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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 133 OF THE
MONETARY POLICY COMMITTEE MEETING HELD ON MONDAY 23rd
AND TUESDAY 24th NOVEMBER 2020
The Monetary Policy Committee (MPC) met on the 23rd and 24th of
November, 2020 amidst the announcement of the discovery of
several high efficacy COVID-19 vaccines, resulting in stronger
optimism for improvement in global output. However, persisting
weakness in crude oil prices, soaring global debt and high
unemployment persist. In the domestic environment, the Nigerian
economy slid into recession in the third quarter of 2020, following a
second consecutive quarter of contraction in output. The third
quarter contraction was, however, milder than the previous
quarter. The Committee appraised the developments in both the
global and domestic economies, as well as the outlook for the rest
of the year and the first quarter of 2021.
Ten (10) members of the Committee were in attendance at the
meeting.
Global Economic Developments
Although the global economy witnessed a better-than-expected
recovery in the second quarter of 2020, it, however, continued to
be weighed down by the headwinds largely associated with the

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COVID-19 pandemic and weak crude oil prices. In the advanced
economies, the persistence of weak aggregate demand, slow
recovery in supply chain networks and the rebound in COVID-19
infection rates, have cast a new wave of uncertainty over their
recovery in the short to medium term. In the Emerging Market and
Developing Economies (EMDEs), China continues to lead the
recovery, recording a stronger-than-expected growth in the
second quarter of 2020. In India, on the other hand, growth
continued to be muted as a result of increasing rates of COVID-19
infections and fatality. In general, this group of economies is set to
contract less, compared with the advanced economies, led by the
expected strong recovery in China. Consequently, the International
Monetary Fund (IMF) reviewed the forecast for global growth in
2020 to reflect a slower pace of contraction from -4.9 per cent to -
4.4 per cent.
Inflation in most Advanced Economies is expected to remain
subdued in the medium to long term as aggregate demand
remains weak across several economies, reflecting the impact of
the Pandemic on income. The US economy has, however,
maintained a steady pace of job creation, even though infection
rates and total fatality continue to rise in that country. The threat of
a rebound of the Pandemic in several countries has resulted in
second and third waves of lockdowns in these countries. This is
expected to further dampen aggregate demand and slow the
pace of price development. In several Emerging Market and
Developing Economies (EMDES), inflation remained relatively high

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compared with the Advanced Economies owing to the persistence
of exchange rate pressures, dwindling capital flows and weak
accretion to reserves as well as other structural issues.
In the financial markets, conditions remain relatively stable, buoyed
by continued monetary and fiscal stimulus. The huge level of
monetary and fiscal injections has, however, increased the
likelihood of a global financial crisis post-pandemic, especially
when central banks commence normalization of monetary policy.
Domestic Economic Developments
Data from the National Bureau of Statistics (NBS) showed that real
Gross Domestic Product (GDP) contracted by -3.62 per cent in Q3
2020, compared with -6.10 and 2.28 per cent in the previous quarter
and corresponding period of 2019, respectively, thereby pushing
the economy into recession. The oil sector contracted further by -
13.89 per cent in Q3 2020 from -6.63 per cent in the previous quarter,
while the non-oil sector contracted by -2.51 per cent in Q3 2020,
compared with -6.05 per cent in the preceding quarter. The
persisting weak performance was mainly attributed to the lull in
economic activities associated with the low price in the oil market
as well as the lingering effects of the Coronavirus Pandemic.
The MPC observed the gradual improvement in the Manufacturing
and Non-Manufacturing Purchasing Managers’ Indices (PMIs)
which rose to 50.2 and 47.6 index points, respectively, in November
2020, compared with 49.4 and 46.8 index points in October 2020.
This development signposts an increase in economic activities,

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driven by growth in new orders, improved supply delivery time, rising
production levels and new export orders. The employment level
index component of the manufacturing and non-manufacturing
PMIs also improved in November 2020 to 47.3 index points and 46.7
index points, respectively, compared with 46.0 index points and
44.2 index points in October 2020. The Committee, however, noted
the likely downside risk to growth of the recent unrest in the country,
warning that this may adversely impact economic recovery in the
near term.
The Committee noted with concern that inflation has been on the
rise for the fourteenth consecutive month, as headline inflation
(year-on-year) moved up to 14.23 per cent in October 2020 from
13.71 per cent in September 2020. This was attributed to the
increase in both food and core inflation, which rose to 17.38 and
11.14 per cent in October 2020 from 16.66 and 10.58 per cent in
September 2020, respectively. The continued increase in food and
core inflation was attributed to the persistence of insecurity across
the country as well as lingering structural deficiencies impacting the
logistics of moving food items to urban areas such as poor road
networks, unstable power supply and a host of other infrastructural
deficiencies. Other factors include the persisting impact of
coronavirus-induced supply disruptions, recent hikes in the price of
energy products (PMS and electricity) and weak crude oil prices.
The Committee, however, noted that the rise in inflation will likely
abate in the medium term, as domestic production is expected to
recover, following the resumption of economic activities post-

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COVID-19 lockdown. In addition to this, food inflation is expected
to moderate as harvest season sets in. Monetary and fiscal policies
are also expected to continue their broad-based stimulus support
towards full recovery. This will involve fiscal measures to reduce
unemployment, provide an enabling environment for private
sector investment and necessary support to the health sector to
cushion the impact of the coronavirus pandemic. In addition, the
CBN is expected to sustain its various intervention measures to boost
consumer spending and support the recovery.
The Committee noted that growth in broad money supply (M3)
increased marginally to 3.53 per cent in October 2020 from 3.20 per
cent in September 2020, reflecting an increase in Net Foreign Assets
(NFA). It further noted the moderation in contraction in Net
Domestic Assets (NDA) to -2.19 per cent from -5.05 per cent in the
previous period. Aggregate domestic credit, however, grew by
7.61 per cent in October 2020 compared with 7.35 per cent in the
previous month, as a result of the Bank’s policy on Loan-to-Deposit
Ratio (LDR), supported by the Bank’s interventions in the various
sectors of the economy. Total gross credit by the banking industry
stood at N19.54 trillion as at 13th November 2020 compared with
N19.33 trillion at end-August 2020, an increase of N290.13 billion.
When compared with N15.56 trillion at the commencement of the
LDR policy in May 2019, total gross credit increased by N3.97 trillion.
These loans were granted mainly to manufacturing (N738 billion),
General Commerce (N874 billion), Agric and Forestry (N301 billion),
Construction (N291 billion), ICT (N231 billion), just to mention a few.

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The Committee noted the reduction in interest rates on loans
granted by Deposit Money Banks (DMBs). As at October 2020, 86.23
per cent of total loans granted to over one (1) million customers, by
Deposit Money Banks (DMBs) were at interest rates considerably
below 20 per cent. This was an improvement from 76.43 per cent as
at July 2019.
MPC noted the improvement in Financial Soundness Indicators of
the DMBs which showed Capital Adequacy Ratio (CAR) of 15.5 per
cent, Non-Performing Loans (NPLs) of 5.73 per cent and Liquidity
Ratio (LR) of 35.6 per cent, as at October, 2020. As regards nonperforming loans (NPLs), MPC however, noted that the ratio
remained above the prudential benchmark of 5.0 per cent and
urged the Bank to sustain its tight prudential regime to bring it below
the benchmark.
The Committee welcomed the improvement in the financial
soundness indicators of Other Financial Institutions (OFIs) as
indicated by the growth of N582 billion, or 16.94 per cent (year-onyear), in aggregate assets to N4.02 trillion as at end-September
2020. Similarly, aggregate credit grew by N217 billion, or 12.27 per
cent (year-on-year), to N1.99 trillion during the same period. The
Capital Adequacy Ratio for the subsector also exceeded the
minimum prudential ratio of 10 per cent.
The Committee recognized the supportive developmental roles of
the CBN towards addressing some of the structural issues in the
economy. The MPC specifically expressed optimism on the future

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impact of the disbursements from Agri-Business/Small and Medium
Enterprise Investment Scheme (AGSMEIS) (N92.90 billion to 24,702
beneficiaries), Anchor Borrowers Program (ABP) by the sum of
N164.91 billion to 954,279 beneficiaries and COVID-19 Targeted
Credit Facility (TCF) to household and SMEs (N149.21 billion to
316,869 beneficiaries).
Liquidity conditions in the banking system continued to influence
money market rates in the review period. The Open Buy Back (OBB)
rate declined progressively as a result of rising liquidity levels in the
banking system, while there were no transactions at the
uncollateralized inter-bank call window. Consequently, the monthly
weighted average OBB rate declined to 1.88 per cent in October
2020 from 3.50 per cent in September 2020.
The Committee noted the recent impressive performance
recorded in the equities market, particularly the increased
patronage by domestic investors largely driven by low yields in the
money market. The All-Share Index (ASI) increased by 20.55 per
cent to 30,530.69 on October 30, 2020 from 25,327.13 on September
30, 2020. Similarly, Market Capitalization, grew by 20.82 per cent to
N15.96 trillion from N13.21 trillion over the same period. This
improved performance was largely attributed to positive third
quarter corporate earnings as investors moved in to pick-up
bargain stocks.
The Committee observed the moderate decline in the external
reserves position, which stood at US$35.18 billion as at November

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19, 2020 compared with US$35.95 billion at end-September 2020, as
crude oil prices continue to fluctuate with downward pressure.

Outlook
Overall, the medium-term outlook for the global economy is
beginning to show a ray of optimism following the discovery of
COVID-19 vaccines.
In the domestic economy, available data and forecasts for key
macroeconomic variables also suggest optimism in output growth
in the fourth quarter of 2020, due to the positive outlook for most
economic activities. Accordingly, the economy is expected to
recover from recession by the end of 2020, while inflation is
projected to moderate by the first quarter of 2021.
The Committee’s Considerations
The Committee’s considerations remained focused around
tailwinds imparting upward pressure to domestic prices and key
headwinds to output growth.
The Committee noted that inflation continued to be driven by
supply side disruptions arising from the COVID-19 pandemic and
other legacy factors. Key amongst these are: the security
challenges in parts of the country; increase in food prices; and the
recent hike in pump price of PMS and electricity tariff. The MPC,
therefore, emphasized the need to address structural supply side
issues putting upward pressure on costs of production and

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unemployment. To address the public health crisis associated with
the COVID-19 pandemic, the Committee urged the Federal
Government to make relentless effort to procure a substantial
quantity of the COVID-19 vaccines to surmount the public health
crisis and pave the way for a broader macroeconomic recovery.
The Committee noted that the contraction had bottomed out,
since it moderated significantly from -6.10 to -3.62 per cent in the
third quarter of 2020. This was so because both the monetary and
fiscal authorities had anticipated the impending recession and had
put measures in place for its quick reversion. Some of these
measures include the Economic Sustainability Programme by the
Federal Government and other CBN facilities targeted at
households,
small
and
medium
enterprises
(SMEs),
youth
empowerment, and reduction of unemployment. It thus, urged the
Federal Government to maintain its initiatives targeted at reducing
unemployment, particularly amongst the youths, citing the recent
EndSARS protests and ensuing agitation by hoodlums as potentially
disruptive to output growth in Nigeria. To this end, the MPC
reiterated its support for the various development finance initiatives
of the CBN to stimulate production and reduce unemployment.
MPC further encouraged the Bank to intensify its efforts by
increasing funding to more beneficiaries so as to boost consumer
spending and accelerate recovery from recession.
On the Financial Markets, the Committee considered the improved
performance in the equities market as a leading indicator of
medium-term macroeconomic recovery. It thus urged the Bank to

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maintain its policies on exchange rate and financial system stability
to attract more investment into the Nigerian equities market.
The MPC noted that credit to key sectors of the economy increased
and encouraged the continued credit support to employmentstimulating sectors to hasten the recovery of output growth and
improve employment particularly among the youths. The
Committee emphasized the need for the Bank to maintain its
regulatory surveillance over the banking system to ensure that nonperforming loans remain low.
MPC noted with pleasure, the CBN’s engagement with relevant
stakeholders, particularly in the private sector, to hasten the
recovery of growth. This engagement would involve collaboration
towards job creation and provision of credit facilities to stimulate
business activities for both corporates and individuals, particularly
those who lost their goods and business premises to hoodlums,
during the recent protest.
The Committee’s Decision
At this meeting, the Committee focused not only on price stability,
but also on the need to speedily take actions to exit the recession.
In view of these considerations, the choices before the Committee
were focused on whether: to tighten the stance of policy to address
rising price levels recognizing its primary mandate of price stability;
to ease to support output recovery; or to hold to allow existing
policy initiatives to permeate the economy.

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The Committee noted that, although the appropriate response to
rising inflationary pressure would be to tighten the stance of policy
in order to moderate upward pressure on prices, it nevertheless, felt
that doing this would exert downward pressure on the recovery of
output growth. The Committee also felt that tightening would
negate the Bank’s desire to expand credit to the real sector at
affordable terms, not only to boost production, but also to increase
consumer spending. To the Committee, tightening was therefore
not the appropriate response at this time.
With the economy, whereas MPC felt that government spending
and Bank’s expansionary stance would be desirable to support
recovery and guide the economy out of recession, it felt loosening
would trigger excess liquidity and worsen the inflationary pressure.
MPC also felt that excess liquidity may impact demand pressure
and fuel further depreciation of the naira.
With respect to a hold position, the Committee was of the view that
this will be beneficial as it will allow current policy measures to
permeate
the
economy
while
observing
the
trend
of
developments. The Committee also felt that the heterodox policies
of the Bank targeted at various sectors are showing positive results
that would further engender growth.
On balance, the MPC was of the view that, although all three
options offer some benefits to the economy, the hold option was
desirable at this meeting. Based on these factors, members, voted
in line with the most pressing need towards reversing the recession
and achieving medium term macroeconomic stability.

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In view of the foregoing, the Committee decided by a unanimous
vote to retain all parameters.

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

Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
24th November, 2020