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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 145 OF THE MONETARY POLICY
COMMITTEE MEETING HELD ON MONDAY 21st AND TUESDAY 22nd NOVEMBER

The Monetary Policy Committee (MPC) met on the 21st and 22nd of November
2022, confronted with the continued weakening of the global economy due
primarily to the persistent increase in energy prices, supply chain bottlenecks,
rising inflation, looming food crisis, and sharp increase in interest rates leading
to tightening external financial conditions. The volatility of the oil market, driven
by policy stance by OPEC+ and the US Government, is also creating
considerable uncertainty in the market, thus making the overall direction
relatively unclear. Moreover, global trade has dwindled significantly in 2022,
with the outlook for 2023 looking rather weak. Global private and public debt
portfolios remain high and, in some cases, expanding as several countries
around the globe acquire debt to stay afloat. The Committee appraised these
and other developments in the global and domestic economies, as well as the
outlook for the rest of the year and into the first quarter of 2023.

Eleven (11) members of the Committee attended this meeting.
Global Economic Developments
Global output growth remained weighed down by familiar headwinds arising
from the war in Ukraine, China’s zero-COVID policy and the ongoing
normalization of monetary policy in the advanced economies. These have
collectively resulted in an energy price shock, historically high levels of price
development across several economies and dwindling investment in capital
markets of emerging market economies. With the war in Ukraine showing no
signs of abating in the near-term, the disruptions to energy and commodity
markets associated with it are more than likely to persist well into 2023.

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While the pandemic has mostly dissipated in most parts of the world, China’s
zero-COVID policy is keeping its impact very significant as the frequent
lockdowns in major industrial cities, continue to derail the smooth functioning of
the global supply chain. Consequently, the resulting macroeconomic
uncertainties and associated shock spillovers, remain heightened, thus
increasing the risk of a global recession which would severely retard the
recovery of several fragile economies. Those to be most affected would be
Emerging Markets and Developing Economies (EMDEs) still confronted with the
lag impact of the 2020 recession. The ongoing capital flow reversal from
perceived higher risk emerging market securities to US dollar denominated
securities with improved yields, is also further hindering orderly global recovery
to pre-COVID-19 pandemic levels.
The International Monetary Fund (IMF), having downgraded for 2022 and 2023
several times, retained global output growth at 3.2 per cent for 2022, but further
downgraded the 2023 forecast to 2.7 per cent compared with 2.9 per cent in
its July 2022 forecast.
Inflation across several Advanced Economies is expected to remain elevated
in 2022, despite progressive rate hikes by several central banks in these
economies. This is predicated on sustained high energy prices associated with
the Ukraine war and continued disruptions to the global supply chain. In the
Emerging Market and Developing Economies (EMDES), inflation is expected to
remain high for other reasons including, the persistence of exchange rate
pressures, dwindling capital inflows and a host of legacy structural issues.
In the global financial markets, activities in several equity markets have
gradually declined as investors take advantage of improved fixed-income
yields in the Advanced Economies, with the progressive hike of policy rates.
Global financial conditions are thus, expected to continue to tighten in the near
term, as risk-averse investors reassign their portfolios.

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In general, therefore, the global economy and financial markets, are
confronted with significant risks in the short to medium-term. The huge build-up
of both private and public debt and the rising risk of default associated with the
current trend of rising interest rates, disruptions to the energy market and poorly
functioning supply chains may tip several fragile economies into a new era of
recession.
Domestic Economic Developments
Data from National Bureau of Statistics (NBS) on Real Gross Domestic Product
(GDP) showed that it grew by 3.54 per cent (year-on-year) in the second
quarter of 2022 and 5.01 per cent in the corresponding period of 2021. The
economy has thus, sustained positive output growth for seven consecutive
quarters, following the exit from recession in 2020. The consistent positive
performance recorded was driven largely by the positive growth in the non-oil
sector, particularly in the services and agricultural sub-sectors, complemented
by continued policy support by the Bank.
CBN Staff projections showed that the economy is expected to remain on a
path of sustained positive growth, given the expected strong performance in
the fourth quarter of 2022 and steady rebound in economic activities.
Members noted with concern, the persisting uptick in inflation for the ninth
consecutive month with headline inflation (year-on-year) rising to 21.09 per cent
in October 2022 from 20.77 per cent in September 2022, an increase of 0.32
percentage point. On month-on-month basis, however, headline inflation
decelerated to 1.24 per cent in October 2022 from 1.36 per cent in the
preceding month, an indication that price development is responding to the
Bank’s recent policy rate hikes.
The persisting uptrend in energy prices and the prolonged period of scarcity of
Premium Motor Spirit (PMS), contributed to a sharp rise in transportation, logistics
and manufacturing costs, which fed through to consumer prices. Other
contributory legacy factors include the lingering insecurity across the country;

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perennial flooding in major food producing states; critical deficit of
infrastructure in the country; and poor road networks amongst others.
The Committee noted that broad money supply (M3) grew further by 13.80 per
cent in October 2022, (year-to-date) compared with 11.00 per cent in
September, 2022. This growth was driven by increased claims on ‘Other Sectors’
(other financial corporations, public non-financial corporations, and private
sector).
In the financial markets, money market rates oscillated below and within the
asymmetric corridor of the discount window facilities, in tandem with fluctuating
liquidity conditions in the banking system. Consequently, the monthly weighted
average Open Buy Back (OBB) rate increased to 15.91 per cent in October 2022
from 11.49 per cent in September 2022.
The Capital Adequacy Ratio (CAR) of the banking system declined in October
2022 to 13.4 but remained within its prudential limit of 10.0 -15.0 per cent. At 40.1
per cent, the Liquidity Ratio (LR) was above its prudential limit of 30.0 per cent.
The Non-Performing Loans (NPLs) ratio also improved to 4.8 per cent in October
2022 from 4.9 per cent in the previous month, staying below its prudential
benchmark of 5.0 per cent. The MPC thus, called on the Bank to continue to
maintain its tight surveillance over the banking system to ensure that the NPLs
ratio remains below the prudential benchmark.
The MPC noted with concern the continuing bearish performance of the
equities market in the review period. The All-Share Index (ASI) and Market
Capitalization (MC) decreased to 43,839.08 and N23.88 trillion on October 31,
2022, from 49,836.51 and N26.88 trillion respectively, on August 31, 2022. This
decrease reflected the sustained sell-off and profit taking by investors
rebalancing their portfolios to benefit from higher yields in the fixed income
market. Other contributory factors include inflationary and exchange rate
pressures, and tightening external financial conditions.

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The Committee observed the decline in the external reserves position, as gross
external reserves decreased by 1.34 per cent at end-October 2022 to US$36.87
billion, from US$37.39 billion at end-September 2022. With indications of lower
crude oil prices in the futures market, Members urged the Bank to sustain its
current policies to boost non-oil exports in order to shore up the external reserves.
Between September and October 2022, under the Anchor Borrowers’
Programme (ABP), the Bank disbursed N41.02 billion to several agricultural
projects, bringing the cumulative disbursement under the Programme to
₦1,067.29 billion to over 4.6 million smallholder farmers cultivating 21
commodities across the country. The Bank also disbursed N0.30 billion to finance
large-scale agricultural projects under the Commercial Agriculture Credit
Scheme (CACS). Consequently, the total disbursement under the Scheme for
agro-production and agro-processing stands at ₦745.31 billion for 680 projects.
In addition, the Bank released the sum of ₦48.30 billion under the ₦1.0 trillion Real
Sector Facility to seven (7) new real sector projects in agriculture,
manufacturing, and services. Cumulative disbursement under this Facility
currently stands at ₦2.15 trillion to 437 projects across the country, comprising
projects in manufacturing (240), agriculture (91), services (93) and mining sector
(13). Furthermore, under the 100 for 100 Policy on Production and Productivity
(PPP), the Bank disbursed the sum of ₦20.78 billion to nine (9) projects in
healthcare, manufacturing, and services. The cumulative disbursement under
the Facility therefore, amounted to ₦114.17 billion in 71 projects. Moreover, the
Bank disbursed ₦4.00 billion under the Intervention Facility for the National Gas
Expansion Programme (IFNGEP) to promote the adoption of compressed natural
gas (CNG) for transportation and liquefied petroleum gas (LPG) for cooking.
In support of the resilience of the healthcare sector, the Bank also disbursed
₦5.02 billion to four (4) healthcare projects under the Healthcare Sector
Intervention Facility (HSIF), bringing the cumulative disbursement to ₦135.56
billion for 135 projects in pharmaceuticals (33), hospitals (60) and other services
(42).

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Under the Micro, Small and Medium Enterprises (MSME) sector, the Bank
provided support for entrepreneurship development with the disbursement of
N1.33 billion and N10.00 million under the Agribusiness/Small and Medium
Enterprise Investment Scheme (AgSMEIS) and Micro, Small, and Medium
Enterprise Development Fund (MSMEDF), respectively. Hence, the total
disbursement under these interventions amounted to N150.22 billion and N96.08
billion, respectively. Under the Export Facilitation Initiative (EFI), the Bank
provided support for export-oriented projects to the tune of N5.34 billion, such
that the cumulative disbursement under this intervention stands at N44.58 billion.
Outlook
The overall medium-term outlook for both the global and domestic economies
remain clouded by uncertainties associated with the Russia-Ukraine war,
lingering COVID-19 pandemic and continued lockdown of major industrial cities
in China. The persistent tightening of global financial conditions and slowing
global trade are also significant pointers to a weakening global economy.
On the domestic front, available data on key macroeconomic indicators
suggest rebound in output growth for the rest of 2022, which may occur at a
much-slower pace than earlier anticipated, in the light of unfolding domestic
and external shocks to the economy. The domestic shocks originate from the
persisting insecurity inhibiting economic agents; rising cost of debt and debt
servicing; deteriorating fiscal balances; increased spending as the 2023 general
elections
approach;
and
continued
uptrend
in
inflationary
pressure.
Accordingly, the Nigerian economy is forecast to grow in 2022 by 3.30 per cent
(CBN), 3.20 per cent (IMF) and 4.20 per cent (FGN).

The Committee’s Considerations
At this meeting, the MPC was concerned that the global inflationary pressures
have continued to trend higher and financial markets were also facing
challenges. It observed that this was indeed the trend in Nigeria, with inflation
attaining 21.09 per cent in October, 2022. The Committee, however, seized the
opportunity to appraise the efficacy of its decisions at the last couple of

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meetings, and came up with the conclusion that the decisions were beginning
to yield the desired results, given that the rate of increase in inflation was
beginning to moderate , in view of the month-on-month deceleration in prices
presented by the Consumer Price Index.
Members noted that though the global economy was progressively weakening
due to the various headwinds derailing the recovery, domestic output growth
remained positive as a result of the combined support from fiscal and monetary
policy. The MPC, therefore, urged both authorities to continue to harmonize
their various policies to achieve the desired objectives of stable prices and
steady growth.
In reaching the decision of whether to loosen, hold or tighten the stance of
policy, Committee felt that, given that all the causative factors, such as the
Russia-Ukraine war, supply chain disruptions, slowdown in China, rising inflation
in advanced economies and other headwinds were still dominant, a loosen
option was not desirable at this meeting. The Committee also felt that, with the
rising inflation, loosening the stance of policy would lead to a more aggressive
rise in inflation and erode the gains already achieved through tightening.
As regards whether to hold, MPC was of the view that a hold stance at a period
close to December festive season and expected heavy spending during the
2023 general election at a time of high inflation would greatly jeopadise the
gains of the previous policy rates hikes and plunge the economy deeper into
the inflation trap.
The MPC therefore decided to continue to tighten, but at a somewhat lower
rate, noting that tightening the stance of policy would narrow the negative real
effective interest margin and thus improve market sentiment and further restore
investor confidence. MPC also felt that recent developments in terms of
observed month-on-month deceleration in the rate of increase in inflation,
suggests that the previous tightening policies were yielding the expected
outcome. It therefore felt that sustaining the tightening would further
consolidate the decline in inflation, albeit more significantly.

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The Committee’s Decision
The MPC noted that inflation has continued an uptrend, even though at a
decelerating rate, despite its last three consecutive sizeable policy rate hikes.
The Committee’s choices were on whether to further hike rates or pause for the
impact of the last three rate hikes to continue to feed through the economy. At
this MPC, therefore, the options considered were primarily to hold or further
tighten the policy rate. The option to loosen was not considered as this would
gravely undermine the gains of the last three rate hikes.
The Committee thus voted unanimous to raise the Monetary Policy Rate (MPR).
Nine (9) members voted to raise the MPR by 100 basis points and 2 members
voted to raise the MPR by 50 basis points.
In summary, the MPC voted to:
I.
Raise the MPR to 16.5 per cent;
II.
Retain the asymmetric corridor of +100/-700 basis points around the MPR;
III.
Retain the CRR at 32.5 per cent; and
IV.
Retain the Liquidity Ratio at 30 per cent.
Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
22nd November 2022

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
Prospects of the global economy continue to be overshadowed by the war in
Ukraine and its fallouts, lingering coronavirus pandemic and inflationary
pressures. These conditions have dampened activity recovery prospects in
many countries, prompting the downward revision of the world output growth
by the IMF to 3.2 per cent in July 2022. Although the Fund retained this forecast
in its update in October, its prognoses of associated parameters like trade, debt
as well as fiscal conditions suggest that global slowdown could continue
through 2023. Global inflation is now forecast at about 8.8 per cent for 2022
from 4.7 per cent in 2021. Globally, incomes are being eroded as cost of living
continues to rise. Poor and low-income households have come under severe
pressure as nearly all the gains of recovery post-COVID appear lost to this group.
The outlook for the global economy continues to be hazy and largely
dependent on the Russia-Ukraine war. Essentially, the November 2022 Monetary
Policy Committee (MPC) meeting held against the backdrop of widespread
risks to global output stability.

In the domestic economy, inflation continues to be a major challenge, albeit
slowly responding to the change in monetary policy. Concomitant with the
change in monetary policy stance since May 2022, the pace of development
finance interventions by the Bank has slowed and interest rates have begun to
rise to rein-in demand. Although we are yet to see a decline in absolute terms
in year-on-year inflation rates, there are credible indications that the process of
disinflation has begun. Inflation measured on month-on-month basis declined
for all 3 categories in October. The NBS Inflation Report for the month shows that
headline inflation slowed to 1.24 per cent from 1.36 per cent in September 2022.
Similarly, both core and food inflation slowed respectively to 0.93 and 1.23 per

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cent from 1.59 and 1.43 per cent in September 2022. These developments
buttress my conviction about the appropriateness of the disinflation strategy of
the Committee.

The recent policy orientation comes at a cost, especially to growth. Already,
there are indications of this playing out in Q3 and Q4 real growth outcomes,
underscoring the need to carefully balance goals against instruments
deployment. That said, I believe the balance of risks remains tilted against price
stability; hence, my preference for maintaining the trajectory of policy
tightening, though cautiously. And so, I chose to be slightly less aggressive at
the November meeting by opting for 100 basis point increase in the monetary
policy rate (MPR). Details of my considerations are outlined subsequently.

Despite the reorientation of policy since May, financial conditions in the
economy have not altered sufficiently. Annualized growth rates of key
monetary aggregates - broad money (M3), domestic asset (net) and net claims
on FG – exceeded programme in October 2022. In addition, the collateralised
inter-bank rate (OBB) continues to be negative in real terms. It rose in October
but moderated in November. Meanwhile, the naira exchange rate continues
to depreciate at the I&E window. The rather slow transition in these and other
financing conditions is understandable given that monetary policy instruments
impact the economy with a lag, which in the case of Nigeria could stretch up
to eight (8) quarters. Sustaining the tightening stance is mandated by the need
to more quickly alter the economy’s financing conditions.

In November, Inflation expectation increased owing partly to persistence and
widespread floods in major food producing zones of the country. It is estimated
to increase further in December due to the expected impact of year-end
festivities. The disinflation process requires that the Bank locks-in expectation of
further increases in prices. In effect, I saw the need to promptly regain control
of inflation expectation by sustaining policy tightening in order not to put
credibility at risk.

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The overall outlook for system liquidity obviously calls for a contractive monetary
policy at this time. Apart from the expected increase in liquidity related to yearend festivities, political campaign activities related to the general elections in
2023 are expected to intensify in the next two (2) months. The associated
increase in spending could buoy up system liquidity and fuel increased
demand.

Fiscal activities are expected to gather momentum in the next few months as
the present political administrations at the federal level and in many states try
to complete ongoing projects before May 2023 when they will be handing over
to succeeding administrations. This further complicates the outlook for system
liquidity and deserves to be a part of the policy calculations from the monetary
side of economic management. On the part of the CBN, the naira redesign is
expected to increase DMBs’ deposit liabilities significantly during this period and
could translate to increased credit creation.

Most central banks are not relenting in tightening monetary policy, leading to
a tightening of the global financial conditions. Yields have continued to rise in
the advanced economies and especially in the United States driven by the
dollar rally. This development is having a straining effect on flows and exchange
rates in emerging market and developing economies (EMDEs). I had argued in
September that doing anything contrary to this global trend could only increase
the vulnerability of the domestic economy to adverse spillovers. Tightening
policy would similarly increase domestic yields and by extension, dampen the
demand for foreign exchange.

Finally, the positive outlook for real GDP growth, though a bit softening,
continues to provide room for the needed adjustment on the monetary side.
Real GDP is forecast at about 3.3 per cent for 2022. It is hoped that fiscal policy
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deliver robust growth. In this regard, I would urge government to continue to
prioritise infrastructure and security.

In conclusion, I believe also that the risk to financial stability arising for further
tightening are moderate going into 2023. The banking system continues to be
resilient with major financial soundness indicators comparing favourably with
the prudential thresholds. Loan repayment and liquidity risks are generally low.
The industry is well capitalized and offering relatively good returns on asset and
equity.

I, therefore, voted to:
1. Raise the MPR by 100 basis points to 16.5 per cent.
2. Retain the asymmetric corridor at +100/-700 basis points.
3. Retain the CRR at 32.5 per cent.
4. Retain the Liquidity Ratio at 30 per cent.


2. ADENIKINJU, ADEOLA FESTUS
International Economic Developments
The global economy continued to slowdown due to the persistence of
macroeconomic fragility and uncertainties, confronted with growing risks of a
recession. The uncertainties are driven by the war in Ukraine, energy crisis in
Europe, Supply shocks in China, continued high inflation and rising interest rates
in Advanced Economies. Arising from these uncertainties, growth in both
Advanced Economies (AEs) and Emerging and Developing Economies (EMDEs)
will likely moderate in 2023.
Global Composite PMI remained below the 50-Index point mark for the third
consecutive month in October 2022. Inflation remained elevated across AEs

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and EMDEs. However, there is a possibility that peak inflation would occur in
2022, as the lagged effects of current monetary tightening policies kick-in, in
2023.
Global commodity prices remained soft as demand moderates. Global equity
markets remained volatile reflecting effects of contending forces of higher
interest rates and rising possibility of recession in 2023. The US dollar remained
strong relative to major local currencies, prompting depreciation of local
currencies against the strong dollar. While global FDI flows have recovered to
pre-pandemic level, the advanced economies are benefiting more than the
EMDEs. So, outlook for 2023 is mixed with strong headwinds to contend with.
Domestic Economic Developments
The Economic Report presented by CBN Staff shows mixed developments in the
economy. Growth was recorded in the economy for the 7th consecutive
quarters as real GDP in 2022Q2 grew by 3.54% year on year, compared to 3.11
recorded in 2022Q1. The growth in output was driven by the non-oil sector
which grew by 4.77%, while the oil sector contracted by a massive -11.77%.
Other sectors that recorded negative growth were livestock, and electricity,
gas, steam &air conditioner. All the other sectors of the economy posted
growth in 2022Q2 relative to 2021Q2.
Headline Inflation rose from 20.77% in September 2022 to 21.09% in October
2022, year on year. This was accounted for by increase in both food inflation
and core inflation. Food inflation increased to 23.72% in October 2022, from
23.34% in September 2022. Core inflation also rose to 17.76% compared to 17.6%
in September 2022. However, looking at month on month figures, there was a
decline in inflation rate, as headline inflation in October 2022 stood at 1.24%
compared to 1.36% in September 2022. Similarly, month on month, food inflation
and core inflation also declined.
In the external sector, the naira depreciated against the dollars from N440.85 to
a dollar in October 2022, to N445.26 to a dollar on November 11, 2022. The trade
balance recorded a surplus in October 2022. FDI inflow and remittances rose,

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while net FPI declined. Current account as a share of GDP rose from 2.4% in
2022Q1 to 4.7% in 2022Q2.
On the monetary and financial side, average net liquidity in October 2022
declined to N186 billion from N252.81 billion in September 2022. This was
attributed to the impacts of the 150 basis points increase in the policy rate and
the 5.0 percentage points increase in the CRR at the September 2022 MPC
meeting. Monetary base declined from N15.007 trillion in September 2022 to
N14.999 trillion in October 2022. Increase in both Net Foreign Assets and Net
Domestic Claims accounted for the growth in total monetary assets (M3) from
11% in September 2022 to 13.8% in October 2022.
The ”Naira 4 Dollar Scheme” continues to support the inflow of dollars into the
economy. US$280.07 million was sold under the scheme in October 2022, down
from US$362,54 million in September 2022.
The fiscal side remained problematic. From January to September 2022, three
months to the end of the month, revenue actualization was 35.8% of the budget
projections for the year 2022, expenditure actualization was 59.99% of the
expenditure projection for 2022, while budget deficit was 0.78% above the
budget estimate of N6.38 trillion for 2022. Total public debt rose by 2.98% to
N42.85 trillion at end-June 2022.
The Banking System Stability Review Report was also presented at the meeting.
The various Financial Soundness Indicators (FSI) showed that the banking
systems remain safe, sound, and resilient. All the FSIs are within the prudential
requirements and compared well with comparator countries. All measures of
industry aggregates: assets, deposits and credit rose year on year. Total assets
of the banking industry grew by N12.37 trillion between end-October 2021 and
2022. Similarly, industry credit increased by N5.32 trillion over the same period.
In addition, total industry deposits rose by N6.92 trillion between end-October
2021 and 2022. In October 2022, a total of 125,305 new credits valued at
N767.06 billion were granted to various customers. There was marginal increase
in lending rates in the industry in response to recent measures by the CBN. The

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decline in industry NPL ratio to 4.81% at end October 2022 compared to 5.29%
at end-October 2021 is commendable.
My Concern
The large-scale flooding that swept through the country in October will have
adverse consequences for food supply, and output growth in 2022Q4 and part
of 2023Q1. This may drag down overall GDP growth for 2022 from level
projected. Inflation expectations in November 2022 was 19.93%, lower than
projected inflation of 21.29%. However, the December festivities may drive up
inflation expectations again. Petrol queues in some parts of the country are also
likely to impact on output growth and inflation.
There is a need to address the pressures on the naira exchange rate by boosting
supply of foreign exchange in the economy. I am also of the opinion that the
FX sold by the Bank at the I&E windows should be for productive activities alone.
The Bank should review its policy of those who qualify to benefit from FX sold in
the official market.
The country should not normalize the negative contributions of the oil sector to
economic growth. The oil sector has so much potential to contribute to
economic growth, generate employment and increase FX flow into the
economy. The government must be deliberate in removing all the
encumbrances to oil sector performance and implement the PIA in full.
The worsening fiscal balances should also be addressed. Most indicators of
fiscal balances are in the red. The reliance on monetary accommodation to
enhance fiscal operations is costly to the economy both in the medium and
long term. The revenue challenges of the government should be confronted
headlong. The Bank should moderate further financing of the federal
government and conclude on the securitization of the FGN exposure to the
CBN. In addition, the issue of oil theft and vandalization of pipelines and other
government assets must be urgently addressed.

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Finally, the government must sustain current military successes against
insurgents and bandits. Government at all levels must also begin to seriously
address the problem of climate change to prevent the scale and impacts of
future incidence of flooding, desertification, and loss of lives and properties.
Timely removal of fuel subsidy and full liberalization of the downstream
petroleum sector will address part of the current fiscal challenges, eliminate
shortage of refined petroleum products, and drive investment into the sector.
My Vote
The deceleration of the inflation rate going by the month-on-month data, is a
positive development. It is an indication that the policies in place to control
inflation are working, albeit with a lag. This is also reinforced by the data that
shows that inflation expectation is dampening. However, with the anticipated
headwinds that are likely to buoy inflation in the near future, the MPC cannot
afford to keep its feet off the pedal at this time. The MPC needs to sustain the
tight monetary policy stance to dampen inflationary pressures and moderate
negative real interest rate on long term securities to encourage capital inflows.
I cast my vote to increase the MPR by 100 basis points, while maintaining all
other monetary parameters at their extant values. Hence, I vote to:
1) Raise MPR by 100 basis points to 16.5%
2) Retain CRR at 32.5%
3) Retain LR at 30%
4) Maintain asymmetry corridor around the MPR at +100/-700 basis points.

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3. AHMAD, AISHAH N.
The last Monetary Policy Committee meeting for 2022 held within an
atmosphere of persistent headwinds and heightened uncertainty; broadly
driven by spillover effects of the Russian invasion of Ukraine, cost-of-living crisis,
lingering inflation pressures, and the slowdown of economic activities in China.
With the war in Ukraine showing little signs of abating in the near-term, the
disruptions to energy and commodity markets associated with it are likely to
persist well into 2023. Also, prices have maintained an upward track in most
economies, despite significant attempts to rein in inflation, including rate hikes
and roll back of monetary easing by various central banks. Indeed, increasing
price pressures remain a major threat to global economic prosperity and
macroeconomic stability, while the rapid tightening by central banks is stifling
global financial conditions, with implications for exchange rate stability
especially for emerging markets and developing economies.
China, the second largest economy in the world, faces output contraction
threats as measures to curb spread of the COVID-19 pandemic remain
underway, amidst other unique domestic challenges. This development
presents significant risks for global recovery in view of China’s strategic role in
the global supply chain.
Overall, the year has been extremely challenging and economic prospects are
generally dampened in many countries, prompting yet another downward
revision of world output growth forecast for 2023 to 2.7 per cent by the IMF in its
October World Economic Outlook, from 2.9 per cent in its July 2022 forecast.
On the domestic front, the November meeting presented an opportunity to
broadly appraise the Committee’s policies vis-a-vis global and domestic

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developments over the year, taking stock of their impact on macroeconomic
variables and the price stability mandate, in particular.
While global risks and domestic vulnerabilities persist, domestic policies have
yielded some positive results, evidenced by fairly good economic
fundamentals with a positive short-to-medium-term outlook.
Real Gross Domestic Product (GDP) growth maintained seven consecutive
quarters of positive growth, following the exit from recession in 2020 with a 3.54
per cent (year-on-year) growth rate by the second quarter of 2022 and 5.01 per
cent in the corresponding period of 2021 according to data from the National
Bureau of Statistics (NBS). The consistent positive performance recorded was
driven largely by the growth in the non-oil sector, particularly in the services and
agricultural sub-sectors, partly fueled by continued policy support by the Bank.
Bank staff projections indicate that the economy is expected to remain, al-beit
at a slow pace, on a positive growth trajectory, given sustained interventions in
critical growth enhancing sectors and steady rebound in economic activities.
This projection is supported by estimates from the composite Purchasing
Managers’ Index (PMI) which expanded to 51.5 index points in October 2022
from 49.5 points in the previous month. The PMI however, declined to 49.0 index
points in November 2022, signifying marginal contraction in business activities,
a development that highlights the need to strengthen output expansion and
forestall reversal of gains recorded so far. Focused implementation of initiatives
that seek to strengthen the business environment, improve infrastructure and
boost domestic production, such as the National Development Plan 2021-2025,
the Economic Sustainability Plan and ongoing targeted interventions by the
monetary authority are useful in that regard.
Domestic price pressures remain largely sticky and a source of concern. The
uptick in inflation persisted for the ninth consecutive month with headline
inflation (year-on-year) rising to 21.09 per cent in October 2022 from 20.77 per
cent in September 2022, an increase of 0.32 percentage point. Food and core
inflation also increased year-on-year to 23.72 per cent and 17.76 per cent in

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October 2022, from 23.34 per cent and 17.60 per cent in the previous month,
respectively. Key drivers of the uptick remain increased production costs
following rising energy prices, foreign exchange constraints, increase in
transport and logistics costs, along-side other structural issues such as insecurity
and flooding.
On month-on-month basis, however, all components of inflation trended
downwards with headline inflation decelerating to 1.24 per cent in October
2022, from 1.36 per cent in the preceding month, an indication that inflation
may be turning the corner in the near term.
Nonetheless, downside risks to inflation outlook remain elevated considering the
traditional end of year spike in prices and build up to the 2023 general elections,
while policy trade-offs to address rising prices have become acutely
challenging. However, it is expected that the tight monetary policy stance of
the Committee will permeate the economy, weigh demand down and
gradually subjugate inflation, especially with broad money supply (M3) growing
further by 13.80 per cent in October 2022, (year-to-date) compared with 11.00
per cent in September 2022. The combined efforts of the monetary and fiscal
authorities to ramp up food supply and tackle age long structural challenges
are also expected to moderate inflation expectations and drive down food
and core prices in the medium-term.
In addition, ongoing exchange rate demand management policies of the Bank
and other initiatives to improve foreign exchange (FX) supply such as the RT 200
policy, are useful in moderating pressure in the FX market, in view of the pass
through to domestic prices.
The financial system remains strong and continues to provide significant support
for needed domestic economic resilience. Data provided by Bank staff showed
stability in broad financial soundness indicators and sustained improvement in
asset quality, alongside growing credit to the private sector. Capital adequacy
ratio as at October 2022 was robust at 13.40 per cent above the minimum 10
per cent requirement. Industry liquidity was also strong at 40.1 per cent over the

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same period while the non-performing loans (NPLs) ratio declined further to 4.8
per cent in October 2022, compared to 5.3 per cent in October 2021. This
reflects
improvement
in
industry
risk
management
practices
and
implementation of regulatory policies to manage NPLs such as the Global
Standing Instruction (GSI) Policy. The results of stress tests conducted by staff,
show that financial soundness indicators remained above minimum regulatory
thresholds under mild to severe shocks
Notably, total assets rose to N69.67trillion in October 2022 from N57.30 trillion in
October 2021, while total deposits rose to N43.05 trillion from N36.13 trillion over
the same period. Total credit also increased by N5.32 trillion to N28.81trillion
between end-October 2021 and end-October 2022 with significant growth in
credit to manufacturing, general commerce, and oil & gas sectors. The
continued credit expansion particularly to output enhancing sectors is
expected to further support economic activities. However, sustained regulatory
vigilance is required to mitigate any potential crystallization of credit risk in the
financial system in view of lingering macroeconomic risks.
As anticipated, average lending rates have risen between June and October
2022, partly driven by the tight monetary policy stance of the MPC, which
requires vigilance by the banks to forestall defaults and preserve asset quality.
Sustained implementation of the policy on GSI and effective credit risk
management policies by the banks are useful in that regard, while recent
initiatives of the Bank such as the naira redesign are expected to enhance
monetary policy transmission via the banking system.
Notwithstanding the strong financial system fundamentals and satisfactory
stress test results, the Bank must remain vigilant and proactively manage
operational, asset quality and other risks to financial system stability, especially
with the challenging global economic environment.
Policy Decision

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Increasing price pressures remain a significant risk with potential to erode real
incomes and undermine macroeconomic and financial stability. The persistent
and broadening inflation pressures have triggered a rapid and synchronized
tightening of monetary conditions, alongside a sharp appreciation of the US
dollar against most other currencies, with negative implications for capital
inflows, sovereign debt sustainability and broad economic prospects of many
economies, including Nigeria.
The energy crisis in Europe triggered by the Russian invasion of Ukraine and
China’s weakening output, also exerts further burden on the global economy
with heightened uncertainty. Overall, the global outlook remains weak and
policy makers must brace for the toughest decisions.
Domestically, output is expected to remain positive but relatively weak through
2022, while inflation is forecasted to accelerate further in the near term within
the double-digit territory, and far above the Bank’s implicit inflation target of 6
to 9 per cent with negative implications for real interest rate and inflation
expectations. The current economic condition presents tough policy choices
between supporting the fragile economic growth and containing inflationary
pressures. Thankfully, the growth outlook offers some buffer for continued antiinflation stance, while previous and ongoing support for the real sector of the
economy, work their way through.
I note that tightening the monetary policy stance to curb inflation has downside
risks for output growth, however, the tight stance of policy would narrow the
negative real effective interest margin, improve market sentiment, and further
restore investor confidence which would translate to improved economic
performance over time.
Moreso, the recent month-on-month deceleration in the rate of increase in
inflation, suggests that previous tightening policies in the year are gradually
yielding positive outcomes. I am, therefore, persuaded that further increase in
the MPR, combined with the cash reserve requirement policy, would re-anchor

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inflation expectations and consolidate the decline in inflation acceleration
rate.
Thus, I vote to increase the Monetary Policy Rate by 100bps to 16.5 per cent
from 15.5 per cent; retain the Cash Reserve Ratio (CRR) at 32.5 per cent; retain
the Liquidity Ratio (LR) at 30.0 per cent; and retain the asymmetric corridor at
+100/–700 basis points around the MPR.


4. ASOGWA, ROBERT CHIKWENDU
Policy Decision:
On the basis of current economic developments at both the global and
domestic levels, a continuation of tight monetary policy stance remains
necessary so as to contain aspects of the inflationary pressures that are
demand driven. This will also ensure that the inflation expectations of domestic
agents are well anchored. However, given the growing fears of possible
economic slowdown especially with the cumulative policy rate hikes in the past
few months, a moderated policy rate increase of not more than 50 basis points
will be appropriate for now.
I will therefore vote to:
Raise the MPR from 15.5 percent to 16.0 percent,
Retain the CRR at 32.5 percent,
Retain the Asymmetric Corridor at +100/-700 basis points,
Retain the Liquidity Ratio at 30.0 percent.
Current Global Economic Developments:

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Global economic indicators especially GDP growth and inflation rates seems to
have deteriorated further in the third quarter of 2022 with the risk of recession
increasing especially in Europe and the emerging market countries. The
slowdown of economic activities is influenced by the same old factors including
the protracted Russia-Ukraine war, the energy crises in Europe and the
prolonged lockdowns in China. CBN staff report shows that in a number of
countries, GDP growth moderated in the third quarter of 2022 compared with
the second quarter. In the Euro Area for instance, GDP grew by only 0.2 percent
in the third quarter of 2022 compared with 0.8 percent in the second quarter,
thus marking its weakest quarterly growth since 2021. In the United Kingdom,
early estimates of third quarter 2022 GDP suggests a contraction of -0.2 percent
from the 0.2 percent and 0.7 percent growth recorded in the second and first
quarters of 2022, respectively. Also, in Japan, third quarter GDP growth
estimates show a slowdown to 0.3 percent from 0.9 percent in the second
quarter of 2022. There are few exceptions such as the US and China where
output turned positive in the third quarter of 2022 from earlier negative
territories. The US GDP contracted by -1.6 and -0.6 percent in the first and
second quarters of 2022, respectively, but expanded by 2.6 percent in the third
quarter. In China, output growth expanded by 3.9 percent in the third quarter
compared with a contraction of -2.7 percent witnessed in the second quarter
of 2022. The outlook for global growth remains skewed to the downside
especially for the last quarter of 2022 and the early parts of 2023 and this is
clearly supported by some high frequency data all of which indicate possible
slowdown in the pace of overall economic activities. Global Composite PMI
contracted to 49.0 index points in October 2022 from 49.7 index points in
September 2022. The export order component of the global purchasing
managers index (PMI), which is a leading indicator of the volume of trade in the
upcoming months remains at a level suggestive of possible future contraction.
The actual forecasts for global growth for 2023 have recently been revised
further downwards by several international financial institutions and investment
houses.

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On global inflation, the environment remains uncertain for most countries
despite the recent moderations in the United States, India and Brazil. On
average, consumer prices are still high and now more broad based in many
countries. CBN staff report shows that in October 2022, both month-on-month
and year-on-year inflation rates accelerated in several advanced, emerging
and developing market economies. In the Euro Area, month-on-month inflation
rose to 1.5 percent in October compared with 1.2 percent in September, while
the year-on-year measure accelerated to 10.7 percent in October compared
with 9.9 percent in September. In the UK, year-on-year inflation rose to 11.1
percent in October from 10.1 percent in September 2022. In Australia, headline
CPI moved to 7.6 percent in October from 7.3 percent in September, while in
Egypt, year-on-year inflation rose to 16.20 percent in October from 15.0 percent
in September. The few exceptions are in the United States where inflation rates
dropped from 8.2 percent in September to 7.7 percent in October, eventhough
on a month-on-month basis, it actually rose to 0.4 percent in October from 0.3
percent in September. In India, headline inflation also reduced to 6.8 percent
(year-on-year) in October 2022 from 7.4 percent in September. For now, the risks
to the global inflation outlook are still heavily skewed to the upside even up to
2023 as the Russia-Ukraine war continues to raise uncertainty in the trajectory of
food and energy prices.
The policy responses of Central Banks across the globe have been similar with
fairly synchronized aggressive policy rate hikes and reduced holdings of assets
purchased under the earlier quantitative easing programmes. CBN staff report
shows that most Central Banks in the advanced and emerging economies
have on average raised policy rates at least four consecutive times recently.
By early November, the US Federal Reserve had accumulated a rate hike of
375 basis points. In early November also, the Bank of England raised its policy
rate by a further 75 basis points to 3.0 percent, which is believed to be the
highest since 2008. Similar rate hikes also happened in Australia, Canada, Brazil,
South Africa amongst several other countries. There are recent renewed
commitments by several Central Banks for additional rate hikes in the future if

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the inflationary pressures persist. There are however concerns about this hawkish
stance of most Central Banks with growing scepticism on its potency. Besides
the unfolding risk of recession in economic activities, volatility in the global
financial markets has increased particularly for the equity and bond markets. In
the past two months, long term government bond yields in most countries rose
significantly but volatilities also increased at the same time. On the currency
exchange rate, the US dollar appreciated considerably against other
currencies perhaps due to capital rebalancing from various emerging and
developing countries to the United States.
Current Domestic Economic Developments:
Turning to the domestic front, Nigeria’s output growth may have slowed in the
third quarter of 2022 compared with the second quarter, but still exhibits some
resilience. The official 2022 quarter 3 GDP growth rate by the National Bureau
of Statistics (NBS) are yet to be released at the time of this November MPC
meeting, but flash estimates suggests a marginal slowdown from the 3.54
percent and 3.11 percent recorded in the second and first quarters of 2022,
respectively. This brake on domestic growth recovery in the third quarter of
2022 may have been triggered partly by rising costs in the economy which
perhaps created some uncertainties and sluggishness in the aggregate
demand conditions. Besides, the observed deceleration in agricultural and
other non-oil sector based activities within this period also weighed down
overall growth. There are signs that 2022 fourth quarter GDP growth may
somehow be better than quarter three especially as activities in the industry
and service sectors are now in an expansion mode as reflected in the
purchasing manager indices (PMIs) and other high frequency data. CBN staff
report shows that Nigeria’s composite Purchasing Manager’s index (PMI) rose
to 51.2 index in October 2022 compared with the two previous months of
contraction at 49.5 and 47.2 index points in September and August 2022
respectively.

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On domestic inflation rate, the increases have lately been at a decelerating
pace. The October 2022 year-on-year headline inflation rates rose to 21.09
percent from 20.77 percent and 20.53 percent in September and August 2022,
respectively, with both food inflation and core inflation increasing marginally
within this period. On a month-on-month basis, headline inflation decelerated
from 1.77 percent in August to 1.36 percent in September and further down to
1.24 percent in October 2022. This month-on-month deceleration is expected
to continue in the coming months, perhaps pivoting towards an envisaged
disinflation path in the second half of 2023. CBN staff report points to a
moderation in inflation expectations in September and October 2022 partly
reflecting the subdued aggregate demand pressures from recent monetary
tightening measures.
Overall domestic liquidity remains high despite the tightening measures. CBN
staff report shows that broad money supply (M3) declined from 11.96 percent
(year-on-year) in August 2022 to 11.00 percent in September, but surprisingly
increased to 13.80 percent year-on-year in October 2022. Also, the aggregate
banking sector credit to the economy increased by 3.53 percent between
August and September 2022, driven more by credit to central government.
Although the current M3 stock remains below the provisional benchmark set for
2022, it may however pose additional barriers to combating the inflationary
pressures.
The domestic financial sector is still resilient at the time of this meeting except
for observed volatilities in the stock market. The banking sector indicators are
robust, similar to the position at the last MPC meeting, with non-performing loans
ratio declining further from 4.9 percent to 4.8 percent in October 2022 and with
further increases in total assets. Of particular interest is the addition of above
one trillion Naira in total industry deposits between September and October
2022. Of marginal concern, is the consistent decline in the capital adequacy
ratio of the banks between June and October 2022, but this is attributed to
increases in total risk-weighted assets, which for some time has been higher
than the total qualifying capital. However, the fact that deposit money banks

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still maintain high levels of capital and loan loss provision partly addresses this
concern. The challenges in the equity market are still there as it remains bearish
with performance perhaps sensitive to recent portfolio rebalancing behaviour
by investors. CBN staff report shows that the All Share Index decreased by 12.03
percent between August and October 2022, and market capitalization also
decreased by 11.17 percent during the same period. In terms of the foreign
exchange market, the US dollar has remained strong with the heightened
global market uncertainty intensifying depreciatory pressures on all currencies
globally including the Nigerian naira. At the official I&E foreign exchange
market, the naira depreciated by 0.94 percent against the dollar between July
and August 2022 but depreciated further by 1.47 percent between September
and October 2022.
The external sector is now looking resilient with reduced balance of payments
pressures compared with the position in 2021. CBN staff report shows that in the
second quarter of 2022, the balance of payments recorded a surplus
equivalent to about 0.08 percent of GDP and this emanated from the current
account balance which has now recorded a positive surplus for a fifth
consecutive quarter. The recent drop in external reserves is, however, linked to
the decline in oil exports even at a time of higher oil prices. Interestingly, the
publicised reduction in oil thefts across the Niger delta and the rising prospects
of increased overseas remittances would likely boost the gross external reserves
to a large extent in early 2023.
The domestic fiscal risk remains elevated on the back of an unimproving
government revenue position, which is similar to the situation during the last
MPC meeting. With considerable increases in government expenditure in the
midst of low revenue as at September 2022, the overall debt stock keeps
ballooning. As at September 2022, the country’s total debt as reported by the
Debt Management Office had reached over forty-four trillion naira with debt
servicing costs also at alarming levels. Clearly, attempts at limiting the size of
the fiscal deficit through some expenditure wisdom will certainly rebalance the
risk.

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5. OBADAN, MIKE IDIAHI
As at the time of the Monetary Policy Committee’s meeting, the global
economy and the individual national economies continued to face numerous
challenges which magnified in the context of serious economic and political
shocks, and uncertainties that had been very visible for quite some time. Not
only have the economies experienced weakening growth, they have also
been confronted with notable headwinds. The socio-economic shocks have
adversely impacted global production and growth, trade, inflation, commodity
and financial markets, public debt, exchange rates and their stability, among
others. The negative impacts have continued to elicit strong fiscal and
monetary policy responses with their own implications.
GLOBAL ECONOMIC FEATURES AND THEIR IMPLICATIONS
The global economy has continued to grapple with uncertainties and
vulnerabilities amidst geopolitical tensions. As the Russia-Ukraine war progresses
without abating, geo-political tensions are becoming persistent and
widespread. Consequently, the outlook for the global economy continues to

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be dim as the prospects of complete elimination of the covid-19 pandemic and
ending soon the Russia-Ukraine war remains uncertain.
The global economy has continued to expand but at a slower pace such that
global output is expected to decelerate from 6.1 percent in 2021 to 3.2% in 2022
and further to 2.7% in 2023. The Global Purchasing Managers’ Index has also
shown a downward trend. Global growth/economic recovery is weakened by
several headwinds:
Global supply chain bottlenecks;
Spill-overs from the unending Russian-Ukraine war;
Continued high inflation rates;
Tighter global financial conditions, policy rates/interest rates hikes in
the major economies due to monetary policy normalisation;
Growing public debt;
Zero covid-19 policy/strict covid-19 containment measures in China;
entails lockdown in parts of China with negative implication for supply
chains;
Persistent increase in energy prices and potential energy crisis in Europe
as the winter sets in.
While the disruptions in energy and commodity markets show no signs of
abating, the various headwinds have resulted in energy price shock, historical
inflation rates and dwindling investment in the capital markets of the Emerging
Market and Developing Economies (EMDEs).
Global inflation had escalated in a worrisome manner in several countries
necessitating strong monetary and fiscal responses. Although there are
indications of moderation as a result of the easing of supply disruptions in the
Advanced Economies (AEs), the inflation rates are still very high and worrisome.
Consequently, central banks in the Advanced Economies (AEs) and Emerging
Market and Developing Economies (EMDEs) have prioritised inflation and
continued to hike their monetary policy rates to curtail inflation and anchor
inflation expectations. In response, inflation is expected to recede in 2023.
Global trade position is also worrisome. It slowed in the first half of 2022 as supply
chains remained constrained. From 8.0 percent in 2021, global trade growth is

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expected to slow to 4.1% in 2022 and 3.2% in 2023 due to lower than expected
economic growth, persisting inflationary pressures, interest rate hikes and
tightening global financial conditions, and supply chain disruptions arising from
geopolitical tensions.
The phenomenon of tightened global financial conditions has remained due
to: aggressive policy rate hikes in the AEs and EMDEs to tame inflationary
pressures (the number of central banks hiking rates increased in 2022 as inflation
escalated); and persistent upward trending global inflation even though it
eased in the US and UK. The tight financial conditions have resulted in high levels
of unsustainable debt in many countries.
Weakening of national currencies against the strong USD. The EMDEs are
experiencing capital outflows and loss of external reserves, exacerbating risks,
and threats to growth and financial stability. Specifically, African currencies are
depreciating against the USD due to:
Capital outflows to US dollar-denominated assets as the FED
aggressively hiked interest rates;
Rise in energy prices;
Persistent uncertainty in the global oil and gas industry.
The crude oil market has continued to experience volatility. After peaking in
June, 2022, oil prices moderated as global economic recovery remained
fragile. As at November 18, 2022, the OPEC basket stood at US$ 91.72 pb from
US$ 94.43 pb on November 1. Bonny Light stood at US$ 87.07 pb from US$ 97.73
on November 1, 2022. Even at these relatively high prices, Nigeria was not able
to meet its OPEC quota and benefit maximally because of subsisting domestic
production challenges.
What have emerged from the global context are as follows:
The global economy is currently battling with serious challenges, two of
which are raging inflation rates at historical levels and weak economic
recovery/threats of recession, resulting in policy dilemma for many
countries including the AEs. The point though is that while the AEs have
robust fiscal positions and can use fiscal policy to support growth and

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exit recession/ low growth trajectory while the monetary authority
tackles inflation with rate hikes, most African countries, Nigeria
included, do not have strong fiscal positions and they face serious
policy dilemma. The AEs are at ease to prioritise inflation.

The strong need to effectively tackle the high inflation which is eroding
incomes and pushing people into poverty and threatening growth and
employment.
The need to recognise the multi-dimensional nature of the current
inflation; it derives from both domestic factors and external shocks,
especially the intermittent crisis in the global oil market, covid-19 effects
and geopolitical tensions; hence the need for appropriate policy
responses to complement interest rate hikes.

The need for monetary policy to also support economic growth; in
particular, in African countries which, unlike their AEs counterparts,
could inject trillions of dollars into their economies, lack the resources
to support growth and are consequently burdened by unsustainable
public debts.
THE NIGERIAN ECONOMIC CONTEXT
The economic situation in Nigeria has remained very challenging. The second
quarter growth rate of 3.55 percent, is less than what is desired for the country;
even then, this is now threatened by various headwinds. Credible sources
project much lower rate for the 3rd and 4th quarters. The IMF is reported to have
downgraded the country’s growth rate to 3.0 percent. Domestic growth gives
cause for concern especially in view of unpalatable global developments
including the fears of possible recession.
Nigeria’s measures of inflation –headline, food and core – have continued to
trend upwards, the monetary policy responses so far notwithstanding. The
headline inflation stood at 21.09 percent in October. However, the good news
is the observed decline in the month-on-month measures of inflation from
August to October. Nevertheless, the year-on-year headline inflation rate is still
worrisome. This requires an understanding of the causal factors in formulating
policy responses.

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The causal factors of inflation are not just monetary factors. They include
monetary growth although below the projected benchmarks, imported
inflation, rising production costs, following consistently high energy prices,
foreign exchange insufficiency and the associated naira depreciation,
transport and logistic challenges, impact of insecurity and banditry in the food
producing communities, current flooding in many parts of the country, anticompetition practices and arbitrariness of economic agents in pricing of goods
and services, etc. What these suggest is the need to address the current
inflation with both monetary and non-monetary responses.
The foreign exchange market crisis elicits deep concerns. The crisis derives
fundamentally from the undiversified nature of the economy, low productivity,
exogenous shocks and recently to the brazen activities of unpatriotic citizens
and enterprises. Against the backdrop of serious supply – demand imbalances,
foreign exchange scarcity has persisted in the foreign exchange market while
the naira exchange rate has experienced serious depreciation in recent times.
The Bank’s interventions aimed at boosting foreign exchange supply are
significant. But such interventions have tended to be misunderstood in relation
to its primary mandate. And so, the fiscal authority must appreciate its role in
boosting foreign exchange supply with fiscal incentives and also tackling
frontally the unacceptable leakages from the country’s erstwhile major source
of supply of foreign exchange – oil export – which, in recent times, has
produced little in accretion to foreign exchange reserves and naira revenue.
Government’s fiscal deficit has continued on a ballooning trajectory with
unacceptable implications for CBN’s financing and public debt. Fiscal deficit
for the first half of 2022 rose by 59.1 per cent from the projected N2,621.41 billion
to N4,169.64 billion. Consequently, in the first half of 2022, Nigeria's total public
debt stock expanded year-to-date by 8.2 per cent to N42.85 trillion (US$103.3
billion), from N39.56 trillion (US$95.80 billion) recorded in December 2021. The
public debt servicing, by absorbing a very large percentage of government
revenue, has tended to crowd out other desired public expenditures.

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Although as at now, the fiscal capacity of the government to stimulate the
economy and put it on a sustainable growth path is still weak because of
revenue constraints and lack of fiscal buffers, the CBN must do the needful to
protect its primary mandate of ensuring price, monetary and exchange rate
stability which is under serious threat in the face of escalating inflation and
depreciating exchange rate.
OPINION
The Bank, has since May 2022, rightly responded to the inflation challenge, by
sustained implementation of a tight monetary policy which has become tighter
at every meeting of the MPC. But can this address all the triggers of inflation? I
doubt; it can tame demand arising from monetary expansion but not the
inflation arising from other sources. Although the American Nobel laureate and
monetary economist, Milton Friedman, had posited that inflation is everywhere
a monetary phenomenon, he did not envisage the impact of the Nigerian
peculiarities of low productivity of the economy, insecurity and banditry, oil
theft, legacy infrastructure and logistics challenges, undiversified economy and
heavy import dependence, among others. Importantly, we need to be mindful
of the recessionary implications of too much policy tightening; the trade-off in
terms of growth and recession may be significant. Someone may argue that
the fall-outs of the policy measures should not bother the CBN. I believe that it
should.
Importantly, it is not certain how much rate hikes need to be implemented to
tame inflation. Empirical estimates may be helpful but there is no certainty
about it; moreover, there is no one-to-one correspondence between policy
rate hikes and inflation reduction because of the existence of numerous
extenuating factors beyond monetary policy influence.
So, while the monetary policy stance should remain generally tight, policy rate
hike should now be moderately done while a strong appeal is made to the
fiscal authority to complement the Bank’s efforts by implementing necessary

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bold reform measures aimed at addressing insecurity, significantly boosting
revenue and foreign exchange and also ensuring fiscal consolidation.
I therefore vote to raise the policy rate by 100 basis points while leaving the CRR
at its extant level – 32.5 percent.
What the Fiscal Authority needs to do to effectively complement the Monetary
Authority in the fight against inflation and exchange rate instability
1. Avoid actions/measures that tend to undermine monetary policy. In other
words, ensure proper coordination of fiscal policy with monetary policy.
2. Engage in aggressive non-oil revenue mobilisation through innovative
taxes, proper taxation of high income groups and abolishing tax waivers.
3. Undertake fiscal consolidation to prevent the need to accumulate Ways
and Means advances. Fiscal consolidation involves measures to reduce
the fiscal deficits. A thorough review of the public expenditure
programme to eliminate non-critical expenditures is indispensable. Need
to recognise that the economy is in crisis and it requires bold reform
measures.
4. Ensure the functioning of the country’s four refineries to prevent the
spending of very scarce foreign exchange on the importation of refined
petroleum products.
5. Consider deregulation of petroleum product prices (premium motor spirit)
to free the nation from the payment of opaque subsidies and associated
corruption.
6. Effectively address the oil theft challenge in the Niger Delta Region. It will
enhance oil production, export earnings and naira revenue, boost
external reserves and ensure exchange rate stability in the short-term.
If robust fiscal actions are lacking, the burden of adjustment may be solely on
consumption and investment demand through monetary actions. This could
trigger economic contraction and worsen poverty.
On its part, in addition to the monetary measures and development finance
interventions being implemented, the CBN would need to seriously consider
bold reforms of the foreign exchange market, in particular, the operation of
Foreign Currency Domiciliary Accounts (FCDA) by Individuals. These accounts
have tended to be grossly abused in recent years to the detriment of exchange
rate stability. Exporting firms that maintain FCDAs must be effectively monitored.

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6. OBIORA, KINGSLEY ISITUA
On the basis of persisting negative real interest rates,
recent flooding that might worsen consumer prices,
upcoming year-end festivities, and the need for
consistency and credibility in the fight against inflation,
I voted to raise the Monetary Policy Rate (MPR) to 16.5
per cent from 15.5 per cent, retain the Cash Reserve
Ratio (CRR) to 32.5 per cent, the Liquidity Ratio (LR) at
30.0 per cent and the asymmetric corridor of +100/-700
basis points around the MPR, respectively. I believe this
stance will contain inflationary pressures without
reversing the modest recovery already achieved.

Global output growth continues to hobble amid rising inflationary pressures and
other significant headwinds. These headwinds include rising cost of living
occasioned by broadening inflation pressures, the Russia-Ukraine war with
negative spillovers across the world, tightening of financial conditions, with
increasing borrowing costs for the emerging and developing economies,
China’s zero-COVID policy and the related economic slowdown. The
combination of these shocks continued to weigh on global economic recovery.
Inflationary pressures continue to affect households and businesses across
advanced, and emerging and developing economies. As a result, global
inflation is projected to remain elevated. The lingering impact of the COVID-19
pandemic, the war in Ukraine and China’s zero-COVID policy, are expected to
widen the supply-demand gap, leading to rising food and energy prices. Global
inflation is forecast to increase from 4.7 per cent in 2021 to an estimated 8.8 per
cent in 2022. In Advanced Economies (AEs), inflation is expected to increase by
7.2 per cent in 2022 from an estimated 3.1 per cent in 2021. Also, in Emerging
Market Developing Europe it is forecast to rise from 9.5 per cent in 2021 to 27.8
per cent in 2022. In Sub-Saharan Africa, inflation is expected to increase from
11.1 per cent in 2021 to 14.4 per cent in 2022 (IMF October 2022, World Economic
Outlook). In advanced economies, inflation is currently far above the target rate
of 2.0 per cent set by the Central Banks under the inflation targeting framework.
It is already double digits in the United Kingdom, reaching 11.1 per cent for the
first time in forty (41) years in October and 10.6 per cent in the Euro Area for the
first time since the start of the European Union in October 2022. Although it has

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slightly eased to 7.7 per cent in October from 8.2 per cent in the United States, it
remains far above the target rate of 2.0 per cent.

Central Banks worldwide remain consistent in raising interest rates to contain
inflationary pressures. Several advanced-economy central banks, including the
Bank of England, the Federal Reserve, the Bank of Canada, and Reserve Banks
of Australia, and New Zealand, are raising the policy rates to contain the rising
inflation. In Africa, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South
Africa, Tunisia, and others have increased the policy rates to rein in inflationary
pressures that have become more persistent in these economies. As global
inflation continues to rise, Central Banks worldwide, especially in some emerging
and developing economies must act resolutely to bring it under control. Apart
from the central bank's efforts in containing global inflation, diplomatic solution
is urgently needed to end the war in Ukraine. There is also a need to increase
climate financing in Sub-Saharan Africa to mitigate the adverse effects of
climate change such as floods and droughts. With this, we will be able to avoid
rising food prices and food insecurity in the region where it is projected that 123
million people or 12.0 per cent of sub-Saharan Africa’s population will face
acute food insecurity at the end of 2022 (IMF, Regional Economic Outlook, SubSaharan Africa, October 2022).

Given these, global growth is projected to decline sharply in 2022 compared
with 2021. The J.P. Morgan Global Composite Purchasing Managers Index (PMI)
declined to 49.0 points from 49.6 points, making it the third successive month of
contraction and the lowest since June 2020. It was driven by a decline in new
order inflows, downturns in economic activity and business optimism, a
development that confirms the continued weakening of the global economy.
Consequently, in the October 2022 World Economic Outlook (WEO), the
International Monetary Fund (IMF) projected the global economy to slow down
to 3.2 per cent in 2022 from an estimated 6.1 per cent in 2021. It is, however,
expected to decline further to 2.7 per cent in 2023. This was due to supply chain
disruptions associated with the lingering effect of the COVID-19 pandemic,
soaring inflationary pressures, tightening financial conditions, the Russia-Ukraine
war, and the slowdown in China. As a result of this, in Advanced Economies,
growth in the United States, the United Kingdom, and the Euro area is projected
to slow down to 1.6, 3.6, and 3.1 per cent in 2022 from an estimated 5.7, 7.4, and
5.2 per cent in 2021, respectively. In Emerging Market Economies, China - a
significant driver of the global economy, is expected to slow down to 3.2 per
cent in 2022 from an estimated 8.1 per cent in 2021, reflecting China’s zero policy
on the COVID-19 pandemic and the downturn in the property sector.

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Following the expected spillovers, the Nigerian economy is expected to
moderate slightly in 2022. Official Data from the National Bureau of Statistics
(NBS) revealed that real GDP (year-on-year) grew by 3.54 per cent in Q2 2022
and 3.11 per cent in Q1 2022. It, however, moderated, compared with 5.01 per
cent in the corresponding quarter of 2021, showing a decline of 1.47 percentage
points. The moderate growth was mainly driven by the non-oil sector, especially
services and agricultural sub-sectors. They include Road Transport; Financial
Institutions; Telecommunications, Manufacturing (Food, Beverage & Tobacco)
Trade and Agriculture (Crop Production) which grew by 56.38, 20.06, 7.70, 5.11,
4.51 and 1.54 per cent, respectively. The non-oil sector, however, moderated to
4.77 per cent, compared with 6.08 per cent in Q1 2022, showing a decline of
1.31 percentage points. The oil sector, further contracted for the 9th consecutive
quarter in Q2 2022. It contracted by -11.77 per cent (year-on-year) in Q2 2022,
indicating, however, a moderation in contraction by 14.27 percentage points,
compared with a contraction of -26.04 per cent in Q1 2022. The contraction in
the oil sector has been attributed to the operational issues, increasing oil theft,
pipeline vandalism, and divestments by international oil companies. This
development has adverse implications for Federal Government fiscal space,
accretion to external reserves and exchange rate stability. As a result, IMF
projected the economy to moderate to 3.2 per cent in 2022 from an estimated
3.6 per cent in 2021. However, the Balance of Payment’s (BOP) position
recorded an overall surplus of 0.08 per cent of the GDP in Q2 2022, compared
with a deficit of -2.22 in the corresponding quarter of 2021, driven by an increase
in the current account balance, decrease in the Net Acquisition of Financial
Assets (NFA) and increase in Net Incurrence of Financial Liability (NFL).

The banking system remained sound, safe and resilient to headwinds. The
industry Non-Performing Loan (NPLs) ratio was 4.8 per cent at the end of October
2022, compared with 5.3 per cent at the end of the corresponding period of
2021, which was below the prudential maximum of 5.0 per cent. The decline in
NPLs was attributable to write-offs, restructuring of facilities, Global Standing
Instruction (GSI) and sound credit risk management by banks. Total assets of the
banking industry showed an increase of ₦12.37 trillion or 21.58 per cent from
₦57.30 per cent in October 2021 to ₦69.67 trillion in October 2022, driven largely
by balances with CBN/banks, investments, and credit expansion to the real
sector. As a result, the total flow of credit to the economy increased from ₦23.49
trillion in October 2021 to ₦28.81 trillion in October 2022, representing an increase
of 22.66 per cent to the key sectors of the economy, including Oil and Gas,
Manufacturing, General, Governments and commerce.

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Domestic economic recovery continues to be fraughted by persistent
inflationary pressures. Headline, food, and core inflation (year-on-year)
continued to rise, driven by persisting high energy prices, exchange rate
depreciation, increase in transport and logistics cost, as well as lingering
structural issues, such as flooding, insecurity, inequality, and poverty. Although
inflation on a month-on-month basis has been declining, an indication of the
impact of the Bank's aggressive increase in interest rates, on a year-on-year
basis, it has continued to rise persistently. Headline rose to 21.09 per cent in
October from 20.77 per cent in September 2022, the nineteenth consecutive
month of persistent increase since February 2022, driven by rising food and core
components. Food inflation increased by 23.72 per cent in October from 23.34
per cent in September 2022. The continued rise in food inflation was driven by
farm produce, transportation costs, flooding, the rising cost of fertilizer, and
security challenges in food-producing areas. Core inflation also increased to
17.76 per cent in October from 17.60 per cent in September 2022. driven by the
rise in the prices of processed foods, housing, water, electricity, gas and other
fuel, clothing, footwear, and transport. Amid these soaring inflationary pressures,
the monthly Composite Purchasing Manager Index (PMI) declined to 49.0 index
points in November 2022 from 51.5 points in October 2022, signifying a
contraction in the overall economic activity. Also, the economic recovery is still
fragile, as it is projected to moderate to 3.2 per cent in 2022, partly driven by the
continued oil sector contraction, thereby widening the fiscal deficit amid the
rising cost of borrowing.

Considering all the above factors, both global and domestic, the best course of
action is for the MPC to tighten the policy rate. Because as inflation becomes
more entrenching, it is fast eroding the real income of households and is
detrimental to stable and inclusive growth. The Bank must, therefore, continue
to act decisively to contain it by raising the monetary policy stance. This will not
only help to tame inflationary pressures in the short-to-medium term but also
sustain the recovery, anchor inflation expectations, and minimize the effect of
exchange rate pass-through to domestic prices.

On the basis of persisting negative real interest rate, flooding that might worsen
inflation, festivities and election spending and the need to be consistent and
credible, I vote to raise MPR by 100 basis points.


Increase the Monetary Policy Rate (MPR) from 15.5 percent to 16.5
percent.

Retain the Cash Reserve Ratio (CRR) at 32.5 percent.

Retain the Liquidity Ratio (LR) at 30.0 percent; and

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Retain the asymmetric corridor to +100/–700 basis points around the MPR.


7. OMAMEGBE, MO’
Global Economic Developments

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The global economy currently reflects a bleak outlook with rising financial and
geo-political uncertainties.1 According to the International Monetary Fund’s
World Economic Outlook (October 2022), the world is in a volatile period and is
growing more slowly. Three critical forces - the Russian Ukrainian war,
broadening inflation pressures, and the slowdown in China - continue to impact
the world economy. 2 The IMF forecast that global growth will decline by more
than a third from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in
2023.3 The IMF also believe that there are gloomier days ahead, and for many
people 2023 will feel like a recession.4

The war in Europe and related events is amplifying upward pressure on inflation
and pushing up global food prices. In addition, the war has created an energy
crisis raising gas prices in Europe more than four-fold since 2021. Russia deliveries
are now down to less than 20 percent of their 2021 levels increasing the
prospect of energy shortages over the next winter and beyond.5

China’s “dynamic-zero” COVID-19 policy and the frequent lockdowns,
especially in the second quarter of 2022 as well as the crisis in its property sector
are taking a toll on the Chinese economy with significant consequences for
global supply chains, global trade and economic activity. Currently, COVID-19
case numbers are on the rise in the cities of Guangzhou, Beijing, Shanghai and
Chongqing. Several airports across China have cancelled majority of their
flights. 6

1 UN (2022), World Economic Situation and Prospects: September 2022 Briefing, No. 164, p.1

content/uploads/sites/45/publication/Monthly_Briefing_164.pdf

2 IMF(2022) World Economic Outlook, October 2022, Washington, International Monetary Fund , p.xiii,
Foreword
by
Pierre-Olivier
Gourinchas,
Economic
Counsellor.


3 IMF, World Economic Outlook, Executive summary, p.xvi

4 IMF, World Economic Outlook, Foreword, p.xiii

5 IMF, World Economic Outlook, Foreword, p.xiii
6Global Times (2022) Beijing, Guangzhou airports see large-scale flight cancellations amid surge in COVID19 cases nationwide

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The October 2022 edition of the IMF’s Global stability report, observed that the
world economy is experiencing stubbornly high inflation, a challenge it has not
faced for decades. Inflation in advanced economies reached rates last seen
since 1982; however, the most severe impact on human health and living
standards is in lower-income groups in developing economies where up to half
of household consumption expenditure is on food.7 Global inflation is forecast
by the IMF to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline
to 6.5 percent in 2023 and to 4.1 percent by 2024. 8

The growing fears and prospect of a global economic recession pushed
International Crude prices to roughly $80 a barrel from more than $120 in early
June.9 However, in October, OPEC and non-OPEC partners agreed to impose
deep output cuts by 2 million barrels per day to shore up prices, seeking to spur
a recovery in oil prices.10

Soaring Inflation has prompted rapid monetary policy tightening as Central Banks across the globe focused on restoring price stability,
and the pace of tightening has accelerated sharply. Countries are feeling the impact from the dollar’s appreciation to multidecade highs fueled by the Federal Reserve’s aggressive tightening cycle, the strong dollar is pushing up the cost of
imported goods, constricting financial conditions and feeding inflation in other economies. 11

Domestic Economy

IMF
(2022),
Global
financial
stability
report,
p.19


8 IMF, World Economic Outlook, Executive summary, xvi

9 Sam Meredith (2022) OPEC+ to cut oil production by 2 million barrels per day to shore up prices,
defying U.S. pressure, p.1

prices.html#:~:text=Crude%20prices%20have%20fallen%20to,of%20a%20global%20economic%20recession
.

10 Meredith, OPEC+ to cut oil production by 2 million barrels per day to shore up prices, defying U.S.
pressure, p.1

11 Enda Curran and Garfield Reynolds (2022). Dollar Pain Spreads From Emerging Markets to Developed
Economies
economies/

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Consumer price inflation12, on a year-on-year basis rose to 21.09% in October
2022. This is 5.09% points higher compared to the rate recorded in October 2021,
at 15.99%. On a month-on-month basis, the Headline inflation rate for October
2022 was 1.24%, this was 0.11% lower than the rate recorded in September 2022
(1.36%). The percentage change in the average CPI for the twelve months
ending October 2022 over the average of the CPI for the previous twelve
months period was 17.86%, showing a 0.91% increase compared to the 16.96%
recorded in October 2021.
Nigeria ranked 103rd in 2022 global hunger index according to the 2022 global
hunger index (GHI) report. 13 The severity of hunger in Nigeria is said to be
‘serious’ having scored 27.3. The report also stated that 12.7 percent of Nigeria’s
population is undernourished. Sixty-three percent of people—133 million—are
multi-dimensionally poor.14
The ongoing rising inflation pushed Nigeria’s consumption expenditure to
N57.08tn in the first half of 2022 according to the ‘Nigerian Gross Domestic
Product Report (Expenditure and Income Approach)15 by the National Bureau
of Statistics16. This represent a 14.39 per cent increase from the N49.89tn in the
corresponding period of 2021.
According to data from the Nigerian Upstream Petroleum Regulatory
Commission, in October 2022, Nigeria’s oil production recorded an increase to
1.014 mbpd. For the first time since June 2022 the country’s oil production
averaged 1,014,485 barrels per day last month indicating an increase of 8.18%
compared to the September figures of 937,766 barrels per day. According to
data from the monthly oil market report from the Organization of Petroleum

12 NBS(2022) CPI and Inflation Report October 2022

13 GHI(2022) Nigeria : Global Hunger Index

14 NBS(2022) Nigeria Multidimensional Poverty Index (2022)

15 NBS(2022) Nigerian Gross Domestic Product Report (Expenditure and Income Approach) (Q1, Q2 2022)


16NBS(2022) Nigerian Gross Domestic Product Q3 2022

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Exporting Countries (OPEC) Nigeria is Africa’s third-largest crude oil producer for
October 2022 after Algeria and Angola.17

Fitch Ratings downgraded Nigeria's Long-Term Foreign-Currency Issuer Default
Rating (IDR) to 'B-' from 'B'. According to Fitch, the Outlook is Stable and the
downgrade to 'B-' reflects continued deterioration in Nigeria's government debt
servicing costs and external liquidity despite high international crude oil prices
this year. Nigeria’s dwindling and low oil production in addition to an
unsustainable and costly subsidy on petrol used up most of the fiscal benefit of
high oil prices in 2022 and will continue to stress already low government revenue
levels.

Nigerian Capital Market
The Nigerian Capital Market Master Plan (2021-2025) 18
Nigeria in the last decade has firmly emerged as one of the leading frontier
markets in Africa with immense potential for significant growth. The aspiration
of the Government to create opportunities for the private sector to be a major
engine of growth that guarantees improvement in the welfare and standard of
living of the citizens of our country has been diligently articulated in Nigeria’s
Medium-Term National Development Plan (MTNDP) 2021-2025. The MTNDP
emphasizes development of a deep, broadened and competitive financial
system that is better positioned to support private sector growth and economic
diversification.
Capital Markets provide a useful means to mobilize capital and harness
economic interests in an efficient manner to drive innovation and growth. The
last decade has been characterized by significant volatility in the global

17 Omono Okonkwo (2022), Nigeria maintains position as Africa’s third largest crude oil producer for October 2022

largest-crude-oil-producer-for-october2022?idU=1&utm_source=newsletter_145&utm_medium=email&utm_campaign=the-latest-on-african-markets-

18The Revised Capital Market Master Plan (2021-2025)

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financial system caused by various economic and health shocks. At the same
time innovative technologies have significantly disrupted how markets operate.
The Revised Capital Market Master Plan 2021-2025 (RCMMP), developed by the
Securities and Exchange Commission (SEC) Nigeria in collaboration with
stakeholders, captures the challenges of our capital market in actualizing its
role to drive national economic growth and more importantly, provides a
blueprint to harness these opportunities to better position the capital market as
the engine of our economic growth and development.
The first five years of the original Capital Market Master Plan 2015-2025 (CMMP)
implementation focused on market and governance reforms in the aftermath
of the global financial crises of 2008 and the Nigerian market correction that
continued into 2009, with significant success. During that period, stock
certificates were dematerialized, dividend management was automated,
corporate governance standards were improved, intermediaries were
strengthened through revised capital requirements and risk based supervision,
amongst several other initiatives implemented under the CMMP.
Today, we face new challenges and opportunities. The pursuit of innovation
and growth requires that we are open to opportunities and risks. Our choices
are limited if we only seek opportunities within our traditional boundaries.
Similarly, we inhibit our ability to grow if we do not curtail the threats of
unregulated risk taking. Promoting entrepreneurial and innovative outcomes,
therefore, requires balancing our openness and more appetite for risk-taking
with the critical need to protect investors. It is important to contextualize our
aspirations within the fundamental objectives of market integrity and investor
protection while pursuing economic growth. The RCCMP has provided a
framework and outlined strategic initiatives that will help embrace and unlock
these opportunities in our capital market.
The Securities and Exchange Commission and market stakeholders recently
launched the Revised Capital Market Master Plan. The diligent implementation
of the strategic initiatives in the plan will help better position the capital market

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to take advantage of opportunities the market presents to catalyze our
country’s economic growth and development.

Overall Consideration
Inflation has continued to rise both domestically and globally. The economies of China, United States and Europe are projected to slow
in the coming quarters and consequently growth in the rest of the world and emerging markets will slow as well. The response in most
countries to rising and persistent inflation has been to calibrate monetary policy to maintain price stability.
Policy trade-offs to address the cost-of-living crisis emanating from sustained
inflationary pressures have become acutely challenging. The risk of monetary,
fiscal, or financial policy mis-calibration has risen sharply. There is also the risk of
both under and over tightening to reduce inflation. Under-tightening would
further entrench inflation and de-anchor inflation expectations. On the other
hand, over-tightening risks pushing the economy into an unnecessarily
prolonged and harsh recession. Financial markets may also struggle to cope
with an overly rapid pace of tightening as evidenced in international capital
markets getting more expensive resulting in capital flight from emerging and
frontier economies.

On the domestic front, we have seen growing fiscal deficits, projected growth
in public debt and debt servicing obligations and oil production fallen to
historically low levels. It is critical for the fiscal authorities to continue to seek
viable ways to address the root causes of these challenges and take
advantage of opportunities to mitigate the effects.
Inflation continues to take a toll on Nigerians – food prices remain very high
(food inflation at 23.72% yoy) and combined with persistent high energy prices
pose an important threat to current and future prosperity by squeezing real
incomes and undermining macroeconomic stability. By reducing citizens real
incomes and driving up costs for firms, inflation continues to dampen spending
and production.

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The importance and effect of deploying a strong monetary policy response in
curtailing price pressures is well established. Consequently, in response to
significant ongoing inflationary pressures, the monetary policy committee has
maintained a tight stance. It is very critical not to prematurely take the foot off
the pedal at this time and for monetary policy to stay the course of tightening
to restore price stability, alleviate the cost-of-living pressures and guard against
the risk of a persistent upward shift in inflation expectations.

My Policy Decisions
I therefore vote to:

Raise MPR by 100 basis points to 16.50 percent;
Retain the Asymmetric Corridor of +100/-700 basis points around the MPR;
Retain the CRR at 32.5 percent;
Retain the Liquidity Ratio at 30 percent.


8. SALISU, MOHAMMED ADAYA
Global Developments and Economic Outlook

The global economic recovery has continued to be adversely affected by high
and rising inflation, the Russian war in Ukraine, ongoing energy crisis in Europe,
continued policy rate hikes in major economies, and supply chain disruptions in
China due to its zero Covid policy that is impacting negatively on
manufacturing output. These and other related factors could further slowdown
the pace of economic recovery in both Advanced Economies (AEs) and
Emerging Market and Developing Economies (EMDEs). This had prompted the
International Monetary Fund (IMF) on several occasions to revise down its global

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output growth forecasts for 2022 and 2023, with the forecasts for both years now
put at 3.2 per cent and 2.7 per cent respectively.

The disruptions to the global economic recovery have also continued to impact
negatively on global output gap (difference between actual and potential
output growth). According to the Central Bank of Nigeria (CBN) staff report,
output gaps in the AEs and EMDEs are expected to widen in the short term.

It is not surprising to note that the slow global economic recovery is mirrored by
the purchasing managers index (PMI) score. For three consecutive months to
October 2022, the composite PMI remained below the 50 basis points – a mark
that separates economic expansion from contraction. Analysts have suggested
that the global composite PMI, at 49 points, reflected a dip in business optimism
to a 28-month low on the back of rising global social, economic, and political
pressures.

The aggregate global output performance, however, exhibits considerable
variation across regions. For instance, a quarterly analysis of output growth
shows that the US economy expanded in Q3, 2022 after a contraction in the
first half of the year. This was largely driven by an increase in both trade balance
and non-residential investments. In contrast, the UK economy contracted by
0.2 percent in Q3 2022, largely driven by rising energy and food prices as well
as hikes in policy rate by the Bank of England. In the Euro area, output growth
in Q3, 2022 was positive but slower than in the preceding quarter. The sustained
positive economic growth in the Eurozone was majorly driven by an increase in
tourism and leisure-related sectors despite the negative impact of the rising
energy prices on output. In Japan, output growth in Q3, 2022 was positive on
account of an increase in trade balance and improvement in business
sentiment. However, economic recovery there is still adjudged to be fragile.

The data outside the AEs also provided mixed results. For instance, in China,
output expanded by nearly 4 percent in Q3 2022 following a contraction of

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2.7% in Q2 2022. This was driven by the introduction of new policies and stimulus
packages by the Chinese government and a rebound in economic activities
due to easing of lockdown measures. In India, however, output contracted by
1.4 percent in Q2 2022 due to high and rising energy prices which impacted
negatively on the transportation and manufacturing sectors. Similarly, output in
South Africa contracted significantly in Q2 2022 due to declines in the outputs
of the manufacturing, mining, quarrying, and agriculture sectors.

Global inflation remained elevated across AEs and EMDEs owing to a number
of factors, including pressures from elevated food and energy prices, rising
wages, and lingering COVID-19 pandemic that has caused supply chain
disruptions especially in China with a zero Covid policy. Global inflation is,
however, predicted to decelerate in 2023 as the monetary policy tightening by
central banks across the world begins to rein inflation and the slower economic
growth starts to dampen demand. It is noteworthy, however, that high energy
and food prices still pose significant upside risks to global inflation. Thus, inflation
in EMDES in particular is likely to remain elevated due to additional reasons such
as declining capital inflows, exchange rate volatility and structural issues.

Domestic Developments
As at the November MPC meeting, the Q3 2022 GDP data were yet to be
released by the National Bureau of Statistics (NBS). However, the data for the
Second Quarter showed that output grew by 3.54 per cent (year-on-year) and
by 5.01 per cent in the corresponding period of 2021. The economy has
sustained positive output growth for seven consecutive quarters since it exited
from recession in 2020. The consistent growth performance was largely driven
by the non-oil sector, especially Services and the Agricultural sectors. In
contrast, the oil sector contracted by 11.77 per cent in Q2, 2022, due to several
factors, including crude oil theft and other production challenges that currently
prevent Nigeria from meeting its own OPEC output quota. The challenges in the
oil and non-oil sectors pose real threats to economic recovery, but projections

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by several Institutions including the IMF, CBN, and the NBS suggest that the
economy is expected to remain on a path of sustained growth in 2022.

Despite the continuous growth in real GDP and optimistic output growth
forecasts, Nigeria is still faced with a persistent rise in inflation over the past nine
months. For instance, headline inflation (year-on-year) rose to 21.09 per cent in
October 2022 from 20.77 per cent in September 2022. On a month-on-month
basis, however, headline inflation decelerated to 1.24 per cent in October 2022,
from 1.36 per cent in the preceding month, an indication that inflation is
responding to the recent policy rate hikes by the CBN’s Monetary Policy
Committee (MPC). Some of the factors that contributed to the persistent rise in
inflation include the continuous rise in energy and food prices, insecurity,
incessant flooding, rural road infrastructure deficits, supply chain disruptions,
post-harvest losses and imported inflation pass-through. The rise in energy
prices, for instance, has resulted in a sharp rise in the cost of transportation,
logistics and manufacturing, which in turn fed into consumer prices. The
insecurity situations in the country have curtailed farming activities which,
together with the perennial flooding in major food producing areas, have
caused food scarcity, thereby resulting in high food prices. Inflation in the
country is also caused by rapid growth in monetary aggregates, resulting in too
much money chasing few goods. A presentation by CBN staff showed that
broad money supply (M3) grew by 13.80 per cent in October 2022 (year-todate), compared with 11.00 per cent in September 2022. This growth was driven
by increased claims on ‘Other Sectors’ (consisting of other financial
corporations, public non-financial corporations, and private sector).

Policy Decision
Despite increases in the Monetary Policy Rate (MPR) in recent months, the gap
between inflation rate and the policy rate as at end of October 2022 was 559
basis points, indicating that there is still a room for monetary policy tightening.
Although hiking the policy rate may help to tame inflation from the demand
side, it could also dent output growth from the supply side. This calls for a

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delicate balancing act in achieving price and output growth objectives. It is
also noteworthy that factors outside the monetary environment play a key role
in influencing the performance of the economy. Addressing these factors to
complement the actions by the monetary authorities would help tackle inflation
and boost economic growth. However, given the challenges that are facing
the fiscal authorities, the CBN will have to continue to do whatever it takes
within its powers to curb inflation in Nigeria. Thus, the monetary authorities
should continue to use all the monetary policy tools at its disposal to tackle the
inflationary pressures in the country.

In view of the foregoing, there is room for hiking the policy rate to narrow the
gap between it and the inflation rate and I support the decision to raise the
rate by a sizeable margin.

Accordingly, I voted to:
Raise the MPR by 100 basis points to 16.5%
Retain the CRR at 32.5%
Retain the Asymmetric Corridor at +100/-700 basis points around the MPR
Retain the Liquidity Ratio at 30.0%

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9. SANUSI, ALIYU RAFINDADI
1.0
Decision
I voted to tighten the monetary policy stance, which I believe is necessary to
rein in inflation and ease the pressure on the foreign exchange market. I am
convinced that, although the month-on-month inflation has begun to
moderate and the rate of rise in the headline inflation decelerated, the
expected increase in spending for Christmas celebrations and electioneering
campaigns could be significant sources of inflationary pressure. Additionally,
the monetary policy normalisation in the Advanced Economies, which
continues to raise real yield, requires domestic policy to focus on mitigating the
foreign exchange market pressure from the impending capital flow reversals.
However, because of the rising domestic public debt and fragile output growth,
especially as the fear of another global recession thickens, the monetary policy
environment should not be over-tightened. On the balance of these concerns,
therefore, I vote to raise the Monetary Policy Rate (MPR) only marginally for its
signalling effects and to tame the inflation expectations further.
2.0
Background and Justification
2.1
Global Economic Development
The global economy continues to grapple with high inflation amidst weak
output recovery as a result of the Russia -Ukraine war, continues disruption of
the global supply chain due to the re-introduction of COVID-19 containment

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measures in major Chinese industrial cities, rising global debt levels as well as
the synchronised policy responses of the major central banks.
Global economic developments continue to be shaped by the lingering
consequences of the Russia-Ukraine war, the COVID-19 resurgence in China,
rising global debt levels and monetary policy normalisation. Consequently,
global inflation remained significantly high amidst the continued weakening of
global output, threatening another episode of recession.
The Russia-Ukraine war has caused significant disruptions to the global
commodity supply chain, especially in food and energy, raising inflation across
Advanced Economies (AEs) and Emerging Markets and Developing Economies
(EMDEs). With no signs of abating, the energy supply disruptions in Europe during
the high winter demand for energy further threaten global output and inflation.
Although the COVID-19 pandemic has slowed in most countries, its resurgence
in some Chinese cities has necessitated the re-introduction of lockdown
measures in some major industrial cities, further disrupting the global supply
chain, especially of manufactured goods. This disruption continued to slow
down the global output recovery. In addition, the tightening global financial
condition flowing with the aggressive pace of policy normalisation by most
central banks in AEs and EMDEs amidst mounting global corporate and public
debt portfolios has continued to increase the risk of another global financial
meltdown. Consequently, the IMF has further downgraded its global output
growth forecast for 2023 to 2.7% from 3.2% in 2022. In the Advanced Economies
(AEs), output growth is similarly forecasted to decline progressively from the 5.2%
achieved in 2021 to 2.4% in 2022 and 1.1% in 2023. In the EMDEs, output growth
is projected to slow down from the 6.6% achieved in 2021 to 3.7% flat in 2022
and 2023. Q-o-Q output in the US has expanded by 2.6% in Q3 2022, following
the second quarterly contraction of -0.6% in 2022Q2. Output in the UK economy
is also forecasted to contract by -0.4% in 2022Q3 compared to 0.2% in 2022Q1
due to a rise in energy and food prices and interest rate hikes. Output in the
Euro area and Japan has also declined in Q3 2022. In the EMDEs, Q-o-Q output
has increased in China, Russia and Nigeria, but fell in India and South Africa in

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Q3 2022. The composite Global PMI of JP Morgan also indicated a decrease in
economic activity in October 2022 to 49.0 from 49.6 in September 2022. Both
the Global Manufacturing and Global Services components of the PMI also
declined, suggesting global output contraction.
Since reaching a peak in June 2022, international oil prices have moderated as
the global economy has remained fragile. Consequently, OPEC+ has agreed
to cut production by 2 million barrels per day to reduce global inventory. By 18th
November, 2022, OPEC Basket has declined to $91.72/b from $94.43/b on 1st
November, 2022. Global demand is forecasted to grow from 99.52 million
barrels per day in 2022 to 101.49 million barrels per day in 2023, while the supply
is expected to average 101.28 million barrels per day in 2023.
Global inflation has remained elevated and significantly well above the longterm targets in most AEs and EMDEs due to pressures in global food and energy
prices, rising wages and disrupted manufacturing supply chain due to COVID19 lockdown in major Chinese industrial cities. However, global inflation is
expected to recede in 2023 due to the ongoing synchronised monetary policy
tightening across AEs and EMDEs. Inflation in the US has continued to ease since
July 2023. Inflation in the Advanced Economies is forecasted to rise to 7.5% in
2022 from 4.9% in 2021 but will decline to 3.1% in 2023. In the EMDEs, inflation is
forecasted to rise to 10.9% in 2022 from 6.2% in 2021. In 2023, it is expected to
decline to 6.1%. As of October 2022, year-on-year inflation has declined in
China (2.1%), India (6.77%), and South Africa (7.30%) but increased in Ghana
(40.4%), Egypt (16.2%) and Nigeria (21.09).
In response to the inflationary pressures, Central Banks in both AEs and EMDEs
have aggressively raised their rates. The Bank of England has increased its repo
rate by 75 basis points to 3.00% in November 2022. The US Fed has also raised its
rate to 3.75 -4.00%. The ECB also raised its rate by 75 basis points to 2.00% in
October. In the EMDEs, Ghana, Egypt, South Africa, and Indonesia have
similarly raised their rates. The monetary tightening in the EMDEs is in response
to their rising inflation and anticipated capital outflows associated with rising

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yields in the major advanced economies. Consequently, net capital flows to
EMDEs were positive in August (US$27 billion) and October (US$9.2 billion) but
negative in September 2022 (- US$2.9 billion).
These global developments have important implications on the domestic
economy, including, for instance, rising imported inflation, tougher external
borrowing conditions, higher debt service payments, and higher pressure on
foreign exchange reserves and the foreign exchange market.
2.2
Domestic Economic Developments and their Implications
The NBS shows that the domestic output grew by 3.54% (y-o-Y) in Q2 2022
compared with 3.11% in Q1 2022. The Output growth was driven by the non-oil
sector, particularly Services, Agriculture and Manufacturing. This is the seventh
consecutive positive output growth since the last recession in 2020, despite the
contraction in the oil sector GDP for nine successive quarters because of oil
theft and pipeline vandalism. The oil production problems have continued to
deprive Nigeria of the opportunity to build external reserves and plug the
widening fiscal gap that has continued to raise deficits and public debt. Output
is forecasted to grow between 2.36% and 3.30% in 2022.
Data from the NBS shows that domestic headline inflation has risen (year-onyear) from 20.77% in September 2022 to 21.09% in October 2022, representing a
33-basis points increase. Food inflation increased from 23.32% in September to
23.72% in October 2022, representing a 33-basis points increase. The Core
Inflation increased by 16 basis points from 17.6% in September to 17.76% in
October 2022. These increases are significantly smaller than the previous,
suggesting that inflation may be decelerating. This evidence of slowing down
inflation is shown by the month-on-month decline in all the measures of inflation.
Headline inflation, for instance, declined from 1.36% in September to 1.24% in
October 2022. Food and Core inflation declined similarly by 20 and 66 basis
points, respectively, between September and October 2022. The relatively
higher deceleration of the Core inflation suggests that inflation may indeed be
responding to the aggressive monetary tightening. The widespread, large-scale

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flooding across the federation may have also reduced the dampening effect
of the harvest season on food inflation as over 146,734 hectares of farmlands
spread across 370 Local Government Areas in the 36 States and FCT were
destroyed. The Staff estimates from surveys show that in October and
November 2022, expected inflation was significantly lower than forecasted.
Developments in the monetary sector show that broad money (M3) grew by
13.8% in October 2022 compared to 11% in September 2022. The annualised
growth rate in September was 16.56%, which was greater than the provisional
benchmark of 15% for 2022. The rise in M3 was driven by the rise in claims on
government, which was 63.87% in October 2022 and significantly above the
11.4% benchmark for the year. The roles of monetary and fiscal factors in the
current inflationary processes may be important. Staff forecasts show that
headline inflation would increase from 21.09% in October 2022 to 21.29% in
November 2022.
The banking system stability report shows that the Capital Adequacy Ratio has
remained above the regulatory minimum at 13.4% as of October 2022. The NonPerforming Loan (NPL) ratio was 4.8%, below the regulatory maximum of 5%. The
industry’s total credit to the economy has increased by N5.32 trillion or 22.66%
between October 2021 and October 2022. Gross industry credit, which stood
at N28.81 trillion in August 2022, has risen steadily since 2019, largely due to the
Bank’s LDR policy.
3.0
The Basis for My Policy Choice
The data on domestic inflation and the staff projections suggest that inflation
may, indeed, have started to respond to the sustained tightening of the policy
stance as indicated by the slower pace of increase in the year-on-year
measures for headline, food and core inflation. It shows that all the month-onmonth measures have declined. However, the expected rise in spending for
Christmas celebrations and electioneering campaigns may add significant
inflationary pressure to the economy. In addition, the widespread flooding that
destroyed farmlands across the country may have exacerbated the supply-

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side pressures and delayed the anticipated decline in inflation. Additionally, the
rising yield in Advanced Economies requires domestic policy to focus on
mitigating the foreign exchange market pressure from the impending capital
flow reversals. In choosing the policy stance, I am convinced that raising the
MPR is the optimal policy choice for reining inflation and mitigating the foreign
exchange pressure. However, given the level of public debt and the concern
about output growth, especially due to the renewed threat of another global
recession, I vote to raise the MPR only by 50 basis points mainly because of its
signalling effects and to tame the inflation expectations further.
Consequently, I voted to:
Raise the MPR by 50 basis points to 16.00 per cent;
Retain the CRR at 32.5 per cent;
Retain the asymmetric corridor at +100/–700 basis points; and
Retain the liquidity ratio at 30.0 per cent.

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10. SHONUBI, FOLASHODUN A.
Global economic activities have remained subdued for most of 2022 on
account of disruptions to trade and production due to prolonged RussiaUkraine crisis, high inflation, and generally tighter financial conditions caused
by general monetary policy normalisation. These developments continued to
exacerbate uncertainties in the global macroeconomic environment,
constituting significant limitations to policy options available to central banks.
This current state of the global economy has not helped the case in emerging
and developing economies, including Nigeria, where the spillovers have
manifested in the form of rising imported inflation, drying capital flows and lower
remittances. At this juncture, the Bank faces the dilemma of assuring itself that
the potency of ongoing monetary policy measures will be far-reaching enough
to moderate the impact of other domestic and external underlying nonmonetary factors, even as other authorities are expected to act decisively to
complement effort of the Bank to address the challenges.

Global and Domestic Economic Developments
Impact of growth in the US and China in the third quarter of 2022 after
contraction in the previous periods was subdued by muted expansion in the
rest of advanced economies. Growth across Emerging and Developing
Economies were generally lower and fragile, including contractions in India
and South Africa. Global growth was thus projected at 3.2 per cent in 2022 by
the International Monetary Fund, reflecting further moderation in the forecasts
for the advanced, emerging market and developing economies, even as
many nations grapple with rising risk of defaulting on obligations arising from
huge buildup of debt stock.

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High inflation has been a major threat to prospects of domestic growth and
macroeconomic stability. General prices continued its upward trend, though it
is slowing down, month-on-month, on account of aggressive actions of the
Bank to curb inflationary pressure. Headline inflation reached 21.09 per cent in
October 2022, reflecting further increase in food and core inflation to 23.72 per
cent and 17.76 per cent, respectively. However, on month-on-month basis
headline inflation slowed to 1.24 per cent in October 2022 from 1.36 per cent in
the previous month. Similarly, food and core inflation decelerated to 1.23 per
cent and 0.93 per cent, respectively, on month-on-month basis.
Against the backdrop of the most recent output data which showed the nonoil sector as the major driver of growth over last 6 quarters, recent widespread
flood and lingering insecurity have heightened the likelihood of a slowdown.
Most hit was the agriculture subsector, which has been a major contributor to
expansion in the non-oil sector. Contractions in the composite and component
PMIs to levels below the 50.0 index point mark in November 2022 portends
slowdown in real economic activities, reflecting impact of a challenging
business environment.
The banking system has remained resilient so far in 2022, even as it continues to
grapple with the effects of a challenging macroeconomic environment on
businesses. Industry non-performing loan ratio was 4.8 per cent in October 2022
below the 5.0 per cent threshold, while industry liquidity ratio was 40.1 per cent,
above the 30.0 per cent minimum level. Of note is the sustained growth in total
industry deposits, credits, and assets, reflecting positive impact of various
measures by the Bank. Industry capital adequacy, though lower at 13.4 per
cent, was above the 10.0 per cent prudential minimum. Significant rise in
domestic claims on private sector and the government has however pushed
annualised growth of major monetary aggregate slightly above the
benchmark for fiscal 2022, highlighting monetary aspect of the drivers of
inflationary pressure.

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Though expenditure and overall deficit moderated over the last two periods,
due mainly to decrease in aspects of recurrent expenditure, government
finance has largely been stressed and less robust for most part of 2022. Overall,
rising deficit and huge debt stock have constituted significant strain on the
capacity of the fiscal authority. The external sector has not fared better either,
as low oil production, dwindling foreign exchange revenue, high import prices
(bills), drying capital and muted remittance flows have become major drags
on external reserve accumulation, precipitating exchange rate pressure.
Overall Considerations and Decision
Whereas the US recorded growth in the third quarter of 2022 after two quarters
of contraction, general lull in the rest of advanced economies, including
probability of a recession in the UK economy, and subdued growth across the
emerging and developing economies, have heightened prospects of a global
recession. Elevated inflation, amidst aggressive monetary policy tightening,
disruptions from the protracted war and slowing trade continued to aggravate
uncertainties in the global macroeconomic environment, thereby weakening
growth prospects.
The actions we have taken so far to curb domestic inflation is not only in tandem
with the trend of monetary policy globally but is also strongly supported by
economic theory. While moderation in month-on-month inflation is a slow
reflection of the positive outcomes of these monetary policy actions, overall
trend in high prices underscores the impact of underlying primary factors,
including recent flood, insecurity, and externalities from ongoing Russia-Ukraine
war, all of which have exacerbated food inflation.
We have done a lot on the supply side through our interventions and the result
can be gleaned from the rising importance of the non-oil sector as a driver of
domestic growth. Impact of exogenous factors is, however, limiting
effectiveness of monetary actions on the real environment. While we must at
this point, pay attention to the transmission mechanism to ensure our actions to
control rising prices do not inadvertently choke aggregate demand and

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output, we cannot afford to relent on our effort to control aggressive rise in
inflation.
Despite the success of CBN actions to control banking system liquidity, the
nature and structure of government finances is another source of liquidity
pressure. This is because as obligations of the government remains huge on one
side, ample government liquidity on the liability side of the Bank contributes to
more pressure on prices as such funds are deployed by the government. This
requires deliberate resolve by fiscal authority to align the structure of its finances
with the overall objective of ensuring optimal liquidity that do not fuel
inflationary pressure.
Clearly, dealing with the primary drivers of the lull in production requires more
than the effort of the monetary authority. While the Bank continues with its
targeted intervention to promote investment for expansion in the productive
sectors, the fiscal authority must take decisive action from different fronts to
improve and ease the constraints to growth. Complementing the effort of the
Bank is now more imperative than ever. Intervention and subsidy by the
government can be strategically targeted at organisations, entities and
processes with assured prospects of future benefits over and above immediate
cost.
On exchange rate, we must continue to juggle our options around demand
management and supply enhancement policy mix, without forgetting that
improving supply is the ultimate solution. Leveraging a model driven approach
to price discovery and keeping an eye on subtle threat of dollarization will be
a good start to embracing the bold adjustment type of approach required at
this time to effectively address the fundamental issues. This of course is not
without regard for the macroeconomic implications but with a focus on the
direction that ensures expected benefits surpasses the costs.
As we consider slowing down without relenting, having regard for the lag in the
manifestation of the full effects of our actions, I am convinced that we must
continue to do all it takes to curb the aggressive rise in inflation.

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I therefore vote to:
Raise the MPR to 16.50 per cent;
Retain the Asymmetric corridor of +100/-700 basis points around the MPR
Retain Cash Reserve Ratio (CRR) at 32.50 per cent; and
Retain Liquidity Ratio at 30.0 per cent.


11. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
With global inflation entrenched at historic heights due to strong energy price
shocks and as elevated domestic inflation impair business confidence and
corrode the purchasing power of households, my policy inclination today is to
further tighten stance to avert inflation trap. Global inflation dynamics reflect
the cost-of-living and energy crises that emanated from the acute supplychain disruptions due to the raging Russian-Ukraine war and the continued
strict Covid-19 restrictions in China. Amidst these developments, the global
economy continued to face significant challenges as intensifying headwinds

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slow growth momentum, worsen global conditions, amplify risks and
uncertainties, and dampen global outlook.
Owing to widespread slowdown in many economies and continued risk of
recession, the IMF has repeatedly downgraded short-term global growth
prospects, as nearly one-third of economies may contract next year. Global
growth was projected at 3.2 percent in 2022 and reduced to 2.7 percent for
2023 even as soaring global inflation remain high for both years. Global growth
is further encumbered by the reactive monetary tightening, especially in key
economies, which have worsened financial market vulnerability and
macroeconomic fragility in EMDEs as capitals flow-out and exchange rates
debilitate.
Tumultuous global economic conditions are impeding Nigeria’s situation even
as the domestic economy continued to withstand external shocks. Though,
domestic outlook remains delicately positive, its prospect is threatened by
global spill-overs, local imbalances, and high inflation. Following the 3.54
percent year-on-year growth in 2022q2 from 3.11 percent in 2022q1, output
growth is expected to consolidate in the remaining quarters of 2022. This is on
the backdrop of the continued robustness of non-oil activities, which grew 4.77
percent in 2022q2 following the 6.70 percent expansion in services and 1.20
percent in agriculture. The strong outcome of the non-oil sector reflected the
continued impact of CBN’s support to critical economic activities. Oil GDP
contracted by a further -11.77 percent due to pervasive production losses,
vandalism and theft. This structure does not only underscore the urgency of
diversifying from oil but, more importantly, buttresses the imperatives of
insulating the economy from unpredictable shocks. The various CBN
interventions to enhance non-oil productivity, aid diversification, ease supply
deficits, and correct domestic imbalances, are buoying economic outlook
and modulating structural inflation.

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Although inflation is beginning to plateau, it remained high and growthinhibiting. Year-on-year headline inflation rose by 0.32pp to 21.09 percent in
October 2022 vis-à-vis the 0.25pp uptick in September, 0.88pp in August,
1.04pp in July and 0.89pp in June, suggesting slowing impetus and falling
expectations following monetary tightening. The reduced pace of increase is
further illustrated by the slowing month-on-month rates from 1.36 percent in
September to 1.24 percent. These outturns reflected the 0.38pp rise in food
inflation to 23.72 percent and 0.16pp in core inflation to 17.76 percent. The
unacceptably high levels of inflation were due to constricting energy prices,
inhibitive infrastructure deficits, widespread flooding, persistent insecurity
issues, and global spill-overs. Short-term projections indicate further descents in
inflation expectations through tighter monetary stance complemented by
targeted interventions to resolve supply rigidities.
Analysis of financial conditions indicated a mixed outcome during the review
period. Monthly weighted average open-buy-back rate rose 4.42pp in
October 2022 to 15.91 percent from 11.49 percent in September, in tandem
with the recent hikes in the monetary policy rate. Monetary aggregates,
however, quickened in October vis-à-vis provisional targets as annualised
broad money growth, at 16.56 percent was 1.35pp above benchmark. The
observed growth was attributable to the substantial overshoot of domestic
claims above programmed benchmark and importantly reflected the
sustained growth of banking system credits to the private sector, consistent
with the CBN policy to finance high-impact sectors. Despite rising private sector
credits and elevated uncertainties, the banking system remained resilient and
stable as NPL ratio (4.81 percent), liquidity ratio (40.14 percent) and CAR (13.39
percent), outperformed their prudential limits. In order to insulate our economy
from adverse external developments, it remains imperative to fortify our
economic base by de-risking the productive sector and diversifying
completely. This is especially as frozen oil receipt impedes the FX market,
shrinking external reserves from US$37.39 billion in September to US$36.87 billion
in October, and abetting exchange rate pressures.

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In my consideration, I note the enormity of the global conditions especially as
the war in Ukraine, the energy and cost-of-living crises, pervasive inflation
upsurge, and the slowdown in China combine to undermine growth outcomes
and outlook. These undercurrents are not expected to relent soon as their longlasting impact permanently dents potential output globally. I note that,
inflation is becoming increasingly entrenched in economies with hitherto low
rates, triggering global monetary tightening which are destabilising FX markets
especially in EMDEs. These global developments hold critical ramifications for
the domestic economy. I note that whilst the Nigerian economy has remained
resilient, its prospects are susceptible to global shocks and domestic
imbalances. Short-term growth output is positive, but inflation expectations
remain unacceptably high.
It is thus imperative to maintain coordinated and decisive policies to tackle
inflation and inflation expectations. I note that the current trajectory of inflation
seems to be flattening reflecting the dampening effect of recent monetary
tightening and other supply-side actions of the CBN. Yet, current level of
inflation is not conducive for growth. Failure to adequately tackle inflation
threats now will entrench it at high levels and detrimentally normalise
expectations. This will harm economic growth in the long-run and depress
potential output while concurrently blunting the efficacy of macroeconomic
policies. Accordingly, I support strong disinflation measures, at this time, in order
to attain price stability conducive to growth. I reiterate that current inflation is
higher-than-desired and needs to be curbed decisively, even as I
acknowledge the attendant GDP loss.
Overall, I note that earlier tightening measures are yielding desired results as
inflation impetus is waning. It is requisite to not reverse course hastily as this
could jeopardise immanent successes. I opt for cautious, practical, and wellbalanced decisions that bring inflation to tolerable levels while optimising
output considerations. Given its depressing effect on household income, I
believe that further tighten is apt to resolutely tame inflation. Thus, I vote to:

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i. Raise the MPR by 100 basis points to 16.50 percent;
ii. Retain the asymmetric corridor at +100/–700 basis points
iii. Retain the CRR at 32.50 percent; and
iv. Retain liquidity ratio at 30.00 percent.

GODWIN I. EMEFIELE, CON
Governor

November 2022