CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 148 OF THE 291ST MEETING OF
THE MONETARY POLICY COMMITTEE HELD ON TUESDAY
23RD, AND WEDNESDAY 24TH MAY, 2023
The Monetary Policy Committee (MPC) met on the 23rd and 24th of May 2023,
confronted with persisting and emerging risks to both the global and domestic
economies. On the global scene, the key risks are the fear of contagion arising
from the US banking crisis; the ongoing Russia – Ukraine war; and growing
tensions between China and the US. In addition to these, the oil market has
remained volatile even as global trade figures continue to decline. In the
domestic economy, the major risks identified include high public debt, high
inflation, declining oil production, and moderate recovery of output growth.
The Committee assessed these developments and the outlook for the rest of
the year.
Eleven (11) members of the Committee attended this meeting.
Global Economic Developments
The Committee deliberated on the key headwinds confronting the recovery of
global growth, including the impact on global trade associated with the RussiaUkraine war; the risk of contagion from the US banking crisis, as investors exercise
caution; and the downside risks from the build-up of hostilities between the US
and China. Output growth recovery has thus, remained moderate in some
countries and subdued in others.
Members noted that despite concerted efforts by the Advanced Economy
central banks, inflation has remained broadly elevated and well above longrun objectives, with consequences for investment spending and the recovery
of output growth. In the Emerging Markets and Developing Economies,
inflationary pressure remains heightened amid several headwinds.

Global financial conditions have continued to tighten as several central banks
maintain their push towards taming inflation. Gold price sustained an uptrend
as investors seek a safe haven asset to hedge against losses in the event of a
broader market downturn, with growing fears of a global financial contagion
associated with the banking crisis in the US and Europe.
Consequently, the International Monetary Fund (IMF), in its April 2023 World
Economic Outlook further downgraded the output growth forecast for 2023 to
2.8 per cent compared with its January forecast of 2.9 per cent. Growth is
however, expected to improve moderately to 3.0 per cent in 2024.

Domestic Economic Developments
According to the National Bureau of Statistics (NBS), Real Gross Domestic
Product (GDP) grew by 2.31 per cent (year-on-year) in the first quarter of 2023,
compared with 3.11 per cent in the corresponding quarter of 2022 and 3.52 per
cent in the preceding quarter. The economy moderated on its current recovery
trajectory, posting positive, albeit lower growth, for the tenth consecutive
quarter, in spite of a multitude of headwinds to its full recovery. The growth
performance was driven largely by the sustained growth in the services and
agricultural sectors; progressive uptrend in economic activities across several
sub-sectors; and sustenance of broad-based support by the Bank in growth
enhancing sectors. Staff projections showed that output growth recovery is
expected to continue reasonably in 2023, given the significant improvements
in the Composite Purchasing Managers’ Index (PMI), which rose to 51.1 index
points in April 2023 from 42.6 index points in March 2023.
The Committee noted the persisting uptick in inflation, as headline inflation
(year-on-year) rose to 22.22 per cent in April 2023 from 22.04 per cent in the
previous month. While this amounted to a moderate increase of 0.18
percentage point. The recent uptick was driven largely by the increase in both
the food and core components, which rose moderately to 24.61 and 20.14 per
cent in April 2023 from 24.45 and 19.86 per cent, respectively, in March 2023.

The lingering insecurity in major food-producing areas; high cost of
transportation driven by rising energy costs; activities of middlemen in the food
distribution channels; as well as the persistence of shocks from legacy
infrastructural bottlenecks, remains major drivers of the inflationary pressure.
The MPC observed that the economy continued to be weighed down by high
import bills, leading to pressure on foreign exchange and resultant increase in
the general price level. The Committee noted that the economy needs to build
up the stock of foreign reserves to act as buffers against shocks. In addition, the
current trend in price development would continue to be monitored by the
Bank with greater collaboration with the fiscal authority, to address the drivers
of inflation.
Broad money supply (M3) in April 2023 grew by 22.11 per cent (annualized),
largely driven by the increase in Net Domestic Assets (NDA). Money market
rates reflected the relatively tight liquidity conditions in the banking system.
Consequently, the monthly weighted average Open Buyback (OBB) and Interbank Call rates increased to 17.05 and 15.80 per cent in April 2023, from 14.07
and 14.75 per cent in March 2023, respectively.
The Committee noted the sustained stability in the banking system, evidenced
by the performance of the Financial Soundness Indicators (FSIs). The Capital
Adequacy Ratio (CAR) stood at 12.8 per cent, Non-Performing Loans (NPLs)
ratio at 4.4 per cent and Liquidity Ratio (LR) at 45.3 per cent, as of April 2023.
The MPC noted the momentary lull in the equities market in the review period
following end-of-year activities by several companies on the Exchange. The AllShare Index (ASI) and Market Capitalization (MC) declined to 52,403.51 and
N28.53 trillion on April 28, 2023, from 55,806.26 and N30.40 trillion on February 28,
respectively.
The Committee, also, noted the moderate decline in the level of gross external
reserves to US$34.91 billion in April 2023, from US$35.14 billion at end-March 2023,

attributable to transactions in the foreign exchange market and largely to
miniscule accretion to reserves from crude oil exports.
The Bank disbursed the sum of ₦25.6 billion under the ₦1.0 trillion Real Sector
Facility to eight (8) new real sector projects in manufacturing packaging,
pharmaceuticals, plastic and cosmetic products. Cumulative disbursements
under the Real Sector Facility currently stands at ₦2.56 trillion disbursed to 462
projects across the country, comprising 257 manufacturing, 95 agriculture, 97
services and 13 mining sector projects.
Under the 100 for 100 Policy on Production and Productivity (PPP), the Bank
disbursed the sum of ₦13.81 billion to three (3) projects in the manufacturing
sector. This brings the cumulative disbursement under the facility to ₦173.31
billion, disbursed to 81 projects comprising 45 manufacturing, 23 agriculture, 5
healthcare, and 8 services sector projects with an estimated 23,343 direct jobs
created.
Under the Nigerian Electricity Market Stabilisation Facility (NEMSF-2) for capital,
and operational expenditure of distribution companies (Discos), the Bank
disbursed ₦11.82 billion to ease liquidity constraints and support the recovery of
legacy debt. Under the scheme so far, the Bank has disbursed a cumulative sum
of ₦254.39 billion.
Outlook
The broad outlook for the full recovery of both the global and domestic
economies remained clouded by legacy and emerging risks.
Available data and forecasts for key macroeconomic indicators in the Nigerian
economy, suggest that the economy will continue on a moderate recovery
path through 2023 as legacy headwinds linger. These include insecurity in food
producing areas; high cost of energy and rising cost of debt servicing.
Accordingly, the economy is forecast to grow in 2023 by 3.03 per cent (CBN),
3.75 per cent (FGN) and 3.29 per cent (IMF).

The Committee’s Considerations
At this meeting, the MPC was concerned that, despite the tight monetary policy
stance adopted since its May 2022 meeting, inflation had not decelerated
towards the Bank’s long run objective. The MPC noted that the continued rise
in headline inflation, albeit moderately, remained the biggest challenge
confronting macroeconomic stability in Nigeria. Headline inflation in the view
of Members, remained high due largely to a host of non-monetary issues outside
the reach of the central bank such as the perennial scarcity of Premium Motor
Spirit (PMS) and expectations of short-term hikes in the pump price of PMS; high
and rising price of various energy sources; and a host of headwinds confronting
the food supply chain. In the circumstance, the Committee enjoined the fiscal
authority to explore other avenues to expand the fiscal safety net in an urgent
bid to improve its ability to respond to legacy and emerging shocks. Non-oil
revenue sources, such as the expansion of the tax bracket, will enable the
reduction of fiscal deficit and public debt to improve fiscal space.
Confronted by these challenges, the Committee tasked the Bank’s Research
and Monetary Policy Departments to evaluate the counterfactual evidence
from available data, using empirical analysis. The results revealed that following
each monetary policy rate hike, the rise in inflation moderated relative to what
it could have been, if the MPC had not aggressively raised rates at all.
In fact, the empirical evidence provided showed that whereas inflation in April
2023 stood at 22.22 per cent, the counterfactual evidence suggests that, it
could have risen to 30.48 per cent in April 2023, had the MPC not taken any
action to raise policy rates as it did since May last year. Indeed, the cumulative
effect of MPC’s policy rate hikes moderated the rise in inflation by about 800
basis points since last year.
The Committee was also concerned that output growth, on a year-on-year
basis dropped to 2.31 per cent during the first quarter of 2023 compared with
3.11 per cent during the first quarter of 2022. The challenge at this meeting,
therefore, centered around whether to hold or loosen, in order to refocus on

growth, or tighten further, in order to tame the rise in inflation. Members were,
however, unanimous that given that rising inflation would hurt growth, it is
imperative to continue to focus on price and monetary stability, though in a less
aggressive manner.
The Committee called on the Management of the Bank to continue to explore
avenues to improve the exchange rate policy to moderate pressure in the
foreign exchange market. Members were optimistic that the continued
progress made with the RT200, Naira-for-dollar and other policies targeted at
attracting trade and diaspora remittances, would continue to support
accretion to reserves and improve liquidity in the foreign exchange market.
While output growth remains on a positive trajectory, the MPC noted the need
for increased monetary and fiscal coordination to support recovery in light of
the identified risks confronting the domestic economy.
Members expressed satisfaction with the banking and financial system stability
indicators presented to the Committee. They, however, noted that the risk of
global financial contagion is yet to dissipate. To this end, Management was
enjoined to maintain strict vigilance to insulate the banking system from
potential spillover effects. So far, the Bank has sustained stringent micro-and
macro prudential measures to ensure that the banking system remains resilient
with adequate buffers to ward-off both external and domestic shocks.
In its consideration as to whether to hold, loosen or tighten, the MPC was of the
view that a hold or loosen option was not desirable at this time given that a
hold may compromise the Bank’s decision to tame the rising inflation,
particularly when its in-house staff estimates have projected that headline
inflation would continue to rise in the immediate months ahead before
decelerating. As to whether to loosen, this option was considered undesirable,
because loosening, in the face of persistently rising headline inflation would
compound the inflationary pressure and trigger further macroeconomic
instability.

The Committee also felt that loosening would further widen the negative real
interest rate margin and worsen domestic financial and money market
conditions: including triggering a naira depreciation.

The Committee’s Decision
In the opinion of the Committee, the key policy dilemma at this meeting was
whether to hold or hike the policy rate marginally to offset the moderate
increase in headline inflation.
Considering the option of a hold policy, the Committee reiterated the empirical
counterfactual evidence of a ‘do-nothing’ and believed that the rate hikes
have indeed helped moderate the continued rise in inflation, albeit, month-onmonth. In addition, the evidence revealed that the policy rate hikes have also
moderated growth in new credit and reduced the pent-up aggregate
demand contributing to the inflationary pressures. Members were unanimous in
their conclusion, that the current policy stance is indeed impacting the
targeted parameters and yielding the expected outcome, although slowly.
Reviewing the argument to further hike the policy rate in a bid to subdue
aggregate demand, Members noted that the current uptrend in inflationary
pressure was driven by a combination of both demand and supply side issues.
The MPC observed the continued upward risk to price development driven
primarily by expectations of rising energy and food prices; unabating security
challenges in food producing areas; as well as persisting exchange rate
pressure. The Committee thus felt it was expedient to continue to address the
demand-side issues falling within the ambit of its policy tools.
The balance of the argument thus leaned sufficiently in favour of a further hike
(albeit less aggressively), considering the adverse impact of rising inflation on
real income. The MPC therefore opted to tighten, though moderately, so as to:
i.
indicate the MPC’s conviction that the current policy stance is
moderating the rising inflation, albeit month-on-month, and sustaining the
stance would consolidate the gains made so far;

ii.
support the efforts toward moderating the demand-pull inflation, as cost
of funds increases, and discourages further build-up in aggregate
demand, in the face of declining output growth;
iii.
narrow the negative real interest rate gap and moderate the associated
consequences, including discouraging domestic savings mobilization and
waning investors confidence;
iv.
effectively moderate the monetary phenomenon in the current drivers of
inflation by tapering both economic and financial conditions and sweepup excess liquidity in the system; and
v.
boost the Bank and Committee’s credibility following its earlier forward
guidance to continue to tighten when confronted with unabated rising
inflation.
Members, thus, resolved by a unanimous vote to raise the Monetary Policy Rate
(MPR), moderately. Ten (10) members voted to raise MPR by 50 basis points and
one (1) member voted to raise the MPR by 25 basis points. All members voted
to keep all other parameters constant.
In summary, the MPC voted to:
I.
Raise the MPR to 18.5 per cent from 18.0 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
24th May 2023

PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD L.
Global output recovery is expected to continue albeit at a slower pace amid
financial market uncertainties sparked by the recent wave of banking system
troubles in the United States and Europe. Because of this and other established
geo-political headwinds like the war in Ukraine, the International Monetary Fund
(IMF) lowered its 2023 world output growth projection in April to 2.8 per cent.
Meanwhile, high inflation continues to be the more urgent macroeconomic
challenge globally. Towards addressing this challenge, most central banks have
embarked on monetary tightening since 2022 despite widespread concerns
about its potential offsetting impact on growth and financial stability. It is
relieving though that some economies have started to see moderation in
inflation on account of policy tightening.
In the domestic economy, the situation is not entirely different. The Monetary
Policy Committee (MPC) has in the past one-year prioritized disinflation by raising
the monetary policy rate (MPR) severally. This has had the effect of slowing the
pace of increase in inflation measured on year-on-year basis. It needs to be
emphasized that the seemingly slower response of the current episode of
inflation to policy adjustment is not entirely unexpected. Compared with the last
episode of high inflation pressure (2016/2017), the shocks that triggered the
current episode were much larger. The pandemic-induced shutdown affected
both economic activity and prices, and thus necessitated a cautious policy
approach in order not to ground the economy. In effect, monetary policy
adjustment took a bit of time to kick-in. In addition, there have been indications
of increased inflation persistence which is also understandable. The economy
was hit simultaneously by both supply and demand shocks of considerably larger
magnitudes. It is my view that this context continues to be important in assessing
the impact of the rate hikes so far, and in the way monetary policy proceeds
broadly in the short- to medium-term.
With headline inflation rising to 22.2 per cent in April 2023, reflecting increases in
both food and core sub-categories, there is a clear sense in which monetary
policy should continue to remain tight. And so, I voted to further raise the
monetary MPR at the May 2023 meeting of MPC. Details of my considerations
are presented subsequently.
First, the short-term outlook for inflation and its major drivers remains unfriendly.
Although the pace of increase has subsided, year-on-year inflation could
continue to rise according to in-house estimates. To ensure that flattening is
quickly achieved to pave the way for deceleration, the stance of monetary

policy needs to be firmer. This is against the backdrop of an uncertain outlook
for fiscal policy, energy prices and wages in the rest of the year. The muchanticipated removal of subsidy on premium motor spirit (PMS) in the second half
of the year contributes significantly to current inflation outlook and therefore,
cannot be ignored. Likewise, the strong possibility of upward adjustment in the
minimum wage cannot be totally discounted. Unless monetary policy remains
tight, these risks could easily crystalize in greater inflation pressure in the rest of
the year.
Second, although much of the impact of the initial shocks to inflation may have
dissipated, inflation expectation has remained significantly elevated. This needs
to change, and quickly so. I believe communication is key in this regard, but
equally important is what the market can see the Bank doing. Raising MPR sends
a clear signal that the MPC is not comfortable with the projected path of
inflation, and therefore continues to be committed to altering that path. I am
persuaded that policy must strive to rein-in inflation expectation as a deserving
complement to effective liquidity management.
Third, economic activity expanded in Q1 2023 by 2. 31 per cent. Although much
lower compared with 3.52 per cent recorded in the preceding quarter, the
decline needs to be viewed against the backdrop of seasonality, the cash
crunch in February/March and tighter monetary conditions. In-house staff
projections suggest a lift in subsequent quarters. Other indicators of economic
activity like the purchasing managers’ indexes (PMIs) lend credence to the
optimism around growth in the coming quarters. Though the volume of new
credit is slowing on account of the prevailing monetary policy direction, the
stock of credit up to May 2023 remained considerable high. In essence, the
outlook for economic activity continues to be positive, offering room for
monetary policy tightening to contain inflation pressures.
Fourth, growth in money supply is yet to be adequately curtailed, at least to the
benchmarks for the year. In addition to tightening the stance monetary policy
to slow credit creation, a fiscal orientation tailored towards reducing public
sector borrowing requirements will be immensely helpful. Among other benefits,
slowing the growth of money supply at this time should contribute to rebuilding
monetary buffers to improve the economy’s resilience against future shocks. It is
in this context that despite posing a risk to inflation, I see the planned removal of
subsidy on PMS as appropriate as it should significantly reduce the need for
monetary accommodation going forward.
Strong exchange rate passthrough to inflation continues to be an important
factor in the current inflation pressure. Exchange rate depreciation fuels

expectation of consumer price increases in the domestic economy. While the
pressure on the naira reflects both supply and demand conditions in the foreign
exchange (FX) market, I believe that policy tightening would dampen the
demand pressure. It could also have a positive impact on autonomous FX supply
as domestic yields improve.
I do appreciate the legitimate concern for financial stability in the event of a
prolonged monetary tightening cycle. However, I see this risk as reasonably
controlled given the resilience of the banking system. At end-April, the major
financial soundness indicators (FSIs) – capital adequacy (12.8 per cent), nonperforming loans ratio (4.4 per cent) and liquidity ratio (45.3 per cent) were within
their prudential thresholds. Industry earnings ratios have also remained
comparatively strong. Nonetheless, there is the need to strengthen
macroprudential buffers. In particular, I see the need to build countercyclical
capital buffers to further improve industry resilience to future shocks.
Overall, I believe that the balance of risks continues to be tilted against price
stability. As such, maintaining a tight monetary policy stance over the short- to
medium- term horizon is ideal. In terms of choice of instrument, my preference
continued to be the MPR at the May 2023 meeting of the Committee. As more
information and assessments become available it might become feasible to
consider other instruments as well.
In summary, I voted to:
1. Raise the MPR by 50 basis points to 18.5 per cent.
2. Retain the asymmetric corridor at +100/-700 basis points around the MPR.
3. Retain the CRR at 32.5 per cent.
4. Retain the Liquidity Ratio at 30 per cent.

2. ADENIKINJU, ADEOLA F.
International Economic Developments
Global economic recovery remains weak because of widespread uncertainties.
The IMF projected global growth to slow down to 2.8% in 2023 from 3.4% in 2022,
but rise to 3.0% in 2024. The factors driving the trend are high level of inflation,
impact of the ongoing Russian Ukrainian war, and unabated rise in interest rates
in both the Advanced Economies (AEs) and the Emerging and Developing
Economies (EMDEs). Global PMI rose by 1.5% between March 2023 and April
2023, driven mainly by services. Global inflation is decelerating and is expected
to decline from 7.3% in 2022 to 4.7% in 2023, and further to 2.6% in 2024. The crude
oil market was soft on fears of a weakening U.S. economy, disagreement over
raising the US debt ceiling among US politicians and slowing Chinese demand.
The state of the crude oil market has direct impact on Nigeria’s economy given
the role of petroleum sector. Between January 31, 2023, and May 19, 2023, price
of crude oil declined from US$86.30/b to US$74.9/b. Most central banks around
the world continue the path of interest rates normalization, albeit at a moderate
pace. Interest rates in those countries are at the highest historical levels. Portfolio
capital flows to emerging markets rose to US$9.8 billion in April 2023 from US$9.4
billion in March 2023 as investors’ enthusiasm for Emerging Market securities
improves. Finally, global debt is expected to remain elevated in 2023 and 2024,
as both the AEs and the EMDEs have ramped up debts to historical levels driven
by legacy debts and slow economic growth.
Domestic Economic Developments
Staff report on the Nigerian Economic Developments and Outlook at the
Meeting showed that real gdp (y-o-y) grew by 3.52% in Q4, 2022. The non-oil
sector grew by 4.27%, while the non-oil sector growth decelerated by -13.38% (yo-y). Overall annual growth for 2022 was 3.10%, down slightly from 3.4% recorded
in 2021. Non-oil sectors of services and agriculture expanded by 6.66% and
1.88%, respectively, while industry contracted by -4.62%. However, quarter on
quarter, real gdp (Q-o-Q) grew by 10.99% in Q4 2022; showed that the non-oil
sector grew by 12.55%, while the oil sector contracted by -14.93%. Information
and Communications contributed 1.57% to the real GDP growth in Q4, 2022,
followed by Trade 0.71% and Crop Production 0.59%. Mining and Quarrying
contributed -0.6%. Oil production decreased to 1.00mbd in April 2023 from
1.27mbd in March 2023 due to pipeline vandalization and technical issues. Oil
price also declined in the world market, further compounding the woes in the
petroleum sector.

PMI expanded in April 2023, after 9 months of contraction. The Industry PMI rose
above the 50.0 benchmark to 51.6 index points in April 2023. Services PMI
increased to 50.9 index points in April 2023 from 42.9 index points in March 2023.
Agriculture PMI increased to 51.4 index points in April 2023 from 43.6 index points
in March 2023. In addition, Industry Employment PMI and Business Expectations
recorded significant improvements. Business expectation rose from -28.9 index
points in March 2023 to 14.57 index points in April 2023.
With respect to price developments, headline inflation increased to 22.22% in
April 2023 from 22.04% in March 2023 due to the impact of elevated transport
costs on production and logistics. Food inflation rose to 24.61% from 24.45% in
March 2023. Core inflation also increased to 20.14% in April 2023 from 19.86% in
March 2023. The increase in core inflation came from processed foods,
education, clothing& footwears, and transport, in that order. Month-on-month,
headline inflation, and food inflation also rose between March 2023 and April
2023, while core inflation declined. Data also showed a marginal increase in
inflation expectations between March 2023 and April 2023. The marginal
increase may also be suggestive of de-anchoring of inflation expectations.
All domestic components of monetary aggregate rose between March 2023
and April 2023. Monetary Base increased from N15.975 trillion to N17.543 trillion
due to increase in currency-in-circulation and reserve requirement. Broad
Money (M3) rose by annualized 22.11% above the 2023 benchmark, between
March 2023 and April 2023. Domestic Claims rose by an annualized 50.28%,
above the 2023 benchmark of 15.78%. Claims on Central Government (net) rose
by annualized value of 112.05% compared with the 2023 benchmark of 19.64%.
However, Net Foreign Assets declined by an annualized value of -77.13%, lower
than the 2023 benchmark of 38.82%. Major sources of net liquidity to the
economy in April 2023 are Net OMO Maturity (N47 billion), FAAC N322 billion, Net
Financing (N443 billion) and Net FGN Operations N813 billion.
Interest rate spread month-on-month narrowed to 23.02% in April 2023. On
average, prime lending, maximum lending and average savings rose between
March and April 2023. Average OBB rate month-on-month rose from 14.07% in
March 2023, to 17.05% in April 2023. In May 2023, relative to April 2023, Nigerian
Treasury Bonds (NTB) rates declined, there was lower recourse to Standing
Lending Facility (SLF) and a decrease in Open Buy Back (OBB) transactions. The
Nigerian Exchange Limited (NGX) recorded a bearish performance between
February 28, 2023, and May 19, 2023. All Share Index (ASI) decreased by 6.48%.
from 55,806.26 on February 28, 2023, to 52,187.93 on May 19, 2023.

The external account recorded an overall balance of payments deficit position
of US$1.11 billion in Q4, 2022. The goods account recorded a surplus of US$2.8
billion in Q4, 2022. The services sector deficit narrowed by 22.7% to US$3.13 billion.
Service
payments
for
the
transport,
insurance
&
Pensions
and
Telecommunication sector fell in the review period. The primary income deficit
narrowed by 34% to US$2.26 billion due to a fall in repatriation of dividends.
As of May 17, 2023, the gross external reserves stood at US$35.19 billion. The gross
external reserves position at end-April 2023 could provide 6.46 months cover of
import of goods and services or 8.88 months cover of import of goods.
With regard to the fiscal sector, both the government revenue and expenditure
underperformed in January and February 2023. FG retained revenue stood at
N1,133.53 billion, lower than the pro-rata target of N1,840.85 billion. This was due
to the underperformance of FAAC receipts, Gross independent revenue. In the
same vein, total FGN expenditure as of February 2023, was N2,225.01 billion,
40.63% lower than the budget estimate of N3,637.86 billion. The shortfall came
mainly from allocation for debt service and capital expenditure. Overall budget
deficit reduced by -39.26% in the first two months of 2023. The underperformance
of the budget is especially felt in the capital expenditures, thus impacting
negatively on economic development.
The report on the Banking System Stability Review was presented to members of
the MPC. The financial soundness indicators remain positive and showed that
the banking system remains strong, sound, and resilient. The capital adequacy
ratio (CAR) stood at 12.8% in April 2023, still within the prudential requirement of
between 10% - 15%. Non-performing loans (NPLs) ratio declined from 4.5% in
March 2023 to 4.4% in April 2023. Liquidity ratio (LR) rose to 45.3% in April 2023,
from 43.8% in March 2023. This is above the minimum 30% recommended by the
prudential requirement. Both the Return on Equity (ROE) and Returns on Asset
(ROA) increased between March 2023 and April 2023. ROE rose from 21.6% to
22.6%; while ROA increased from 1.6% to 1.7% between March 2023 and April
2023, respectively. Interest margins to total operating income declined from
58.1% in March 2023 to 50.5% in April 2023. However, operating cost to operating
income declined marginally from 70.6% to 70.5% between March and April 2023.
The high operating cost environment of the banking sector should be addressed.
In other climes, the ratio is 23.5% in Turkey, 50.6% in Brazil, 41.0% in Malaysia, 62.0%
in South Africa, 43.2% in Angola, 35.2% in Egypt, Kenya is 45.2% and Ghana,
46.1%.
Finally, all the measures of banking size, assets, deposits, and credits also rose.
Total Assets of the banking industry grew by N16.65 trillion or 25.88% between

April 2022 and 2023. Industry credit increased by N4.54 trillion or 17.40% between
end April 2022 and end-April 2023. Gross credit has been on an upward
trajectory since 2019. Total industry deposits increased by N8.84 trillion or 21.4%
between the end of April 2022 and April 2023. The stress tests conducted on the
industry show that it can weather the major risks and vulnerabilities in the system.
My Concern
The development in the international market continues to pose a challenge to
the Nigerian economy. The softening of the crude oil market is not a very good
omen, as the sector plays a significant role in export and official foreign
exchange earnings.
The persistent contraction in the Oil-GDP growth in Nigeria should not be
normalized. The oil sector’s contribution to the GDP, government revenue and
foreign reserves have been on the southward trends for the past few quarters.
Declining oil production is also affecting natural gas production and capacity
utilization of the NLNG, Nigeria’s gas flagship company. Hence, the government
should focus on reversing the trend.
The soft fiscal situation of the FGN drives up public debt which rose by 16.92%
between December 2021 and December 2022. This further worsened debt
service payments and increased the rise of debt sustainability. The high debt
service/revenue ratio is a threat to macroeconomic stability and the growth of
the economy. Government should focus on driving up revenue. Removing the
unproductive fuel subsidy should be on top of the list.
The various price distortions in the economy must be addressed to address the
weak output growth of the economy recorded in 2023Q1, the expansion of PMI
in April 2023, after 9 months of contraction is heartening. These figures suggest
that the economy is rebounding from the effects of the Naira redesign Policy.
Finally, there is a need to tackle the stubborn inflation. Data on monetary
aggregates showed clearly that money supply and liquidity growth, both
domestic components of monetary aggregate rose between March 2023 and
April 2023. This is due mainly to unbridled growth in the credit to the government.
This is not sustainable.
My Vote
The MPC needs to sustain its current tight monetary policy stance to dampen
inflationary pressures. This is in addition to other administrative measures by the
Bank to control liquidity in the system. Hence, I cast my vote to increase the

current MPR by 50 basis points and retain other monetary parameters at their
extant values. Hence, I vote to:
1) Raise the MPR to 18.5% from 18.0%
2) Maintain the asymmetry corridor around the MPR at +100/-700 basis
points.
3) Retain the CRR at 32.5%
4) Retain the LR at 30%

3. AHMAD, AISHAH N.
Domestic prices remain sticky requiring sustained policy intervention
At the May 2023 MPC meeting, I voted to raise the monetary policy rate (MPR)
by 50 basis points from 18.0 to 18.5 per cent, whilst keeping all other policy
parameters constant. My decision to sustain the tight monetary policy stance
was guided by data on key domestic macroeconomic indicators, especially
headline inflation which continues to rise to record levels, with an uncertain
outlook.
According to the National Bureau of Statistics (NBS), headline inflation (year-onyear) rose to 22.22 per cent in April 2023 from 22.04 per cent in the previous
month, driven by increases in both food and core components. Food inflation
increased to 24.61 per cent from 24.45 per cent in the same period, while core
inflation rose by 0.28 per centage point to 20.19 per cent in April 2023 – the
highest level since 2004.
Risks to domestic price movements are expected to remain elevated due to
anticipated rise in cost of energy, which could heighten the supply-demand
imbalance and production costs. This development is reflected in staff
projections which show near-term increases in inflation.
In addition, monetary aggregates have maintained an upward trend with
annualized Broad Money Supply (M3) growing by 22.11 per cent in February
2023, rising above the provisional benchmark of 17.18 per cent for 2023, driven
by the increase in Net Domestic Assets. This further validates the hawkish stance
of monetary policy.
Thankfully, previous rate hikes are yielding some results al-beit slowly. Month-onmonth inflation numbers depict a decline in the rate of inflation acceleration
(rate of month-on-month increase in headline inflation declined from 8.6 per
cent in February to 2.9 per cent in March 2023). This position is also buttressed by
counterfactual evidence presented by staff research reports which indicated
that inflation could have risen to 30.48 per cent in April 2023 without the
aggressive rate hikes by the MPC. Thus, further rate hikes are expected to drive
inflation down over the medium term, however, concerted effort is required to
confront the host of headwinds impacting on food supply chain, which also
have pervasive influence on domestic prices.
Lastly, a rate hike is an important counterbalancing signal to curtail the
development of negative inflation expectations, ensuring that the monetary
authority is proactively positioned to curb rising prices.

Sustaining output growth in the face of multiple headwinds
A possible fallout of prolonged contractionary monetary policy is a reversal of
the domestic growth trajectory. Therefore, a cautious and phased program of
policy tightening is recommendable in the current circumstance to preserve
economic activities, whilst reigning in price developments.
Based on data from the NBS, Real Gross Domestic Product (GDP) grew year-onyear by 2.31 per cent in the first quarter of 2023, compared with 3.11 per cent in
the corresponding period of 2022 and 3.52 per cent in the preceding quarter.
This represents the tenth consecutive quarter of real output expansion, following
the economy’s exit from recession in 2020. The output expansion was driven
largely by sustained growth in the services and agricultural sectors; progressive
uptrend in economic activities across several sub-sectors; and sustenance of
broad-based support by the Bank in growth enhancing sectors.
The dip in output performance in the first quarter of 2023 relative to the 2022
position was anticipated. This is reflected in the manufacturing purchasing
manager’s index (PMI), which contracted for three consecutive months in the
first quarter of 2023 before improving to 51.1 index points in April 2023.
Nonetheless, policy decisions that support output expansion, especially
improved banking industry lending to growth enhancing sectors are critical to
forestall derailment of the positive output performance.
Preserving financial system stability amidst tight monetary policy
Sustaining banking sector lending to critical sectors of the economy as monetary
policy tightens to contain inflation, therefore, remains paramount. Given the
positive correlation of market lending rates to the MPR, borrowing costs have
risen, while growth in credit has slowed.
Industry credit increased by N4.54 trillion between end-April 2022 and 2023 with
significant
portions
of
the
credit granted
to
output
elastic
sectors
(manufacturing,
general
commerce,
agriculture,
information
and
communication), and has been in an upward trajectory since 2019, yet the
monthly trend in credit growth declined from 1.31per cent in March 2023 to 0.05
per cent in April 2023. Lending rates also remain high in response to the
contractionary monetary policy stance. These developments point to the
importance of balanced actions in the pursuit of the price stability mandate.
Gratuitously, the CBN’s intervention loans targeted at selected industries and
Small and Medium Enterprises, are currently at single digit to stabilize access to
affordable finance for employment generating sectors. This should be positive

for the macroeconomy, stimulating further output growth and positioning
businesses to maintain strong cash flows, whilst minimising default risk and
preserving financial stability.
Industry soundness indicators also remain strong as of April 2023, with capital
adequacy ratio at 12.8 per cent, non-performing loans ratio at 4.4 per cent (from
5.3 per cent in April 2022) and liquidity ratio at 45.3 per cent (above the 30.0 per
cent minimum) even as credit to the real sector continued to grow.
Stress test results showed that industry solvency and liquidity positions could
withstand mild to moderate shocks in the short to medium term. Nonetheless, the
sector must continue to build adequate capital buffers – ongoing
implementation of the Basel III capital standards (which prescribes additional
capital buffers) are relevant in this regard.
On the global front, economic prospects remain threatened by the fear of
contagion arising from the US banking crisis; the Russia – Ukraine war, growing
tensions between China and the US, and other country specific challenges. In
addition, the oil market has remained volatile even as global trade figures
continue to decline, while emerging market and developing economies
grapple with tightened financial conditions and risk of debt sustainability as
central banks raise rates to curb rising prices.
Output growth recovery has, thus, remained challenged. This is reflected in the
International Monetary Fund (IMF), April 2023 World Economic Outlook which
projects further downgrade in output growth for 2023 to 2.8 per cent compared
with its January forecast of 2.9 per cent. Growth is however, expected to
improve moderately to 3.0 per cent in 2024.
Globally, central banks are consequently faced with the dilemma of curbing
inflation as output slows. As noted in my March 2023 statement, recent
economic developments are testing the capacity of policymakers to navigate
an uncertain and constantly evolving landscape, manage their policy tradeoffs, and sustain global economic recovery.
For Nigeria, containing inflation in line with the price stability mandate is the
appropriate monetary policy priority in my opinion. It will be prudent however to
be cautious in raising the policy rate, recognizing underlying structural factors
driving price developments and the potentially negative effect of a significant
rate hike on credit expansion, financial system stability and economic growth.
Therefore, at this meeting, it was appropriate to vote to
-
Raise the MPR by 50 basis points to 18.5%

-
Retain the CRR at 32.5%, liquidity ratio at 30% and asymmetric corridor of
+100 and -700 basis points around the MPR.

4. ALIYU, AHMED
The global economy continues to face high inflation rates, tightened financing
conditions, financial markets turmoil in the US and Europe and uncertainties
arising from the lingering effects of the Russia-Ukraine war. As such, the pace of
economic growth in Advanced Economies and Emerging Market and
Developing Economies (EMDES) has been slow. Consequently, global growth is
expected to moderate to 2.9 percent in 2023 from an estimated 3.4 percent in
2022 before rising to 3.1 percent in 2024. Nevertheless, mitigating food and
energy prices, complemented by improved supply chain, following the
reopening of the Chinese economy, are expected to stimulate growth recovery
in the medium term.
Global inflation remains elevated, but has moderated in most Advanced
Economies and EMDEs. Accordingly, headline inflation is expected to ease to
6.6 percent in 2023, from 8.8 percent in 2022 and further to 4.3 percent in 2024.
These optimistic scenarios are based on expected decline in food and energy
prices, continued monetary policy tightening and easing of disruptions to the
global supply chain. Potential sources of risks to the overall inflation outlook
include the uncertainties around the Russia-Ukraine war and its wider
consequences, stronger than expected aggregate demand, pass-through
effects of high input costs, rising wages especially in Advanced Economies, and
currency depreciation, particularly in EMDEs.
On the back of persistent elevated inflation levels, is tightened global financial
conditions, which portend significant contraction of capital flows to EMDEs. In
addition, tighter credit environments are starting to weigh on economic activity,
cost of debt service and financial markets stability.
Crude oil prices are declining amidst fears of a weakening US economy and
slowing Chinese domestic demand. From an average of 83.86 percent on
January 31, 2022, price trend of the OPEC Basket, Bonny Light and UK Brent
averaged 74.17 percent on May 19, 2023.
THE DOMESTIC ECONOMY
Real GDP (year-on-year) grew by 2.31 percent in Q12023 from 3.52 percent in
Q42022. Growth performance was also less than the 3.11 percent recorded in
Q12022. The National Bureau of Statistics (NBS) attributed the decline to the
adverse effects of the cash crunch experienced earlier in the year. Real GDP
performance in the review period was driven mainly by the services sector,
which recorded a growth of 4.35 percent and contributed 57.29 percent to the
aggregate GDP. The agriculture sector grew by -0.90 percent, lower than the

growth of 3.16 percent recorded in the first quarter of 2022, while the industry
sector improved to 0.31 percent relative to the -6.81 percent recorded in the first
quarter of 2022.
The Purchasing Managers’ Indices (PMI) pointed to some rebound in economic
activity in April 2023. The monthly composite PMI improved to 51.1 index points
from 42.6 index points in March 2023, above the 50.0 index points benchmark.
This is indicative of expansion in business activities, driven by optimism for output
expansion in the economy. The development is corroborated by the moderate
improvement in the output gap, which though negative, narrowed by 1.11
percentage points to -6.58 percent in the fourth quarter of 2022, on account of
marginal improvement in resource utilization and productivity.
Inflation (year-on-year) increased by 0.18 percentage points to 22.22 percent in
April 2023 from 22.04 percent in March 2023. The food and core components of
the index increased by 0.16 and 0.28 percentage points to 24.61 percent and
20.14 percent, respectively, in April 2023. Likewise, on a month-on-month basis,
the index at 1.91 percent in April 2023 was 0.05 percentage points higher than
the 1.86 percent recorded in March 2023. Generally, price developments have
been driven by elevated inflation expectations.
Monetary aggregates in April 2023 showed a strong growth in liquidity. Broad
Money Supply (M3) grew by 7.37 percent year-to-date, reflecting the increase
in Net Domestic Assets, which grew by 12.46 percent. Similarly, Net claims on
Other Sectors increased by 5.72 percent, while Net Claims on Government grew
by 37.35 percent. Monetary Base increased by 9.81 percent month-on-month,
driven by the increase in Currency-in-Circulation (CIC) which grew by 41.32
percent, month-on-month. Also, Net Foreign Assets (NFA) declined by 25.71
percent year-to-date.
Gross external reserves stood at US$35.19 billion on May 17, 2023. The reserves
position at end-April 2023 could finance 6.46 months cover of import of goods
and services, and 8.88 months cover of import of goods, only.
Financial Soundness Indicators remained satisfactory, indicative of the thorough
regulatory environment in place. The industry Capital Adequacy Ratio (CAR) at
12.8 percent at end-April 2023 was above the 10 percent and 15 percent
regulatory requirements. Asset quality improved with the marginal decline in the
industry’s Non-Performing Loans (NPLs) from 4.5 percent in March 2023 to 4.4
percent in April, 2023, below the 5 percent supervisory requirement. The
performance of NPLs was due to recoveries, restructuring of facilities during the
year and sound risk management practices, amongst others. Return on Equities
(ROE) and Return on Assets (ROA) improved from 21.6 percent and 1.6 percent

in March 2023 to 22.6 and 1.7 percent in April 2023, respectively. At 45.3 percent,
Liquidity Ratio substantially exceeded the regulatory requirement of 30 percent.
Industry Total Credit increased by N4.54 trillion or 17.40 percent between endApril 2022 and end-April 2023, reflecting increased industry funding base and
adherence to the CBN’s Loan to Deposit Ratio (LDR) directive.
On fiscal developments, the recent removal of Petroleum Subsidy is expected
to engender significant fiscal space and improvement in Federal Government
of Nigeria’s (FGN’s) overall fiscal operations.
In analyses, pressure points remain the persisting high level of domestic inflation,
rising growth of domestic money supply, lowered global and domestic growth
outlook, high but receding global inflation, rising interest rates across the world,
and rising global debt which reflects higher primary deficits and higher interest
bills particularly in EMDEs.
CONSIDERATION FOR VOTING
The Nigerian economy remains confronted with persisting inflationary pressure.
While growth has sustained its positive trend since the country’s exit from the
COVID-19 induced recession, it has however, not shown strength. In a situation
of rising inflation and tepid GDP growth, achieving the mutually reinforcing
objectives of price stability conducive to economic growth requires a delicate
balance.
Since May 2022 when the Bank commenced monetary policy tightening to rein-
in inflation, the Committee has raised policy rates by a total of 700 basis points
in a bid to attain a stance of monetary policy that is sufficiently restrictive to
return inflation to the long run objective of 6-9 percent.
It may seem that policy rate hikes have not achieved the desired objectives
given that inflation at 22.22 percent in April 2023 is intolerably high. But what
could have been the counterfactual had the central bank not tightened the
stance of policy in the last one year?
Empirical evidence by Bank staff, show that in the absence of the policy rate
increases, headline inflation could have been 30.22 percent in April. The result
submits that interest rate hikes narrowed what could have been the actual rate
of inflation by 800 basis points, which suggests that tightening has had some
disinflationary impact. The result is validated by the Banking Stability Report in
which despite observed growth in deposit, there is an absence of a
corresponding growth in lending.

There is no contradiction that high inflation imposes significant hardship on the
citizens, as it erodes purchasing power, especially for the low-income earner,
including the poor and vulnerable. The regime of monetary policy tightening,
though at some point could negatively impact on investment through the credit
channel;
low
and
stable
inflation,
however,
engenders
a
stable
macroeconomic environment, which drives investment and growth.
The observed improvement in Performance Managers Index (PMI), business
expectations, the current account and output gap, suggest strong potentials for
growth rebound in the near to medium term.
In the recent past, I had maintained in my statements that, the current
inflationary pressure is propelled by both monetary and structural factors. The
Economic Report noted the rising trend on all monetary aggregates, with the
exception of Net Foreign Assets. Bearing in mind that inflation remains skewed
to the upside and inflationary expectations appear to have de-anchored as
reflected in surveys on economic agents, I believe that there is still some
headroom for further policy tightening, while actions are being taken to remove
structural impediments to price stability and economic growth.
Nonetheless, considering that monetary policy affects economic activity and
inflation with a lag, and taking note of the cumulative increases in the monetary
policy rate since May 2022, a significant tightening action may not be required
at this time. I, therefore, vote for a moderate hike in the policy rate by 50 basis
points.

5. ASOGWA, ROBERT C.
Background:
Monetary policy still faces difficult trade-offs despite stronger than anticipated
economic recovery in many countries. There are genuine worries that despite
sustained global monetary tightening, inflation remains persistent. At the
moment, some advanced economies stand in a better position as they appear
to have less intense inflationary pressures unlike developing countries especially
in Africa where widening fiscal deficits and huge public debt levels seems to
have eroded potential gains from recent monetary policy actions. A judgement
on the future interest rate path for Nigeria should therefore be anchored on the
need to quickly stabilize inflation rates while addressing output and financial
stability concerns. Such considerations must be data dependent, requiring
assessments of recent changes in the domestic and external economic
environments.
External Economic Developments:

On the global front, currently available information suggests that economic
growth may turn out more favourable in the second quarter of 2023, compared
with the first quarter, especially for advanced economies. In the US for instance,
growth in the first quarter of 2023 moderated to 1.1 percent from 2.6 percent in
the fourth quarter of 2022 but recent data on composite PMI shows an increase
from 49.2 index points in March 2023 to 52.4 and 54.3 index points in April and
May 2023, respectively. The Euro-area economy grew by 0.1 percent in the first
quarter of 2023 compared with 0.0 percent in the fourth quarter of 2022 and the
recent composite PMI shows further expansion as it rose to 54.1 index points in
April from 53.7 in March 2023, which is the fastest in an eleven-month period. In
the UK, output rose by 1.0 percent in the first quarter of 2023 compared with 0.1
percent in the fourth quarter of 2022 and the preliminary composite PMI indicate
further expansion from 52.2 index points in March 2023 to 54.9 index points in April
2023. Similarly, in Japan, real GDP for the first quarter of 2023 grew by 1.6 percent
as compared with 0.0 percent in the fourth quarter of 2022, while latest
composite PMI shows further expansion from 51.9 index points in March to 52.9
index points in April 2023. Despite this slight improvement in economic activities
for advanced economies in this second quarter of 2023, overall global growth
prospects are still bleak especially for developing countries in Africa and Latin
America. The April World Economic Outlook of the IMF has further downgraded
global growth forecast for 2023 to 2.8 percent, compared with its earlier forecast
of 2.9 percent.

Global headline inflation is coming down in most economies especially the
advanced ones, eventhough not fast enough. The core component of inflation
remains high almost proving persistent in a number of countries. Inflation
expectations are also tracking down in several of these countries. CBN staff
report shows that in April 2023, year-on-year inflation measure in the United
States moderated for a tenth consecutive month to 4.9 percent compared with
5.0 percent in March, but the month-on-month rates rose to 0.4 percent in April
compared with 0.1 percent in March 2023. In the Euro Area, while month-onmonth inflation reduced to 0.7 percent in April 2023 compared with 0.9 percent
in March, the year-on-year measure increased marginally to 7.0 percent in April
2023 compared with 6.9 percent in March 2023. In Jamaica, headline inflation
rate in April 2023 lowered to 5.8 percent which is marginally below the Bank of
Jamaica’s expectation and also represented a return to the target range for the
first time since July 2021. In Brazil, month-on-month inflation declined to 0.6
percent in April 2023 compared with 0.7 percent in March, with the year-on-year
measure also declining marginally from 4.65 percent in March to 4.18 percent in
April 2023. On balance however, global inflationary pressures have eased lately
but its future path may still be affected by global oil prices and exchange rates.
In the global financial market, recent evidence shows that activities have been
somewhat quiet in April and early May 2023 after recent volatilities associated
with the banking sector stress in the United States and Europe. The US dollar has
weakened with currencies of many economies appreciating against the dollar
since the last MPC meeting in March 2023. CBN staff report shows that in Europe,
the British pound and the euro appreciated against the US dollar by 3.75 and
4.40 percent, respectively, between March and April 2023. In North America, the
Canadian dollar and the Mexican peso also appreciated against the dollar by
0.74 and 1.78 percent, respectively, between March and April 2023. Stock prices
and long-term government bond yields have risen somewhat between March
and April 2023 in many advanced economies, although the increases are still
lower than in January and February this year.
On the prevailing global monetary policy regime, evidence from across several
countries indicate that a monetary tightening regime has continued even
though, the pace of interest rate hikes is now slow especially as inflationary
pressures are easing. Most policy rate announcements since May 2023 have
adopted a more cautious approach to hikes. At the May 2023 meeting, the US
FED raised its policy rate to a range of 5.00 -5.25 percent. The European Central
Bank also raised its policy rate to by 25 basis points in May 2023, while the Bank
of England at its May 2023 policy rate meeting moved its benchmark rate to 4.50
percent which is also a 25 basis point increase. Also, the Australian Reserve Bank

and the South African Reserve Bank raised their policy rates in May 2023 by 25
basis points and 50 basis points, respectively. The Central Banks of Korea, Mexico
and Chile however kept their policy rates unchanged in their May 2023 rate
setting meetings.
Domestic Economic Developments:
Turning to the domestic economy, there are signs that the Nigerian economy
has picked up since the second quarter of 2023. In the first quarter of 2023, the
economy grew by 2.31 percent (year-on-year) which is a decline compared
with the 3.52 percent growth in the last quarter of 2022, but this is attributed to
the adverse effects of the Naira cash crunch. The 2023 first quarter performance
of the economy was driven mainly by the services sector which contributed
57.29 percent of the aggregate GDP following improvements in the
telecommunication, financial institutions and trade sub-sectors. There are
however expectations that the second quarter 2023 GDP will record more
positive improvements as post-election stability drives resurgence of economic
activities. The composite PMI for April 2023 is out and very encouraging at 51.1
index points compared with 42.6 index points in March 2023. Overall, GDP
growth projections for Nigeria in 2023 remains strong especially as perceptions
of the economy by households and businesses sound pessimistic despite
downside risks related to oil sector volatilities.
Domestic headline inflation has continued to increase eventhough moderately
but is still a source of concern especially with recent monetary policy rates
increases. In April 2023, headline rates rose to 22.22 percent which is an increase
of 0.18 percent from March 2023 level. Both food and core indicators increased
year-on-year in April 2023 but the food component has surprisingly shown a
resistance to decline in recent times, signalling risks around logistical constraints.
On a month-on-month basis, while both headline and food inflation increased
consistently since 2023, the core component declined in April 2023 to 1.46
percent from 1.84 percent in March 2023. This decline is related largely to the
lowering cost of processed foods. Generally, the balance of risks on the
trajectory of inflation for the second half of 2023 is still heavily biased on the
upside especially with recent fuel price increases but a disinflationary process is
anticipated as from early 2024.
Growth in monetary aggregates has been somewhat mixed. Broad money (M3)
grew by 7.7 percent in April 2023 compared with 4.66 percent in March 2023 but
below the 2023 benchmark of 17.18 percent and also not as high as the growth
rate of 17.35 percent recorded in December 2022. There was also an increase in
the growth of credit to the core private sector from 1.96 percent in March 2023

to 7.60 percent in April 2023 but much lower than the growth of 19.95 percent
recorded in December 2022 which is apparently consistent with the effects of
the ongoing tight monetary policy regime.
The domestic banking system remains sound with good safety and profitability
indicators. The Capital adequacy ratio declined in April 2023 compared with
March 2023, but it is well above the statutory minimum requirement of 10
percent. With non-performing loan ratio declining further in April 2023 to 4.4
percent, there are generally no threats to the current capital situation of banks.
Bank profitability indicators in Nigeria are still on the upward (month-on-month)
move with both return on assets and return on equity rising markedly since
December 2022 despite the vulnerabilities of some banks in several developed
countries. Total bank deposits also increased by 1.48 percent between March
and April 2023, while total bank total assets increased month-on-month by 1.78
percent between March and April 2023. Interestingly, within this same period,
spread between maximum lending rate and the average savings interest rates
narrowed after a long time as market lending rates declined while savings rates
increased. The domestic stock market took a surprising heat in April 2023 after
the significant recovery recorded between December 2022 and February 2023.
The All- Share Index increased by 8.89 percent between end- December 2022
and end-February 2023, while the Market Capitalization increased by 8.90
percent during this same period, attributed at that time to investors optimistic
sentiments. CBN ‘staff report’ however shows that between end-February 2023
and end April 2023, the All-Share Index decreased by 6.10 percent with the
market capitalization also decreasing by 6.14 percent during this same period,
all reflecting investors profit taking and sell-off activities.
The domestic formal foreign exchange market has been relatively stable since
the last monetary policy meeting in March 2023, evethough there were some
temporary week-on-week fluctuations. CBN staff report indicate, that at the I&E
window, the end-period naira to dollar exchange rate appreciated marginally
by 0.20 percent between March 2023 and April 2023 largely as a result of Central
Bank measures to boost foreign exchange earnings whilst minimising
unnecessary foreign exchange demand pressures. The gross external reserves
declined month-on-month by -0.1 percent between March and April 2023 but
may likely reverse in the coming months with recent recorded current account
surplus. The major risks are still around oil prices which remain volatile and
sensitive to ongoing global geopolitical shocks.
With reduced tax and general federal revenues, the fiscal sector outlook still
looks fragile similar to the position at the last MPC meeting. Already, the debt
levels are at astronomical levels and with the desire of the new government to

embark very early on human development and infrastructure expenditures, the
fiscal gap may further widen in the coming months. The removal of petroleum
subsidy is useful and will help curtail the fiscal deficits but additional efforts at
revenue expansion and diversification as well as expenditure prioritization should
be key aspects of any future fiscal sector reforms.
Policy Decision:
It is important for MPC to keep prioritizing price stability but the extent to which
current inflation rates in Nigeria can be contained by monetary policy alone is
also in doubt. As such, a more cautious and moderated approach to MPR hikes
is necessary. This will additionally address risks related to financial stability and
broader economic activity recovery. An interest rate hike of between 25 to 50
basis points at this meeting will be adequate as the bank continues to monitor
the global and domestic economic environments to identify other potential
threats to price stability.
I will therefore vote to:
• Raise the MPR from 18.00 percent to 18.25 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.

6. OBADAN, MIKE I.
INTRODUCTION
As at the time of the Monetary Policy Committee’s 3rd meeting of the year in
May, 2023, global economic prospects remained cloudy due to widespread
uncertainties arising from the following: persisting Russia-Ukraine war; high level
of global inflation although there is evidence of its deceleration, especially in the
Advanced Economies (AEs); vulnerabilities in the global financial system due to
the impact of continued interest rate hikes in both the AEs and Emerging Markets
and Developing Economies (EMDEs). Already the financial systems in the US and
Europe have shown signs of stress considering the collapse of three banks in the
US and the take-over of Credit Suisse by UBS in Europe. Also, the continued
monetary policy normalisation is having a dampening effect on recovery of
global output growth. High inflation and high interest rates have continued to
put downward pressure on business and consumer spending.
Geo-political tensions and conflicts across the world impacting the full recovery
of global output growth remain heightened, considering the following: RussiaUkraine war which is now in its second year and with no clear signs of resolution;
the territorial dispute in the Southern China Sea between China and Taiwan - an
extension of China’s One-China Policy -which is generating increased tensions
between both superpowers with a rising risk of a military stand-off; and the
unabating war in Sudan, with rising instability in the region.
Considering the numerous risks and headwinds, the major areas of concern in
2023 remain the weakening global growth, high inflation and the associated
monetary policy normalisation, threats to the stability of the global financial
system, weakening global trade, worrisome public debt position, especially of
the EMDEs, etc.
GLOBAL ECONOMIC DEVELOPMENTS CONTEXT
Against the backdrop of various headwinds, global growth appears to be
slowing down considering the available projections from the International
Monetary Fund’s World Economic Outlook. In this regard, the Fund’s global
growth forecast of April 2023 reduced to 2.8 percent compared to the earlier
forecast of 2.9 and 3.4 percent in 2022. Similarly, GDP growth of the major groups
is projected to decline: the AEs from 2.7 percent in 2022 to 1.3 percent in 2023
and that of the EMDEs is expected to reduce marginally to 3.9 percent in 2023
from 4.0 percent in 2022. However, with China having lifted restrictions under its
zero-COVID policy and reopened its economy, moderate improvement is
expected in global output in 2023.

The global trade outlook for 2023 mirrors the output growth prospects. Growth in
global trade volume is projected to decline from 5.1 per cent in 2022 to 2.4 per
cent in 2023 reflecting a sharp slowdown in global demand and weakening
economic activities in both the major Advanced Economies and the EMDEs.
Global trade continues to be hampered by increasing national barriers and
restrictions, driven by the rising threat of de-globalisation. However, the IMF’s
World Economic Outlook forecast global trade to rebound to 3.5 per cent in
2024.
For the oil exporting countries, the weak oil market outlook in 2023 is not
comfortable although it is a blessing to the oil consuming nations that are
currently striving to contain energy price-induced inflation. Energy prices in 2023
are expected to be 23.0 per cent lower than in 2022 and remain broadly stable
in 2024. The Brent oil price fell sharply to a 15-month low (US$ 70.00 per barrel) in
mid-March, but quickly returned to the previous range in early April following a
cut in production quotas by OPEC+. The price of Bonny Light declined by 36.95
per cent to US$80.69 per barrel on May 6, 2023, compared with the peak of
US$127.98 on March 08, 2022. The US dollar prices of crude oil per barrel as at
January 31 and May 19, 2023 were, respectively, as follows:
OPEC basket: US$ 81.95/b and US$ 76.06/b
Bonny Light: US$ 86.30 and US$ 74.90/b
UK Brent: US$ 83.36 and US$ 71.55/b
The crude oil price decline is traceable to fears of weakening US economy and
slowing Chinese demand as factory activity contracted unexpectedly in April.
Crude oil futures market suggests that prices would fall further in 2023 and into
2024 as supply is expected to increase in the medium term. Indeed, the sixmonth crude oil price forecast is slightly below US$ 70.00 per barrel from April to
September 2023. This is not good news for Nigeria which is currently faced with
serious oil supply challenge due to oil theft. This has resulted in a significant gap
between the OPEC quota for the country and actual production.
There is good news relating to global inflation and that of the AEs. In 2023, global
inflation is projected to decelerate gradually to 7.0 per cent, from 8.7 per cent
in 2022, dropping further to 4.9 per cent in 2024. Similarly, inflation in the AEs is
expected to decline from 7.3 percent in 2022 to 4.7 percent in 2023 and further
to 2.6 percent in 2024. A similar pattern is projected for the EMDEs as a group. In
this direction, the inflation rate is projected to decline from 9.8 percent in 2022
to 8.6 percent in 2023 and further to 6.5 percent in 2024. The drivers of the
expected disinflation include sharp reversals to energy and food prices,

moderate weakening global demand, and easing disruptions to the global
supply chains. But the inflation rates are expected to remain above prepandemic levels and above the long-run objectives of central banks. And the
downside risks remain, including uncertainties about the Russia-Ukraine war. The
structural differences between Nigeria’s economy and most other EMDEs are
manifested in the inflation trends. While inflation rates are declining in some
countries such as Saudi Arabia, China, India, Russia, Nigeria’s monthly inflation
trend showed consistent upward movement from January to April, 2023 mainly
because of the structural factors including supply constraints driving inflation in
the country.
Monetary policy stance remains tight in both AEs and EMDEs. In the AEs, central
banks in many countries have committed to interest rate normalisation and
further increased policy rates to dampen demand and contain inflation.
However, policy rate hikes are moving in the direction of less aggressive pace,
in light of the possible negative impacts. The rapid adjustment of monetary
policy to ease the rising trend of inflation in several countries, is taking a huge toll
on entities that were previously highly exposed when interest rates were
considerably low. And following the emergence of stress in parts of the banking
system in the US and Switzerland, some central banks have emphasised greater
uncertainty over the outlook for policy rates. Amidst tightening financial
conditions, growing uncertainties associated with the recent banking crisis have
doused the prospects of continued aggressive rate hikes. In this regard, key
advanced economy central banks are expected to moderate their rate hike
cycles in 2023. In the EMDEs, some central banks have similarly maintained a
tight monetary policy stance, although less aggressively, signalling nearness to
the end of the era of the tightening cycle. Underlying the tight policy stance is
the high inflation driven by high energy and food prices, and exchange rate
depreciation which drives capital outflows. However, some central banks have
paused their monetary tightening cycle as growth concerns become elevated,
for example, South Africa, Brazil, Russia and China.
What are the messages from the global socio-economic situation? Although
growth prospects are improving, they remain clouded by heightened
uncertainty around geo-political tensions, financial stability concerns and the
pace and extent of monetary tightening to tame inflation.
The expectation for a continued interest rate hike by key central banks,
especially in the AEs, would further help in taming inflationary pressures but the
attendant negative consequences of slowing global output recovery, financial
instability and debt default should moderate the pace of policy rate hiking.

Otherwise, tightening financial conditions may ultimately tilt the global economy
into a recession.
KEY DOMESTIC ECONOMIC DEVELOPMENTS
The Nigerian economy has remained in a vulnerable state with many worrisome
economic issues that would confront the new Federal Government expected to
be inaugurated on May 29, 2023. The economy remains vulnerable to both
internal and external shocks without meaningful fiscal buffers to withstand the
shocks. Against the backdrop of weak fiscal management, monetary policy has
been seriously stressed from attempts to accommodate fiscal inadequacies and
keep the economy afloat. But the situation cannot continue as it is. The new
government must therefore develop the political will to implement the desired
reforms – fiscal, monetary, and other reforms – to put the economy on a stronger
footing although the challenges appear daunting.
The key current economic issues can be highlighted as follows.
Fiscal management is not how it should be. Revenue generation is very low and
consistently below government expenditure, resulting in accumulation of fiscal
deficits and public debt. The 2023 Federal Government budget, for example,
shows the expected total revenue to be generated as N10.49 trillion while the
total expenditure is projected to be N21.83 trillion, resulting in a projected deficit
of N11.34 trillion, a large part of which is to be financed by borrowing from the
Central Bank of Nigeria (CBN). In the first two months of 2023, an actual deficit
of N1.091 trillion was incurred. The associated public debt accumulated, and
the corresponding debt service payments have become a national burden as
debt service absorbs a huge proportion of revenue. Debt service and interest
payments on Ways and Means Advances (W&MA) totalled N5.66 trillion in 2022,
reflecting ongoing debt build-up, and pressure on government revenue. Total
public debt (internal and external) stood at N46.25 trillion at end-December,
2022 from N39.56 trillion at end-December, 2021 while the Ways and Means
Advances stood at N22.7 trillion. The initiative to securitise the W & MA would
provide some relief to the Government. Nevertheless, the public debt profile
remains daunting and necessary reforms are inevitable to prevent unsustainable
debt build-up. There are already fears about this. Excessive borrowing from the
CBN blunts the effectiveness of monetary policy aimed at controlling inflation.
There is thus the need to prevent a recourse to W&MA as a matter of routine.
Stakeholders have tended to question the efficiency and productivity of public
spending. Therefore, going forward, it is imperative for the new Government not
only to prioritise revenue generation but also significant improve the efficiency
of public expenditure through restructuring of such expenditure to eliminate

wastes and corrupt practices. Importantly, the Government needs to revisit its
mode of financing capital projects, in particular, infrastructure. The present
financing method entailing borrowing, and Tax Credit Schemes are
unsustainable. The Tax Credit Scheme involves loss of tax revenue to the
Government. Therefore, the Federal Government should develop the will to
cede key infrastructure financing to the Infrastructure Corporation of Nigeria
(INFRACO). This will benefit the Government as it does not entail loss of tax
revenue, the projects are developed and the country/citizens benefit.
Patronising INFRACO will provide room to expand the fiscal space for priority propoor spending. The most vulnerable in the society deserve fiscal support to cope
with the soaring food and energy prices while in other areas, fiscal consolidation
is inevitable in support monetary policy to control inflation and also reduce debt
accumulation.
There is good news though for the in-coming government relating to the rolling
out of petroleum products sometime in July by the Dangote Refinery. The
coming on stream of the Refinery should provide an opportunity for the
government to eliminate subsidy on petroleum products and save the foreign
exchange used to import refined petroleum products, improve fiscal
management and build fiscal buffers, among others. A proper positioning of the
oil sector through effective resolution of the legacy challenges of the sector
including insecurity and oil theft in the oil producing areas should also strengthen
Government revenue and foreign exchange earnings. As at now, these
challenges have prevented the oil sector from contributing meaningfully to
Government revenue and external reserves. The country, for some time now, has
not been able to meet its OPEC production quota of 1.83 million barrels per day
(mbpd). From 1.27 mbpd in March 2023, oil output declined to 1.0 mbpd in April
– a production shortfall of 83,000 barrels per day. Correspondingly, oil export
declined to 0.55 mbpd, negatively impacting foreign exchange earnings,
external reserves, and exchange rates. The downward trends have occurred
despite the private security architecture put in place not long ago by the Buhari
Government. The important question then is how effective is the private security
company along with the arsenal of government security presence in the oil
producing areas of the Niger Delta Region? A good handle on the security
challenges in the region should enable the new government to improve
macroeconomic management, in particular, fiscal management.
The economic growth rate is not where it is expected to be – over 7.0 percent,
employment-generating and poverty-reducing. Against the backdrop of severe
exogenous shocks and two recessions in the last eight years, Nigeria’s economic
growth rate has shown resilience even though the annual growth rate post-2020

recession has shown some weakness, declining from 3.4 percent in 2021 to 3.03
percent in 2022 and further to 2.31 percent in the first quarter of 2023. In contrast,
the quarter-on-quarter growth gradually and consistently improved from -14.66
percent in Q1 2022 to 10.99 percent in Q4 2022. Monetary policy has played a
vital supportive role in the growth process. Nevertheless, the growth rate is still
fragile and not robust to reduce poverty and unemployment. Importantly too,
the continued contraction of the oil sector makes it a major drag on growth, just
like the industrial sector. The non-oil sector remains the saving grace for growth
through the Services and Agricultural sectors. But then, the pattern of growth
reaffirms the de-industrialisation of the economy with the Services sector having
56.3% share of the GDP in Q4, 2022 while the Industry and Agriculture sectors lost
shares (17.3 and 26.5%, respectively) in Q4, 2022. Industry is not serving as the
employment sponge as expected in the country’s current stage of
development. A strong focus on the industrial sector is thus indispensable to
reverse the trend of de-industrialisation in the country.
Inflation remains a major challenge in the country, despite the aggressive
monetary measures of the CBN since May, 2023. Headline inflation (year-onyear) rose from 22.04 percent in March 2023 to 22.22 per cent in April 2023, its
highest level since 2009 when the National Bureau of Statistics adopted the
current consumer price index (CPI) consumption basket. Since May 2023 when
the upward trend in the inflation rate elicited greater concerns, the Bank has
implemented what can be considered as a very tight monetary policy stance
with the Monetary Policy Rate successively hiked to the present level of 18.5
percent as of May 24, 2023, and Cash Reserve Requirements standing at 32.5
percent. These measures have kept the inflation rate much lower than what it
would have been in their absence. The challenge is the many non-monetary
factors, mostly structural, including escalating government fiscal deficit, that
have tended to blunt the effectiveness of monetary policy. This is where fiscal
and monetary policy coordination is crucial. As I had written in my MPC Personal
Statement in March, the Fiscal Authority needs to be mindful of the implications
of its actions for monetary policy effectiveness. Importantly, fiscal policy actions
must complement the monetary policy actions to effectively address the
upward-trending inflation in the country. This means embracing fiscal restraint by
the Government to achieve smaller fiscal deficit which would cool aggregate
demand and inflation. This is the essence of complementary fiscal policy to
monetary policy to combat inflation. The other legacy factors of inflation in the
country are also within the purview of the Government to resolve.
So far, the financial system has remained sound, stable and resilient. But there is
need to be watchful of possible headwinds arising from tight monetary policy

implementation, the banking stress in the US and to a lesser extent, Europe. The
CBN needs to stand ready to safeguard financial system stability by providing
liquidity support to banks should the need arise. Aggressive monetary policy
tightening by central banks across the globe has led to high interest rates which
portend a risk to global output recovery, and debt servicing capacity.
Both global and domestic conditions amidst growing risks continue to weigh on
Nigeria’s external performance. The phenomena of low productivity, insecurity,
legacy infrastructure deficits, and exogenous shocks have continued to impact
negatively on external sector aggregates – export earnings and foreign
exchange inflows, capital inflows, balance of payments, external reserves and
exchange rate stability. These aggregates/indicators are far from where they
should be and remain causes for concern. As at end-April 2023, the gross
external reserves declined by -0.1 per cent (m-o-m) to US$34.91 billion from
US$34.94 billion in March 2023. The stock could, however, finance 6.5 months of
imports of goods and services or 8.9 months of imports of merchandise. Strong
demand management measures have sustained this coverage. The new
Government must consider the foreign exchange supply constraint as binding
and implement policies to support the non-oil sector to produce for exports.
THE CONSIDERATION
A review of global and domestic developments suggests a dampened
economic outlook. The recovery of the global economy is expected to progress
moderately in 2023 through to 2024. Several key economies face the risk of
subdued growth, thus mitigating the prospects of a full global recovery in 2023.
But the fears of recession have somehow receded. This more so as the pace of
monetary policy normalisation is being moderated.
Nigeria faces numerous challenges relating to the economy’s growth, fiscal
sustainability, external finances, and macroeconomic stability. These are
aggravated by low revenue generation, low-performing oil and industrial
sectors, unprecedented magnitude of crude oil theft and less than prudent
fiscal management. Although output growth is projected to remain positive in
2023, it faces numerous headwinds including the possible effect of monetary
policy tightening and less favourable developments in the oil market relating to
low export and subdued prices.
The primary mandate of the CBN remains price stability. Despite the monetary
measures implemented, inflation remains high, mostly because of the numerous
non-monetary factors at work. And inflationary pressures may persist in the short
to medium term, except if the new Dangote Refinery moderates petroleum
product prices, imported inflation reduces with the observed moderation in

global inflation and energy and food prices, and the Government has a good
handle on the cost-escalating poor infrastructure as well as insecurity in the foodproducing areas of the country. The latter is particularly important as food
inflation accounts for over 65.00 percent of headline inflation in the country: 66.2
percent in April, 2023.
I consider the prevailing situation as warranting the continuation of the tight
monetary policy stance but with a moderate policy rate hike. I therefore vote to
raise the Monetary Policy Rate by 50 basis points while all other parameters
remain at their extant levels.

7. OBIORA, KINGSLEY I.

In light of inflationary pressures and the need to ensure
monetary and price stability, I voted to raise the Monetary
Policy Rate (MPR) to 18.5 per cent from 18.0 per cent, retain
the Cash Reserve Ratio (CRR) at 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. I believe this action
will further tame inflationary pressures, restore price stability,
minimize its effect on growth, and safeguard financial
system stability.

Although global economic activity is recovering from multiple shocks,
inflation
remains
elevated,
with
increased
financial
stability
risks. Recent developments show that the global economy is recovering
from the shock of the pandemic and the ongoing Russia-Ukraine war. The
Chinese economy is also rebounding after lifting the restriction on the zeroCOVID-19 policy. As a result, supply chain pressures are easing, and
commodity prices are moderating. Consequently, April’s J.P. Morgan
Global Composite Purchasing Managers Index (PMI) expanded to 54.2
index points from 53.4 index points in March 2023, driven by the expansion
in consumer goods, consumer, business, and financial services as well as
investment goods.
While the global growth recovery is on track, it is expected to remain weak
in 2023. The International Monetary Fund (IMF WEO April 2023 Update)
projected global growth to decelerate to 2.8 per cent in 2023, compared
with 3.4 per cent in 2022. The slowdown is due to a tighter monetary policy
stance to tame inflation by many central banks across the world, the
ongoing Russia-Ukraine war, growing geoeconomic fragmentation, and
rising financial stability risks. As a result, the growth rate in Advanced
Economies (AEs) is expected to decline by 1.3 per cent in 2023 from 2.7
per cent in 2022. In Emerging Markets and Developing Economies
(EMDEs), the growth rate will decline slightly to 3.9 in 2023 from 4.0 per cent,
which is stronger than the growth in AEs. The expected decline in global
growth will, therefore, be driven largely by Advanced Economies,
especially the United Kingdom and the Euro Area, where growth is
expected to decline to -0.3 and 0.8 per cent, respectively, in 2023. In the
United States and Canada, growth rates are also expected to fall to 1.6

and 1.5 per cent in 2023 from 2.1 and 3.4 per cent, respectively, in 2022.
However, in Emerging Market and Developing Economies , China will
rebound and expand by 5.2 per cent in 2023, up from 3.0 per cent in 2022,
due to a total reopening of the economy and improved supply
restrictions. India is also projected to grow strong at 5.9 per cent but lower
than 6.8 per cent in 2022.
Despite weak growth forecasts, many central banks in advanced and
developing economies remain focused on taming inflation. Although
global inflation is expected to moderate in 2023, it will remain high. It is
projected to decelerate from 8.7 per cent in 2022 to 7.0 per cent in 2023
before dropping further to 4.9 per cent in 2024. The decline is driven by the
fall in commodity prices, including oil and non-oil commodity prices and
the impact of ongoing monetary policy tightening. Consequently, inflation
in Advanced is expected to moderate to 4.7 per cent in 2023 from 7.3 per
cent in 2022. Also, in Emerging Market and Developing Economies,
inflation is forecast to drop to 8.6 per cent in 2023 from 9.8 per cent in 2022.
Furthermore, inflation in sub-Saharan Africa is projected to slightly decline
to 14.0 per cent in 2023 from 14.5 per cent in 2022—all driven by the
decline in food and energy prices, the easing of disruptions to global
supply chains, and monetary policy tightening.
Overall, inflation has turned a corner in some advanced economies but
remains above many central banks’ targets. In April 2023, inflation (yearon-year) in the United States and the United Kingdom decreased from 5.0
and 10.1 per cent to 4.9 and 8.7 per cent, respectively, in March 2023. In
the Euro Area and Canada, it only inched-up to 4.4 and 7.0 per cent in
April from 4.3 and 6.9 per cent, respectively. While headline inflation is
moderating, core inflation remains sticky, driven by an increase in the
prices of services and continuous labour market tightness. As a result of this
development, the US Federal Reserve (Fed), the European Central Bank
(ECB), and the Bank of England (BoE), among others, continue to hike
interest rates, though at a modest pace, to contain inflation and bring it
down to the target of 2 per cent. However, in sub-Saharan Africa (SSA),
inflation is still in double-digit territory. For example, in April, inflation in
Ghana, Ethiopia, Egypt, Rwanda, and Nigeria stood at 41.2, 33.5, 30.6,
28.4, and 22.2 per cent, compared to 45.0, 34.2, 32.7, 31.0, and 22.04 per
cent, in March 2023, respectively. Overall, at least 20 out of 45 countries in

SSA are still facing double-digit inflation, and about 80.0 per cent are also
confronting double-digit food inflation (IMF regional outlook, sub-Saharan
Africa, April 2023). This is why the central banks of SSA countries are also
hiking rates to tame inflation, which has become more persistent and
continues to deteriorate the purchasing power of individual households.
Following these weak global developments, the non-oil sector continues
to push the Nigerian economy towards sustainable long-term growth.
Recent data from the National Bureau of Statistics (NBS) revealed that
Nigeria’s real GDP (year-on-year) grew by 2.31 per cent in Q1 2023,
compared with a growth rate of 3.11 per cent and 3.52 per cent in Q1
2022 and Q4 2022, respectively. The growth rate was mainly driven by the
service sector, which grew by 4.35 per cent with a relative contribution of
57.29 per cent to the overall GDP in Q12023. While the industry sector grew
by 0.31 per cent, the agriculture sector contracted by 0.9 per cent. The
two sectors contributed 21.05 and 21.66 per cent, respectively, to the
aggregate GDP in Q1 2023. The sub-sectors that recorded significant
growth included Agriculture (Crop Production), Trade, Information and
Communication (Telecommunication), Crude Petroleum and Natural
Gas, and Real Estate, with growth of 19.48, 15.97, 14.13, 6.21, and 5.38 per
cent, respectively. In real terms, the non-oil real GDP grew by 2.77 per cent
in Q1 2023, compared with 4.44 per cent in Q4 2022, representing a 1.67
percentage points decline. In relative terms, the non-oil sector contributed
93.79 per cent in Q1 2023, compared with 95.66 per cent recorded in Q4
2022. Although the oil sector further contracted in Q1 2023, it was an
improvement over Q4 2022. It contracted by 4.21 per cent, compared
with a contraction of 13.38 per cent in Q4 2022, reflecting an increase of
21.38 percentage points. Overall, the oil sector’s contribution to
aggregate GDP increased from 4.34 per cent in Q4 2022 to 6.21 per cent
in Q1 2023. The increased performance was attributed to the improved
security surveillance of the oil pipelines, leading to increased oil
production, though it is still below the OPEC production quota.
This modest growth, however, faces significant macroeconomic
imbalances that can be addressed by strengthening public finance and
promoting private investment and innovation. The economy is confronted
with both domestic and global headwinds. On the global front, global
inflation, although moderating, remains high and continues to pass

through to domestic prices. Also, rising interest rates in the advanced
central bank economies have resulted in capital reversals, high borrowing
costs, and depreciating currencies in the EMDEs, including Nigeria. This
continues to squeeze public funding, widening fiscal deficits and severely
impacting domestic investment, social inclusion, and economic growth
for Nigeria and other developing economies. Domestic headwinds
include domestic consumer price inflation, which remains elevated.
Headline inflation (year-on-year) increased to 22.22 per cent in April from
22.04 per cent in March 2023, driven largely by food inflation, which
increased slightly to 24.61 per cent in April from 24.45 per cent in March
2023. Core inflation increased from 19.86 per cent in March to 20.14 per
cent in April 2023 due to an increase in processed foods, education,
clothing and footwear, and transport. Although inflation continues to
increase, the tight monetary policy stance of the Bank is moderating the
pace. Furthermore, the overall Balance of Payments (BOP) position
recorded a deficit of 0.85 per cent of the GDP in Q4 2022, reflecting
increased external vulnerabilities of the economy occasioned by overreliance on volatile oil export earnings. Other key challenges include
lingering infrastructural deficits, rising unemployment, power supply
shortages, rising insecurity, inequality, and poverty.
Amid these headwinds, the Nigerian economic outlook remains positive.
The IMF (WEO April 2023 Update) projected the economy to grow at 3.2
per cent in 2023 from 3.3 per cent in 2022, driven by the non-oil sector and
expected improved oil production. Also, the monthly composite PMI has
started to improve. It significantly increased to 51.1 index points in April
2023 from 42.6 points in March 2023, above the 50.0 benchmark,
indicating an expansion in economic activity. Overall, the economy
sustain and even surpass this domestic projection through increased
domestic revenue mobilization, efficient debt management, promotion of
competition, increased private sector investment and innovation in
various sectors of the economy.
The banking system maintained its resilience amid rising global financial
stability risks. The capital adequacy ratio (CAR), although decreased by
1.85 percentage points, remained above the 10.0 per cent prudential
requirement. It decreased from 14.6 per cent in April 2022 to 12.8 per cent
in April 2022, due to an increase in total risk-weighted assets. The liquidity

ratio (LR) is also above the 30.0 per cent regulatory minimum ratio, as it
slightly decreased from 43.5 per cent in February 2022 to 43.1 per cent in
February 2023. Non-performing Loans (NPLs) ratio declined to 4.4 per cent
in April 2023 from 5.3 per cent in March 2022, further below the maximum
prudential requirement of 5.0 per cent. The continuous decline in NPL was
attributable to write-offs, restructuring of facilities, Global Standing
Instruction (GSI) and sound credit risk management. Consequently, total
gross credit increased by N4.54 trillion, representing an increase of 19.71
per cent between the end of April 2022 and the end of April 2023, from
N26.10 trillion to N30.64 trillion, due to the increase in the industry funding
base, the CBN’s directive on Loan-to-Deposit Ratio (LDR), and business
strategy and competition. The credit growth was largely recorded in key
sectors of the economy, including oil and gas, manufacturing, general
commerce, and government.
Overall, inflation is proving persistent, and the MPC must continue to act
to bring it down and ensure inflation expectations stay well
anchored. Inflation is fast eroding the real income of the most vulnerable
households and is detrimental to stable and inclusive growth. Therefore,
based on the need to restore price stability, sustain the growth recovery,
anchor inflation expectations, minimize the effect of exchange rate passthrough to domestic prices, and be credible and consistent, I voted to
raise the MPR by 50 basis points.
•
Increase the Monetary Policy Rate (MPR) from 18.0 percent
to 18.5 percent.
•
Retain the Cash Reserve Ratio (CRR) at 32.5 percent.
•
Retain the Liquidity Ratio (LR) at 30.0 percent; and
Retain the Asymmetric Corridor to +100/–700 basis points
around the MPR.

8. OMAMEGBE, MO’
Global Economic Developments
The past few months were characterized by significant concerns regarding the
adverse effects of the recent bank failures in the United States and Switzerland,
as well as, the widespread tightening of monetary policy on the economies of
those regions and potential impact on the global economy. Inflation levels
remain elevated and to mitigate the effect, Central Banks intervention through
interest rates adjustments have been persistent. As a result, the interplay
between interest rates and market sentiment continues to exert pressure on
growth forecasts, leading to a mixed economic outlook.1
We have seen some degree of reduction in the price levels in some developed
countries owing to the easing of supply chains and falling commodity prices.
There is also the growing risk of high inflation and financial stability concerns in
others.
The World Economic Situation and Prospects report for May 2023 emphasized
the uncertain trajectory of the global economic recovery. Persistent inflation,
rising interest rates, and increased uncertainties were identified as substantial
challenges to global growth. Instead of a robust rebound, there is a growing risk
of prolonged low growth. Factors contributing to this include the enduring
effects of the COVID-19 pandemic, and unresolved macroeconomic structural
issues. According to the report, the projected growth rate for the world economy
in 2023 is 2.3%, with a slightly improved forecast of 2.5% for 2024. These projections
reflect the prevailing economic conditions and highlight the cautious outlook for
global growth in the coming years2.
Inflation has been sticky and remains higher than central bank’s target. Growth
continues to slow and financial stress remain in the face of rapid tightening by
central banks. The inflation outlook downside and upside risks remain very
uncertain. The longer inflation remains sticky and stays high, the more difficult it
would be to tame it. For Emerging Markets (EMs), this challenge is even more
critical as inflation expectations are less well anchored. Also, the EMs are more
vulnerable to upside inflation risks, exchange rate pass-through and energy
shocks and their impact on core inflation. Global integration of financial and

1
intelligence-executive-summary-april-2023

2
2023/

economic activities has made international factors a key driver of domestic
prices and weakened transmission of monetary policy at the national level.
The World Bank reports that emerging economies like China and India are
experiencing stronger growth compared with developed economies. SubSaharan Africa on the other hand, is equally encountering sluggish economic
growth, primarily attributed to high inflation rates, global economic
uncertainties, underperforming major economies on the continent, and a
significant deceleration in investment growth.3
Domestic Economy
Nigeria experienced a notable rise in inflation in April, reaching a seventeenyear high of 22.22%, compared with 22.04% in March4. This reflects a 0.18% rise in
the inflation rate from March 2023. This increase was accompanied by a surge
in food inflation to 24.61% and core inflation to 20.14% during the same period.
Furthermore, on a year-on-year basis, the April 2023 headline inflation rate was
5.40% points higher than the rate recorded in April 2022, which was 16.82%5.
Although core inflation showed a monthly decrease from 1.84% to 1.46%, the
overall inflationary pressures continue to be a cause for concern.
In April 2022, the Purchasing Managers’ Index (PMI) experienced a significant
increase to 53.8 index points, bouncing back from a low of 42.3 index points in
the previous month6. This rise indicates a revival of growth in the country’s private
sector after two consecutive months of contraction. The expansion was driven
by a notable surge in new business and output, as the cash crisis that had
severely impacted the economy started to ease. All sectors, including
agriculture, manufacturing, services, and wholesale & retail, witnessed a
rebound in activity.
The highly anticipated world's largest single-train refinery, the Dangote Refinery,
commenced its operations 22nd May 2023, marking a significant milestone in
Nigeria's oil industry7. With a capacity to process 650,000 barrels of crude oil per
day, the refinery is designed to handle oil grades from Africa, Asia, and America.

3
tap-resource-wealth-for-sustainable-development-and-transition-to-low-carbon

4

5

6

7

One of its key advantages is the ability to supply Nigeria with an excess of 38
million litres of petrol, diesel, kerosene, and aviation fuel daily, meeting the
country's entire fuel demand8. The successful launch of the Dangote Refinery
reflects a significant step towards enhancing Nigeria's energy independence
with the attendant positive consequence in driving economic growth, and
creating employment opportunities. This initiative aligns with the government's
aim of achieving self-sufficiency in local oil refining and reducing foreign
exchange expenditure on petroleum product imports. As the Dangote Refinery
begins operations, The Nigerian National Petroleum Company Limited will
commence the supply of 300,000 barrels of crude oil per day to the facility9.
Overall, the macroeconomic environment has weakened due primarily to high
and rising inflation and fiscal challenges. We have seen revenues decline and
expenditure increases which has contributed to growing fiscal deficit. The
financing of this deficit by the Bank has increased interest cost, further
exacerbating inflation. The oil sector continues to underperform and combined
with growing and unsustainable cost of fuel subsidies further deteriorates the
fiscal position. The growing inflation especially food inflation disproportionately
impacts the poor and low income demographic.
Growth is expected to decline and oil production will continue to fall if security
challenges and inefficiencies are not addressed. Growing debt accumulation
and very weak accretion to reserves have driven debt service to revenue ratio
to unsustainable levels. According to recent data from the Central Bank of
Nigeria (CBN), the Federal government's debt service to revenue ratio reached
a new high of 111.8% in 2022. The data reveals that while the government
earned N5 trillion, it spent N5.65 trillion on debt servicing, surpassing the previous
ratio of 96% in 2021. This marks a significant increase in Nigeria's debt service
ratio. The country's total public debt, excluding Ways and Means, has also risen
from N12 trillion in May 2015 to N49 trillion as of December 2022. Declining
revenues and significant challenges to debt sustainability poses significant
downside risks to the economy.


8
22/

9

Overall consideration
The current macroeconomic environment in the country presents significant
challenges. The task of achieving stable price levels is daunting primarily due to
the presence of external shocks, fiscal imbalances, and structural challenges.
There has been significant and rapid monetary policy tightening to combat
rising prices. We have seen a gradual impact of these tools on the inflation
trajectory. In spite of some encouraging signs, inflation seem entrenched and
upside risks remain considerable. The imperative to curb inflationary pressures
arises from the inherent risks it poses to the fundamental pillars of economic
stability. As prices continue their ascent, they steadily erode purchasing power,
disrupt business operations, and impede the inflow of investments, thereby
inflicting economic hardships on individuals and robbing them of their real
incomes.
We have argued that recent inflation drivers are mostly supply side in origin and
monetary policy would not fully address the rise in price level as interest rate
policy is primarily targeted at controlling aggregate demand. This argument also
poses a dilemma since reducing aggregate demand by interest rate
adjustments will negatively impact growth. However not addressing the inflation
caused by supply shocks by taking adequate steps to reduce demand will deanchor inflation expectations and make it extremely difficult to achieve price
stability in the short to medium term. Focused and frequent policy responses to
supply and other shocks are needed as monetary policy can be distorted by
fiscal policy. In addition, the explosion of ways and means and growing level of
deficit financing has worsened the fiscal outlook. This is further compounded by
consistent revenue shortfall and lack of fiscal discipline. With a high debt, high
inflation environment, there is the need for a joint requirement on monetary and
fiscal policy to coordinate effectively to address price, financial and
macroeconomic stability. Fiscal consolidation will help curtail aggregate
demand and therefore consistent with the Bank’s inflation objectives.
In all, the focus for the Bank must be to pursue price stability in the short to
medium term while Fiscal authorities should ensure debt sustainability, fiscal
prudence and align their policies to be consistent with the price stability
objectives of monetary policy. It is critical to not only strengthen monetary, fiscal
and financial policy frameworks but better coordinate and align these
frameworks and resultant policy for optimal results.
By combining monetary policy actions with fiscal policy adjustments,
implementing structural reforms to enhance efficiency and productivity, and
implementing targeted interventions to address supply-side constraints, the

country can work towards restoring macroeconomic stability. There are
important synergies to be derived from effective coordination of monetary
policy and fiscal policy that ultimately reduces supply shocks impact and
government expenditure while keeping a lid on the price level.
Monetary policy should therefore aim to anchor inflation expectations as a key
priority and the Bank should stay focused on its policy tightening stance as a
premature easing of policy tightening will require more painful and difficult
choices later.
Furthermore, meticulous management of the money supply is of paramount
importance to forestall the recent increase in currency in circulation from fuelling
inflationary pressures. In essence, by remaining steadfast in its pursuit of inflation
control, factoring in the lags in policy transmission, and implementing astute
currency management strategies, the Bank can contribute significantly to the
attainment of price stability, the stimulation of sustainable economic growth,
and the preservation of the nation's economic prosperity.

My Policy Decisions
I therefore vote to:

• Raise MPR by 50 basis points to 18.50 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.

9. SANUSI, ALIYU R.
1.0
Decision
As inflation continues an upward trend, and the forecast inflation threatens to
continue rising at a slower pace, I voted to raise the MPR to rein in inflation. Data
showed that in April 2023 the core and food components increased year-onyear (y-o-y), but core inflation declined month-on-month. Survey data also
shows that expected inflation remains elevated and is rising. In addition, data
showed that the expansion of the broad money supply, mainly as a result of net
claims on the Federal government, has increased beyond the provisional
benchmark. Data and staff forecasts also show that output growth will continue
to be positive. I believe further tightening of the monetary policy stance is
needed to re-anchor inflation expectations and rein in inflation.
2.0
Background and Justification
2.1
Global Economic Development
As widespread uncertainties persist, the global recovery remains weak, albeit
with a positive outlook. Global inflation remains high but continues to moderate
due to monetary policy tightening across the globe and a decline in energy and
food prices. As global inflation remains above central banks' long-run target,
further rate hikes are expected, albeit at a moderate pace.
The elevated geopolitical tensions, chiefly arising from the Ukraine-Russian war
and the rising tension between the US and China over Taiwan's sovereignty,
have continued to increase global supply chain bottlenecks raising pressure on
food and energy prices. Consequently, central banks across the globe have
continued to tighten monetary policy, which has increased vulnerabilities in the
global financial system and dampened the global aggregate demand.
Consequently, IMF’s World Economic Outlook (WEO) has reviewed its forecast
for global output growth downward to 2.8% in 2023 from the 3.4% achieved in
2022 but is expected to improve to 3.0% in 2024. In the Advanced Economies
(AEs), output growth is forecasted to moderate to 1.3% in 2023 from 2.7%
achieved in 2022, but improve to 1.4% in 2024 due mainly to the high inflation,
monetary tightening, and slow growth in the Euro area and the UK. Output in the
US expanded by 3.2% in Q3 2022, 2.6% in Q4 2023 and is expected to rise by
1.6% in 2023. Output in the UK economy inched up to 0.1% in Q4 2022, up from
the contraction of -0.1% recorded in Q3 2022. Furthermore, it is expected to
expand by 1.6% in 2023. In the Euro area, output growth declined to 0% in Q4
2022 from 0.4% in Q3 2022 as the high cost of borrowing and inflation continue
to dampen output growth, eventhough forecast shows it would expand by 0.8%

in 2023. Japan’s output also remained flat at 0% in Q4 2022, from the negative
growth of -0.3% in Q3 2022 but is forecasted to rise to 1.3% in 2023. The composite
Global PMI of JP Morgan has expanded to 54.2 index points in April 2023,
indicating an increase in global economic activity.
In the Emerging Market and Developing Economies (EMDEs), output growth in
China declined to 0% in Q4 2022 from 3.9% in Q3 20122. It is forecasted to grow
by 5.2% in 2023 from 4.0% in 2022, and to 5.2% in 2024. In Russia, quarter-onquarter (q-o-q) output is forecasted to expand by 1.1% in Q4 2022 compared
with the contraction of -0.8% in Q3 2022. It is expected to expand by 0.7% in 2023
due to a decline in retail and wholesale trade as well as the ongoing conflict
with Ukraine. In South Africa, output contracted q-o-q by -1.3% in Q4 2022,
compared with an expansion of 1.8% in Q3 2022 due to the escalating energy
crises. In 2023, output is expected to grow by 0.1%. In Nigeria, q-on-q output
expanded by 10.99% in Q4 2022 compared with 9.68% in Q3 2022, driven largely
by the Finance and Insurance, ICT, Services and Agriculture sub-sectors. Output
is expected to grow by 3.2% in 2023.
Global inflation has continued to decline but remains elevated above the longterm targets across most Advanced Economies (AEs) and EMDEs. In the AEs, IMF
forecasted inflation to decline to 4.7% in 2023 from 7.3% in 2022 due to a decline
in non-fuel commodity prices and the effects of the ongoing monetary
tightening. In the US, inflation has continued to decline since July 2022 and
dropped to 4.9% in April 2023, while it stood at 7.0% in the Euro area and 10.1%
in the UK (in March 2023). In the EMDEs, inflation is forecasted to decline to 8.8%
in 2023 and further to 6.5% in 2024 due to the expected decline in food and
energy prices, continued monetary tightening and easing of disruptions to the
global supply chains. As of April 2023, year-on-year inflation declined in China to
0.1%, in India by 4.6%, and Russia, 2.3% but increased in South Africa to 7.1% and
Nigeria, 22.22% in December 2022.
2.2
Domestic Economic Developments and Their Implications
In Q4 2022, the domestic output grew by 3.52% (y-o-y) compared with the 2.25%
achieved in Q3 2022. This was driven by the growth of the non-oil sector by 4.27%,
particularly Services, (5.69%); and Agriculture, (2.05%). However, the oil output
contracted by -13.38% due to persisting oil production problems. On a q-on-q
basis, output grew by 10.99% in Q4 2022 compared with 9.68% in Q3 2022. Output
is forecasted to grow by 2.64% in Q1 2023.
National Bureau of Statistics (NBS) data shows that year-on-year headline
inflation increased by 19 basis points, from 22.04% in March 2023 to 22.22% in April
2023, due to high transportation costs on production and logistics. This is the

highest level since 2009, when the current CPI basket was introduced. In April
2023, both food and core inflation increased year-on-year. Food inflation
increased to 24.62% in April 2023 from 24.45% in March 2023, driven by 0.53
percentage point increase in prices of processed foods. Core inflation also
increased in April 2023 by 0.28 percentage point to 20.14% from 19.86% in March
2023, due mainly to increased prices of processed foods, education, clothing
and footwear, and transport. Survey data shows that expected inflation
continued to rise in April 2023 eventhough it had remained below actual inflation
since September 2022. Monetary sector developments showed that broad
money (M3) growth increased by 7.37% in April 2023 year-to-date (annualised at
22.11%, above the benchmark of 17.18% for 2023). This increase was driven by
the rise in the Net Domestic Asset (NDA), which grew 16.76% (year-to-date) in
April 2023 (annualised at 50.28%, above the benchmark of 15.78%). The key
driver of the growth in NDA was net claims on government which grew by an
annualised rate of 112.05% (y-t-d) in April 2023, above the 2023 benchmark of
19.64%. Staff forecasts showed that headline inflation would marginally increase
from 22.22% in April 2023 to 22.41% in May 2023 due to the expected rise in the
cost of energy, particularly Premium Motor Spirit (PMS) and Automotive Gas Oil
(AGO), anticipated increase in consumer demand as eid-el-fitr approaches and
exchange rate pass-through.
The banking system stability review report showed that the Capital Adequacy
Ratio (CAR), standing at 12.8% in April 2023, was above the regulatory minimum
of 10%. The Non-Performing Loans (NPLs) ratio was 4.3%, and was below the
regulatory maximum of 5%. Furthermore, Liquidity Ratio stood at 45.3%, above
the regulatory minimum of 30%. These suggest that the banking system continues
to remain safe, sound and resilient. The industry’s Total Assets and Gross Credit
to the economy have sustained an upward trend, the former grew year-on-year
by N16.65 trillion or 25.88% to N80.97 trillion in April 2023. The upward trend in total
credit to the economy had continued since 2019 following the Bank’s Loan-toDeposit Ratio (LDR) policy, standing at N30.64 trillion as of April 2023. It has
increased by N4.54 trillion or 17.4% between end-April 2022 and end-April 2023.
3.0
The Basis for My Policy Choice
Given the high level of inflation, adjudged to be well above the growthretarding threshold and forecasted to further rise, I believe monetary policy must
continue to prioritise taming inflation. Evidence, including counterfactual
analysis, showed that ongoing monetary tightening has significantly dampened
the pace of the increase in inflation. In deciding between loosening, holding or
raising the MPR, I choose to raise the policy rate because loosening would
compound the inflationary pressure, negate the present efforts at taming

inflation and accelerate capital outflows. Holding, at the moment, could erode
the gains made from the previous policy rate hikes. I, therefore, voted for a
further tightening, albeit by a lower rate, to rein in inflation and mitigate the rising
foreign exchange pressure. Consequently, I voted to:
Raise the MPR by 50 basis points to 18.5% 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.

10. SHONUBI, FOLASHODUN A.
Global growth for the rest of 2023 has been buoyed by the promising outlook
of Asian economies, especially with the reopening in China. This rebound is now
challenged by the unintended consequences of general tight policy
environment that has characterized most economies. As such, while sustaining
the actions to deal with high inflation, policy makers around the world are now
facing the herculean task of dealing with both the immediate drag effect of a
higher interest rate environment on output and the need to strengthen the
resilience of the financial system against contagion risks. As we move into the
second half of 2023, prospect for domestic economic growth remains
cautiously positive owing to rising inflation, narrow fiscal space and pressured
external sector. Like the rest of the world, Nigeria is thus confronted with the
dilemma of ensuring that the momentum of slow but steady growth is
maintained, even as current actions to curb inflation are sustained to avoid
premature reversal of recent gains.

Global and Domestic Economic Developments
Global growth recovery remains weakened by elevated inflation and
disruptions to the global supply chain caused by the protracted Russian-Ukraine
war. Global output growth is thus projected downward to 2.8 per cent in 2023
by the International Monetary Fund (IMF), on account of minimal growth
numbers in the Advanced Economies and slower growth projections in the
Emerging Market and Developing Economies (EMDEs). A situation further
compounded by the high levels of debt stock majority of these countries now
carry.

Persistent uptick in domestic prices, on account of rise in both food and
core inflation remains the major concern for monetary policy. Headline
inflation, on year-on-year basis, inched up further to 22.22 per cent in April 2023,
from 22.04 per cent in March 2023, reflecting increase in the food and core
components. On month-on-month basis, whereas core inflation fell, headline
and food inflation rose further, highlighting the effects of higher logistic cost on
food prices, insecurity induced food supply shortages and high imported
inflation from imported food items.
Reduced growth in Q1:2023 reflected the effect of the underperformance
of the oil sector. Growth in the Real Gross Domestic Product (GDP) was lower
at 2.31 per cent Q1:2023, on account of mainly the 2.77 per cent growth in nonoil sector, which compensated for the continued dismal performance of the oil
sector. Services sector grew by 4.35 per cent and contributed over 57.30 per
cent to growth. Also, Industry sector expanded marginally by 0.31 per cent,

against a 0.91 per cent contraction recorded in the Agriculture sector. For the
first time since June 2022, the Composite Purchasing Managers’ Index (PMI) and
all its sectorial indices for manufacturing, agriculture, and services sectors were
above the 50.0 index points.
Growth in monetary aggregates showed the presence of monetary factor
as a contributor to inflation. Annualised growth in broad money supply (M3),
at 22.11 per cent at end-April 2023, was above the benchmark (17.18 per cent)
for fiscal 2023. The expansion of the monetary base, as a result of significant
rises in domestic claims, accounted for the high growth in major monetary
aggregates. Notwithstanding this, major money market and lending interest
rates moved higher than their levels in the previous period. This highlights the
need for the Bank to intensify its liquidity management measures.
Despite the reduction in the capital adequacy ratio of the banking
industry, the state of other soundness indicators showed that the
industry remained resilient. Industry liquidity and non-performing loan ratios
improved in April 2023, from 43.8 and 4.5 per cent, to 45.3 and 4.4 per cent,
respectively. Average capital adequacy ratio however declined to 12.8 per
cent from 14.2 per cent in the preceding month, due to higher rise in risk
weighted assets vis-à-vis the qualifying capital. Industry credit and deposit
maintained upward trend, just as improvements were recorded in the measures
of industry profitability.
The fiscal and external sectors were characterised by reinforcing shocks.
Low accretion to the external reserves from crude oil exports, high import bill
and limited supply to the foreign exchange market from other sources have
compounded the liquidity condition in the foreign exchange market, resulting
in increased pressure on prices in the foreign exchange market. The fiscal sector
is characterised by low revenue, high deficit, and huge debt, thus limiting the
capacity of the government to respond to, and fully support monetary policy.
Outlook, Overall Considerations and Decision


The rebound in China and most of the rest of Asia provides major positive
impetus for the global economy. While this is encouraging for growth, the
overall outlook remains clouded by the heightened uncertainties around the
impact of worsening geopolitical tensions and unintended costs of generally
elevated policy rates to tame inflation. Every economy must therefore contend
with the delicate task of balancing actions to turnaround the trajectory of
inflation, with the imperative of ensuring the wheel of growth is kept running,
while also tracking financial system stability implications of the tight policy
environment.

Despite the resolute actions we have taken in the last one-year, the major
challenge for domestic monetary policy remains high inflation, which is still at a
level that is considered detrimental to investment and the overall fortune of the
economy.

The imperative for the government to actively implement initiatives that will
address impediments to real sector activities and aid growth cannot be over
emphasized. Hence, recent decision to securitize outstanding “Ways and
Means” is expected to provide some immediate funding respite. In the same
vein, state governments need to do more to attract and encourage investment
that will improve the fortunes of states, especially as easy-to-get resources
continue to dwindle.
Clearly, the fiscal authority has a major role to play to promote growth and curb
inflation. For instance, despite the optimism that followed the new security
arrangement in oil producing areas, dismal performance of the oil sector has
been a major drag on growth. The incoming administration must act to
eliminate the encumbrances in the oil sector, while addressing the general
insecurity and low revenue challenges. Again, as stated in previous statements,
government should revisit the adoption of Public Private Partnership (PPP) to
eradicate leakages and wastages in various aspects of our social and
economic affairs.

For monetary policy, the immediate and short-term realities require that we
must maintain a tight policy stance to sustain and consolidate recent gains,
while ensuring that we do not stifle real sector activities. The outlook showed
uptick in food inflation due to insecurity induced supply shortage and imported
inflation. Indication by the incoming administration to discontinue fuel subsidy
will be a major source of pressure on prices from the resultant high energy and
logistics costs. It is therefore imperative that the Bank continues to focus on
actions to moderate the monetary undercurrent, while fiscal actions are
targeted at addressing the more fundamental structural and supply side
challenges.

Despite having shown evidence that convinces us that our actions are working,
and that things would have been worse, we have the opportunity to do more.
This especially is by ensuring that we manage the liquidity level more better
through more efficient conduct of our interventions in the financial market, and
fiscal related monetary activities. it is pertinent that, to properly anchor inflation
expectation, we must act to entrench the perception that monetary policy is

focused on ensuring turnaround of at least the monetary undercurrent of
inflationary pressure.

I therefore vote to:
• Raise the MPR to 18.50 per cent;
• Retain the asymmetric corridor of +100/-700 basis points around the MPR
• Retain Cash Reserve Ratio (CRR) at 32.5 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 fragile growth and inflation persistence, global condition is still teetering
notwithstanding the receding fears of widespread recession. Major constraints
to economic activities persist, but at lesser intensities amidst sizeable
uncertainties. The strong global economic rebound that was expected,
following the reopening of the Chinese economy and the gradual correction
of global supply-chain disruptions, is now deferred. As growth in the Advanced
Economies (AEs) stall around the zero-line, short-term global growth prospects
remain vulnerable, and largely propped by the performance of Emerging
Market and Developing Economies (EMDEs). Accordingly, the IMF’s global
growth projection for 2023 was downgraded by 0.1 percentage point to 2.8
percent, reflecting the 1.3 percent growth in the Advanced Economies and 3.9
percent in EMDEs. Following ubiquitous monetary tightening, global inflation has
begun to slow, although it stayed significantly above historical averages and
national targets. Along with monetary policy effect, the reducing volatility in
energy and food prices contributed to expected global disinflation. However,
tighter monetary conditions has amplified financial sector vulnerability,
especially in the Advanced Economies, and elevated capital flow reversals in
EMDEs.
Domestic macroeconomic recovery continued with positive short-term outlook,
despite global uncertainties and domestic imbalances. Output growth, though
fragile, has sustained a rebound and is projected to strengthen further following
steady diversification and continued improvements in the oil sector. Thus,
domestic growth is estimated to remain positive in 2023 reflecting broad-based
consolidation of economic activities. Output grew by 2.31 percent in 2023q1,
albeit with 1.21 and 0.8 percentage points drop from 2022q4 and 2022q1,
respectively. The current performance reflected the continued resilience of the
non-oil sector, which grew by 2.77 percent, and the marked improvement in oil
GDP from a deeper contraction of -13.38 percent in 2022q4 to -4.21 in 2023q1.
Non-oil growth was essentially driven by the services (4.35 percent) and
industries (0.31 percent) sub-sectors, as agriculture GDP slowed during the
quarter. The overall performance of the economy followed the quantitative
intervention of the Bank in high-impact sectors.
Impulses from soaring global prices are impacting domestic outcomes, as
imported inflation reinforced legacy structural constraints to elevate domestic

inflation. With another year-on-year uptick to 22.22 percent in April 2023,
headline inflation remained sticky, although at a slowing momentum. With April
inflation at 0.18 percentage point above the March 2023 level, the pace
inflation appears to be steadily losing steam since the 1.04 percentage points
surge in July 2022. Current trend tracked the modest 0.16 and 0.28 percentage
points rises in food and core inflation, respectively, to 24.61 and 20.14 percent.
These developments reflected coexisting cost-push and demand-pull drivers of
inflation,
especially
as
energy
prices
challenges
aggravate
existing
infrastructure and security inadequacies. At its current level, inflation remains
growth-inhibiting and must be decisively subdued in order to effectively anchor
expectations. The slowing impetus is a welcome indicator that the inflation
trend is flattening and would soon begin to drop following our tight policy
stance.
Monetary and financial developments reflected the tight policy stance with
lower build-up of systemic liquidity. Broad monetary expansion rose, month-onmonth to 2.56 percent in April 2023 from 2.42 percent in March due, largely, to
the 4.60 percent increase in net domestic assets during the month. This reflected
the 2.56 percent rise in banking system claims on other sector, including CBN’s
support for high-impact sectors. Amidst prevailing global banking crisis,
Nigeria’s banking system is resiliently stable as industry Non-Performing Loans
(NPLs) ratio (4.41 percent), Liquidity Ratio (45.29 percent) and Cash Adequacy
Ratio (CAR) (12.79 percent), were tolerably within their benchmarks.
In my consideration, I note the lingering uncertainty in global conditions. Output
growth remains weakly positive while inflation stayed sizeably above historical
trend, especially among advanced economies. Widespread monetary
tightening is unsettling the banking system (especially in the US and Europe) and
is inducing investors’ flight to safety from EMDEs, with severe ramifications for
financial markets stability. These global conditions and fragile outlook
potentially expose the domestic economic to exogenous shocks. Yet, I note
that domestic growth prospect remains positive, even with inflation at
undesired levels. Nigeria’s FX market is projected to remain stable, particularly
due to various policies to strengthen economic fundamentals, resolve macroimbalances and diversify our productive base. The onset of the Dangote
refinery is gratifying, as it could fortify FX reserves, enhance continued exchange
rate stability, improve fiscal space, and promote economic advancement.
While medium-term outlook is bright, current outcome indicates the need to
tackle near-term challenges to the domestic economy. Output growth, though

positive, is weak and needs to be propped to avert long-run dent to potential
GDP. However, I am more concerned that inflation, at 22.22 percent is at a
detrimentally unacceptable level that continues to rise. Despite the various
policy rate hikes over the last one-year, inflation remained sticky. This does not,
however, imply impotency of monetary policy as inflation would have galloped
faster to inordinate heights without those hikes. In-house counterfactual
analyses indicate that the various policy hikes cumulatively lowered possible
inflation outcome by over 8 percentage point. Indeed, the hikes have been
effective in moderating the pace of inflation as its momentum declined from
1.04 percentage points in July 2022 to 0.18 percentage point in April 2023.
Accordingly, I note the need to intensify effort to combat domestic inflation in
order to reduce it to growth-supporting levels and anchor expectation. I favour
further tightening of policy stance to rein in inflation. Though I remain mindful of
the dampening effect of tightening on growth, we can’t afford inflation at its
current level, because it is already growth-inhibiting. We will continue to
carefully analyse, review, and recalibrate our policy actions to ensure optimal
effects on the macroeconomy. Today, on the balance of evidence and
judgement, I am strongly convinced that rising inflation is a bigger threat to
macroeconomic stability than weak output. While the cyclical recovery of
Nigerian economy continued, it is important that inflation expectations are
adequately anchored. Overall, I am convinced that a further hike of the policy
rate is needed to effectively fast-track price stability and bolster long-run output
growth. Therefore, I vote to:
i. Raise the MPR by 50 basis points to 18.50 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

May 2023