.1 per cent and 1.7 per cent in 2024 and 2025,
respectively.
Conversely, the European economy remained stagnant at 0.0 per cent in Q4
2023, following a contraction of the German economy which offset growth in
Italy and Spain. This performance was attributed to persistent rises in

borrowing costs, weak external demand, and high inflationary pressure. The
UK economy further contracted by 0.3 per cent in Q4 2023 from 0.1 per cent
in Q3 2023, mainly due to a decline in the service sector. However, Japan
saw a modest economic expansion of 0.1 per cent in Q4 2023, contrasting
with a contraction of 0.8 per cent in Q3 2023, driven by growth in capital
expenditure.
In the EMDEs, China's economy expanded to 5.2% in Q4 2023 from 4.9 per
cent in Q3 2023, driven by increased industrial production and retail sales.
Similarly, India's economy grew to 8.4 per cent in Q4 2023 from 8.1 per cent in
Q3 2023, attributed to expansion in the manufacturing sector, particularly real
estate and construction. The Brazilian economy remained unchanged at 0.0
per cent in Q3 2023 and Q4 2023. Despite ongoing conflicts, Russia's
economy expanded by 5.5 per cent (year-on-year) in Q3 2023 compared to
4.9 per cent in Q2 2023.
In sub-Saharan Africa, Ghana recorded a growth rate of 3.8 per cent in Q4
2023 compared to 2.0 per cent in Q3 2023. South Africa's economy
transitioned from a contraction of 0.2 per cent in Q3 2023 to an expansion of
0.1 per cent in Q4 2023, attributed to growth in transport, manufacturing, and
mining sectors. Kenya expanded its economy by 5.9 per cent in Q3 2023
compared to 5.5 per cent in Q2 2023, due to favourable weather conditions
boosting agricultural outputs, complemented by growth in manufacturing
and service sectors.
In the Middle East and Central Asia, Saudi Arabia remained in an economic
recession, with its contraction increasing to 0.4 per cent in Q4 2023 from 3.2
per cent in Q3 2023, primarily due to a substantial decline in the oil sector.
Similarly, Egypt's year-on-year economic growth dropped to 2.7 per cent in
Q3 2023 from 2.9 per cent in Q2 2023, mainly attributed to weaknesses in
trade, agriculture, and communication sectors.
Brazil's economy is expected to grow by 1.7 per cent in 2024 and 1.9 per cent
in 2025, while Russia is anticipated to grow by 2.6 per cent and 1.1 per cent in
2024 and 2025, respectively. Ghana's economy is forecasted to grow by 2.8
percent in 2024 and 4.4 per cent in 2025, with South Africa expected to grow
by 1.0 per cent in 2024 and 1.3 per cent in 2025. Kenya's projected growth
would be 5.0 per cent in 2024 and rise to 5.3 per cent in 2025. Saudi Arabia is
expected to grow by 2.7 per cent in 2024 and considerably by 5.5 per cent in
2025, while Egypt's economy is forecasted to grow by 3.0 per cent and 4.7
per cent in 2024 and 2025, respectively.
Global inflation is expected to decrease as the world continues to see a
decline in global commodity prices under a tight monetary policy
environment. IMF projections indicate 5.8 per cent and 4.4 per cent in 2024

and 2025, respectively, compared to 6.8 per cent in 2023. Inflation in
advanced economies is expected to move towards central banks' targets,
with a forecast of 2.6 per cent in 2024, compared to 4.6 per cent in 2023 and
7.6 per cent in 2022. EMDEs inflation is also expected to drop to 8.1 per cent
in 2024, compared to 8.4 per cent and 9.8 per cent in 2023 and 2022,
respectively. However, this expected inflation is exposed to risks such as
climatic conditions, supply chain disruptions linked to conflicts in Ukraine and
Gaza, and ongoing US-China geopolitical tensions.
In February 2024, US inflation slightly rose to 3.2 per cent from 3.1 per cent in
January 2024, driven by increases in the cost of energy, housing, and medical
care. Eurozone headline inflation dropped to 2.6 per cent in February 2024
from 2.8 per cent in January 2024, primarily due to moderation in the cost of
services, food, alcohol & tobacco, and non-energy industrial goods. Japan's
inflation reduced to 2.2 per cent in January 2024 from 2.6 per cent in
December 2023, driven by decreases in the cost of food, healthcare, culture
& recreation, communication, and energy, among others. UK headline
inflation decreased to 3.4 per cent in February 2024 from 4.0 per cent in
January 2024, attributed to declines in the cost of household goods,
electricity, and transport.
Global commodity prices are expected to continue falling at a slower pace
in 2024. Energy prices are projected to drop by approximately 5.0 per cent in
2024 and then remain stable in 2025. The World Bank projects price falls for
agricultural commodities and metal in 2024, but metal prices are expected to
rebound by 6.0 per cent in 2025 due to supply disruptions from ongoing
geopolitical tensions and attacks in the Red Sea. Global crude oil prices are
forecasted to decrease by about 2.3 per cent and 2.4 per cent in 2024 and
2025, respectively, compared to a 16.0 per cent fall in 2023. The IMF attributes
the projected oil price fall to a weak growth outlook, ongoing geopolitical
conflicts, rising crude oil production by non-OPEC members, among other
factors. However, global commodity prices become riskier amid climate and
geopolitical shocks, such as the escalation of the Russia-Ukraine war and
persistent geopolitical tensions, which could disrupt both supply and prices,
posing a dual shock to global commodity markets and the global economy.
Monetary policy instruments remained largely unchanged, especially in
developed economies and India. For instance, the US Federal Reserve Bank
retained its rate range of 5.25 – 5.50 per cent at its January 2024 meeting, the
Bank of England at its January meeting, and the European Central Bank
(ECB) at its March 2024 meeting retained their policy rates of 5.25 percent
and 4.50 per cent, respectively. However, the Bank of Japan increased its
short-term policy rate to between zero and 0.1 percent in March 2024, from
between -0.1 per cent and zero, marking the first interest rate hike since 2007.

Similar moves to retain policy rates were observed in EMDEs in their most
recent monetary policy meetings. Russia and India kept their policy rates at
16.00 and 6.50 per cent, respectively. China retained its policy rate at 3.45
per cent. However, Brazil and Kenya reduced their policy rates by 50 basis
points to 10.75 per cent and 13.0 per cent, respectively, while Egypt raised its
rate by 600 basis points to 27.25 per cent on March 6th, 2024.
Domestic Context
The persistent rise in inflation poses a significant threat to Nigeria's economic
growth trajectory. Headline inflation in the country surged to 31.7 percent in
February 2024, up from 29.9 per cent in January 2024, attributed to exchange
rate pass-through to inflation and deficit in food supply. Food production is
failing to keep pace with the rate population growth.
Of particular concern, year-on-year food inflation, which constitutes a
significant portion of the inflation basket, increased to 37.9 per cent in
February 2024 from 35.4 per cent in January 2024. This surge is mainly driven
by elevated prices of essential food items like maize, meat, fish, eggs, yams,
fruits, and vegetables. Month-on-month inflation also rose to about 3.8 per
cent in February 2024 from 3.2 per cent in January 2024, primarily due to
increased transportation costs and security challenges. Additionally, monthon-month core inflation decreased to 2.17 per cent from 2.24 per cent in
January 2024, but its year-on-year figure increased to 25.13 per cent in
February 2024 compared to 23.59 per cent in January 2024, largely due to
exchange rate pass-through, persistently high input costs, and expectations
of further increases.
Moreover, Nigeria's reserve money declined by 24.91 per cent to
approximately N22.2 trillion by the end of February 2024, while broad money
(M3) supply increased to N93.7 trillion, exacerbating inflationary pressures
within the country. Additionally, Nigeria's external reserves decreased to
US$32.87 billion as of March 19, 2024, from US$33.68 billion in February 2024.
Although the current reserves could cover imports for 5.7 months of goods
only and 4.5 months of goods and services, the country's ability to repay
short-term debts using reserves stood at 104.0 per cent against the threshold
of 100.0 per cent. Nevertheless, the reserves-to-broad money ratio of 33.1 per
cent surpasses the 20.0 per cent threshold, bolstering the country's capacity
to manage capital flows.
In terms of the balance of payments, Nigeria achieved an overall surplus of
US$0.32 billion in Q4 2023, compared to a deficit of US$0.69 billion in Q3 2023,
primarily due to the accumulation of external reserves from third-party
receipts. However, the current account recorded a deficit of US$3.48 billion,
against a surplus of US$1.55 billion in Q3 2023, driven by higher import bills for

goods and services as well as increased dividends claimed by non-resident
investors. Furthermore, the increased influx of diaspora remittances resulted in
a surplus of US$5.74 billion in secondary income in Q4 2023, compared to
US$5.30 billion in Q3 2023.
Decision
Given the critical importance of managing inflation among macroeconomic
variables, I express my endorsement for raising all parameters. This
endorsement aligns with my firm dedication to maintaining price stability. I
voted increasing the Monetary Policy Rate (MPR) by 200 basis points to
alleviate inflationary pressures and enhance our yields to attract Foreign
Portfolio Investment (FPI). Furthermore, to tackle excessive liquidity within the
banking system, I propose raising the Cash Reserve Ratio (CRR) to 50 per
cent. Similarly, I recommend enhancing the effectiveness of the Asymmetric
Corridor by adjusting the floor to -300 basis points and the ceiling to +100
basis points. However, I concur with my colleagues in maintaining liquidity at
30 per cent.

11. PHILIP IKEAZOR

Given the persistent inflationary pressures, improvements in the foreign
exchange market, and moderation in the economy-wide liquidity surfeit, my
stance aligns with measures aimed at continuing to steer the economy
towards price stability to achieve long-term sustainable economic growth.

I therefore voted as follows:

1. Monetary Policy Rate (MPR): To increase the MPR by 150-basis points, to
elevate it to 24.25 from 22.75 per cent. This adjustment sought to further
address inflationary pressures and foster investment incentives.

2. Asymmetric Corridor: To adjust the asymmetric corridor around the
MPR to +100/-300 from +100/-700 basis points. This is to improve the
effectiveness
of
the
operational
target
and
enhance
policy
transmission.

3. Cash Reserve Ratio (CRR): To retain the Cash Reserve Ratio of
Commercial Banks at 45.00 per cent and raise the Cash Reserve Ratio
of Merchant Banks to 14.00 per cent from 10 per cent, aligning it with
evolving market realities and prudential considerations.

i.
Retain the Liquidity Ratio at 30 per cent.

Developments in the Global and Domestic Economy
The global macroeconomic outlook for 2024 remained largely consistent with
earlier projections, with notable resilience for 2025. This is contingent upon
anticipated stronger growth in advanced, emerging, and developing
economies,
alongside
potential
fiscal
expansions.
However,
despite
expectations for a decline in inflation, factors such as tightened global
financial conditions, low productivity, and reduced fiscal support in the face
of high debt burdens are anticipated to subdue growth in 2024.

The International Monetary Fund projected that growth in the Advanced
Economies will moderate to 1.5 per cent in 2024 before rising to 1.8 per cent
in 2025, reflecting stronger growth in the US, while the emerging market and
developing economies will grow by 4.2 per cent in 2025. This is marginally
higher than the projected growth of 4.1 per cent for 2024 partly due to the
expected rise in net-capital flows and loosening financial conditions that
improved macroeconomic conditions since the end of 2023.

However, uncertainties persist, and the anticipated improvement in the
global macroeconomy is approached with cautious optimism. The previously
overlooked impact of the Red Sea attack on commodity prices could pose a
significant disruption in commodity markets, leading to a contraction in real
trade and exacerbating inflationary pressures, particularly for Africa's trade.

Despite inflation decelerating in most economies and expectations for
significant rate cuts in 2024, China and Japan remain exceptions in the
global tightening cycle. Japan raised interest rates for the first time in 17 years
to address the long-term effects of prolonged negative rates, while China
tightened regulations on consumer finance companies. Additionally,
uncertainty surrounding the US election could escalate trade tensions
between the US and China, with potential implications for global markets.

As consumers and businesses grapple with lingering inflationary pressures and
high interest rates, the subdued global economic activity, and the
anticipated mild rollback of previous rate hikes by major economies, could
translate into weak global demand.

In the domestic economy, inflation has persisted in its upward trajectory with
headline inflation rising to 31.72 per cent in February from 29.90 per cent in
January, driven by food and imported food inflation. Imported food inflation
rose to 23.0 per cent in February up from 20.8 per cent in January. In terms of
real output, the CBN and IMF average estimate projected that real output
would grow by 3.29 per cent in 2024.

The fiscal space continues to shrink with low tax-to-GDP ratio and high debt
obligations. The tax-to-GDP ratio at end-2023 was 10.6 per cent which is lower
than the global average of 14.0 per cent and the WAMZ benchmark of 20.0
per cent, while the public and domestic debt-to-GDP ratios stood at 41.5 and
25.2 per cent in Q4-2023. In addition, domestic crude oil production fell in
February 2024 by 7.7 per cent, while the value of exports rose to ₦12.69 Trillion
in Q4-2023, an increase of 22.68 per cent compared to Q3-2023. Nonetheless,
the negative trade balance of N1.4 trillion will likely impart pressure on the
maintenance of both internal and external balance.

The banking sector has remained resilient as most financial soundness
indicators were within their regulatory thresholds. Despite this, the moderate
increase in NPLs and the slight decline in CAR reinforces the importance of
recapitalizing the banking system.

Credit to individuals and households declined significantly by 11.1
percentage points, down from 11.82 per cent at end-January to 0.71 at endFebruary 2024. The decline in consumer credit is due to the tightening stance
of the Bank to curb inflation.

My Considerations
In the February MPC meeting, I noted the importance of distilling the drivers
of price i.e., inflation, exchange rate, and interest rate, before deciding on
the appropriate instruments and in what proportions to adjust the instruments
to address the current inflationary and exchange rate pressures. Accordingly,
statistics and contextual analysis identified two related pass-throughs as key
drivers of headline inflation: imported food and the psychology of seller’s
inflation. The seller’s inflation pass-through, reflects the use of the exchange
rate at the time of purchase of current stock of inventory as a guide to
markup for domestic market prices, despite a real-time appreciation in the
exchange rate. This psychology further extends to the price of commodities
which are foreign exchange-neutral or not affected by the dynamics in the
exchange rate.

To this end, I am inclined to support an increase in the policy rate this time,
partly to attract the projected capital inflow of the $200.0 billion in emerging
markets to Nigeria while being mindful of the crowding out effect of the
foreign portfolio inflow on domestic investors and its associated volatility. In
addition, the asymmetric corridor in its present form is distortionary and does
not anchor the interbank market thereby necessitating contractions of the
corridor to make it more responsive. However, the tweaking of the corridor,
especially its ceiling (upper bound), should be modest to allow banks the
flexibility to meet their overnight reserve targets without creating an
oligopolistic market that allows the bigger banks to control the market.

Whereas the settlement of the backlog of valid FX transactions and clearing
of $7.0 billion in claims has helped stabilize the market and improved
transparency in the operations, projections show that market volatility may
persist in the short term. The combined effects of the policy rate and the
adjustment of the asymmetric corridor (through the operating target) are
meant to moderate volatility and address the inflationary pressure through
the exchange rate channel. Given the estimated 62.0 per cent association
between the overnight interest rate and the exchange rate, the
contractionary effect of the policy rate and the corridor will simultaneously
increase liquidity in the foreign exchange market and moderate liquidity in
the money market.

Consequently, the envisaged naira appreciation from the contractionary
stance will increase the value of net foreign assets with a corresponding
decrease in reserve money due to the FX effect on the revaluation of foreign
liabilities and the consequent decline in risk premium.


Encouraged by the continued moderation in the growth of reserve money
which fell by 24.91 per cent at end-February 2024, coupled with the
reduction in the growth of currency outside depository corporations,
retention of the CRR will allow the effects of the previous adjustment of the
CRR, to fully permeate the economy.

The imbalance between the exposure of the oil and manufacturing sectors
and their poor contribution to growth is worrisome, even as non-performing
loans (NPLs) continues to rise. Considering their vulnerability to rate hikes,
consecutive aggressive tightening will further depress the economy. The
pressure point is already manifesting as indicated in the projected
contraction of PMI in the industrial sector by 7.1 index points occasioned by
rising input cost and low-capacity utilization.

Overall, as the various economic reforms implemented by the Federal
Government of Nigeria continues to yield results, economic growth will be
sustained in 2024 and boosted in 2025. Further harmony of fiscal and
monetary policies is thus, imperative to achieve a non-inflationary growth
and stable macroeconomic environment.

12. OLAYEMI CARDOSO
Governor of the Central Bank of Nigeria and Chairman, Monetary Policy
Committee
Our first Monetary Policy Committee (MPC) meeting held on February 26th
and 27th 2024, was one month ago with a deliberate short date in the
following month to enable us to review the impact of the initial 400 basis point
hike in the policy rate. Despite notable stability in the foreign exchange
market resulting from decisions taken at that 293rd MPC meeting, inflationary
pressure remains unabated. While there is the argument that the significant
tightening since the last MPC meeting is yet to fully permeate the system and
yield its expected impact, the risk of galloping inflation persists. If such a
hyperinflationary scenario is to become reality, available options to control
inflation could be severely constrained. From facts presented to the MPC,
there is clear indication that the monetary factors contributing to inflation are
diminishing in their significance. This could be considered as evidence of the
impact of decisions reached at the 293rd MPC meeting. Staff reports show
that the principal drivers of acceleration in inflation are hikes in food and
energy prices which are associated with structural factors. Further, new
dimensions to inflationary pressure are emerging. First, ‘seller inflation’ arising
from the oligopolistic structure of commodity markets such as noticed in the
prices of local commodities is gaining significance. In addition, huge
purchases by the government for distribution as palliatives to vulnerable
citizenry is adding another dimension to the food price inflation, with seasonal
factors of food price increases during religious fasting and festive periods,
adding price cyclicality. Some of these new sources of inflation are better
addressed by the fiscal authorities to complement the efforts of monetary
policy in achieving all round price stability.
Having identified these non-monetary components of the current inflationary
pressure, the major concern of the MPC at the March 2024 meeting was to
ensure that the negative real interest rate is reduced to attract capital flows
to improve liquidity in the foreign exchange market and stabilize the
exchange rate. In the short term, attracting capital flows via foreign portfolio
investments and moderating the exchange rate pressure is a proper course
of action, bearing in mind the impact of exchange rate pass-through on
inflation in an import-dependent economy like Nigeria.
Moderate growth rate in the global economy supports improvement in the
outlook for commodity prices. The possibility of improved oil output and rising
oil prices in the international market would create more fiscal space for the
Federal Government to implement impactful infrastructure projects and
rebuild external reserves, which is crucial to stimulating investor and consumer

confidence in the economy. On the downside, however, the high debt and
high interest rate levels remain major concerns for domestic monetary policy.
While the high yield in advanced economies presents a challenge to capital
flows to emerging markets and developing economies (EMDEs), the
continued disinflation in these economies presents an opportunity for EMDEs
to address underlying structural challenges, preparatory to attracting new
capital inflows as advanced economy policy rates begin to ease. In addition,
the current tight financial conditions in the advanced economies, imply that
EMDEs must also maintain tighter financial conditions to compete and attract
capital flows. The argument for further monetary tightening is therefore
compelling.
On the domestic front, the low Purchasing Managers Index (PMI) is indicative,
in part, of diminished access to credit by critical sectors. Consequently, there
is need to unlock the flow of credit, especially to agriculture, small and
medium enterprises (SMEs) and manufacturing, as these sectors are key
drivers of domestic output growth. Further, we are aware of the potential risk
of economic recession and the challenge it poses to tax revenue generation
from the non-oil sector and hence broad fiscal operations.
While the short-term trade-off between inflation and output growth is well
acknowledged in economic literature, in the long term, this trade-off tends to
dissipate. In developing countries such as ours, with prevailing high poverty
and unemployment rates the popular dictum among policymakers is to give
greater weight to economic growth. In keeping with this, it could be recalled
that at the inception of this administration, low interest rates were identified
as essential in channeling credit to the real economy. However, there is
consensus among monetary and fiscal authorities that containing inflationary
pressure through policy action that sacrifices output growth in the short term
is a necessary course of action. The emphasis should therefore be on ensuring
that this period of pain is as short as possible. Considering the reduction in
flows to EMDEs, our target should be to act swiftly and take advantage of the
window available to attract capital flows to the economy as soon as
possible. In the short term, we must do all that is necessary to attract inflows
to ensure the FX market remains liquid at a level that stabilizes the exchange
rate. Failure to tame inflationary pressure using the exchange rate channel
may jeopardize not only price stability, but also long-term growth.
In the prevailing circumstances, it is my view that the argument for a further
hike in Monetary Policy Rate (MPR) to complement the rate hike at the last
MPC meeting is valid. This increase in the MPR will help curb inflationary
pressure and reduce the negative real policy rate. Most importantly it will
further strengthen the anti-inflationary signal of the Central Bank of Nigeria
(CBN) as we transition to an inflation targeting regime. This, however, is

predicated on the assumption that sustained fiscal and monetary policy
coordination will result in policies that address the multitude of structural
factors required for long-term investment and economic growth in Nigeria.
Without addressing the structural issues in agriculture, electricity, and energy
sectors we may continue to see persistent increases in food inflation.
For these reasons, I align with other members of the MPC in voting for further
tightening of monetary policy stance. My vote is to:
1. Increase MPR by 200 basis points from 22.75 per cent to 24.75 per cent.
2. Adjust the asymmetric corridor from +100/-700 to +100/-300 around the
MPR.
3. Increase Cash Reserve Requirement (CRR) for merchant banks to 14.0 per
cent from 10.0 per cent.
4. Retain Cash Reserve Requirement (CRR) for deposit money banks at 45 per
cent.
5. Retain liquidity ratio at 30 per cent.

OLAYEMI CARDOSO
Governor
March 2024