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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 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-

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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
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 postpandemic, 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

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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 NonManufacturing 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, 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

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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-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

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and Forestry (N301 billion), Construction (N291 billion), ICT (N231 billion), just to
mention a few.
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 non-performing 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-on-year), 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 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

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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 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.

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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 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

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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 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 employment-stimulating 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.
In view of the foregoing, the Committee decided by a unanimous vote to retain
all parameters.
In summary, the MPC voted to:

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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

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
The global economy is showing prospects of recovery from the fallouts of the
COVID-19 pandemic and commodity price volatility. World output is forecast to
contract by 4.4 per cent, from 4.9 per cent contraction envisaged previously by
the International Monetary Fund (IMF). The World Bank is slightly less optimistic
with a forecast of 5.2 per cent contraction in 2020. The improvement in outlook
comes on the heels of recent progress with COVID-19 vaccines, significantly
eased global financial conditions as well as increased tempo of economic
activity (trade especially) across the world. Nevertheless, there remains a great
deal of uncertainty, coming especially from the second wave of the COVID-19
pandemic, which has resulted in resumption of partial lockdowns in Europe and
Japan. Adding to the cloud over global output recovery are the political
impasse in the United States following the November 2020 presidential election
and other geo-political risks (Iran, China, Syria, Israel/Palestine).
Meanwhile, commodity exporting countries continue to face additional
uncertainty arising from commodity price instability. For Nigeria, low and volatile
oil prices is a major cause for concern just as it is for most OPEC member
countries. This and the other downside risks identified earlier could drag global
output recovery. Even though some economies could be out of recession by Q2
2021, regaining the output momentum of 2018/2019 (before COVID-19) could
take much longer. I think that Emerging Markets and Developing Economies
(EMDEs) should view the presumption of a spiffy global recovery implied by most
of the current forecasts with caution. First, based on the presumption of a sharp
recovery, policy makers could underestimate the amount of adjustment
needed to weather a slower and more difficult global environment. Second,
domestic policy calibrations could inadvertently be tailored to quick fixes rather
than a more comprehensive reform agenda needed to realign the economy to

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the emerging economic order (new normal) of asymmetric external spillovers –
weak gains from positive external conditions and strong/heavy penalty from
adverse ones. An indication of the former is here – capital inflows to most EMDEs
including Nigeria has remained sluggish despite the unprecedented (high)
liquidity injections and (low) yields in the advanced economies. Similarly, a
rebound in global growth, whenever, is unlikely to be accompanied by crude oil
prices as high as witnessed in the 2000s until the global financial crisis. It is
therefore pertinent for oil producing economies like Nigeria to look more in the
direction of non-oil activities for recovery.
Nigeria’s real gross domestic product (GDP) contracted by 3.62 per cent in Q3
2020, implying a descent into a recession. However, relative to Q2 which
recorded a contraction of 6.10 per cent, the Q3 outcome represents a
significant improvement. Beneath the headline, we find some interesting
undercurrents. Agriculture remained positive at 1.39 per cent, while Crude
Petroleum and Natural Gas contracted twice as much as in Q2 2020.
Importantly, the improvement in output during the quarter was driven mainly by
Industry which climbed about 6 percentage points from -12 per cent in Q2,
thanks to Construction and Manufacturing. These details underscore the
importance of the real sector interventions by the Central Bank of Nigeria (CBN)
in the wake of the COVID-19 pandemic. Looking ahead, I could see prospects
of an early exit from the current recession, premised on a more hopeful global
economic environment following the rapid progress with vaccines; trends in
overall and sector GDP performance from Q2 to Q3 2020 with Q3 real GDP
outperforming most projections; rising PMIs and capital market indicators; robust
credit flow to the real sector as the loan-to-deposit ratio (LDR) and differentiated
cash reserves requirement (DCRR) policies continue to make impact,
strengthening the effect of interventions in the real sector; impact of harvests
and the promise of the Economic Sustainability Plan (ESP).

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Meanwhile inflation remains muted in advanced economies, but creeping up in
some EMDEs including Nigeria, owing to depreciating exchange rates and
supply bottlenecks. Although most analysts would not blame monetary
expansion for the consumer price pressures in some EMDEs, the element of
increased (pent-up) demand could partially embody the influence of cheap
money. As such, even as monetary and fiscal stimuli appear to be the ace in
the race against output and employment losses, growth promoting policies in
these countries must be designed to target activities that directly support
production and ease supply. In the face of rising domestic inflation
underpinned by exchange rate pressures, further easing of monetary conditions
must be predicated on the principle that, by directly incentivizing production
and supply, both low inflation and output expansion may be within reach. The
CBN Monetary Policy Committee (MPC) has been guided by this consideration,
which in my view has proved to be credible. Both the LDR and DCRR policies
have ensured unprecedented flow of credit to growth and employment
promoting sectors, which is partly why we can be optimistic about early
recovery from the current recession. Along same line of reasoning, I am
persuaded that a more aggressive implementation of the development finance
interventions of the Bank would quicken recovery and ease supply-induced
pressures on consumer prices. From the fiscal side, measures aimed at alleviating
production and distribution bottlenecks will equally be significant. In particular,
security remains a priority towards evacuation from farm and distribution of food
commodities across the country.
I should emphasize that at the root of the present economic crisis is a health
crisis, COVID-19 pandemic. And so, policy priorities must therefore continue to
include; (1) financial support to activities that are most constrained/impacted
by the pandemic as revealed by the Q2 and Q3 output numbers and (2)
securing more resources for the health system. The CBN is almost at the limits of
what monetary instruments can do. Therefore, fiscal policy must step in to deliver

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long-term economic stability even if, as it were, the capacity to do so appears
to be thin currently in view of multiple constraints on public finances.
Government nevertheless must find a way to promote resource development –
the recourse under the present circumstances for Nigeria appears to be external
financing. This is because, increasing taxes in a recession can be challenging
and perhaps, counterintuitive.
Finally, at the November 2020 meeting of the MPC, I opted for a hold position,
having viewed the extant monetary policy stance as enough to keep liquidity
conditions optimal. It is comforting that the domestic money market has
remained stable and supportive of economic activity. I saw no credible risk to
system liquidity in the short- to medium-term, given the impressive financial
soundness indicators (FSIs) coming from the banking system. Industry capital
adequacy continues to be robust just as earnings and liquidity. Despite
significant expansion in the loan books, banks’ non-performing loans have
remained reasonably contained and well provisioned. I should say that
sustained financial stability will be essential to the output recovery process.
In summary, I voted to:
Retain the Asymmetric Corridor at +100/-700 basis points around the MPR;
Retain the MPR at 11.5 per cent;
Retain the CRR at 27.5 per cent; and
Retain the Liquidity Ratio at 30 per cent.

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2. ADENIKINJU, ADEOLA FESTUS
Overview of International Development
The rise of second wave of the coronavirus is driving more countries to go back
to some forms of lockdown to slowdown the pressure on hospitals, healthcare
facilities and hospital personnel, as number of cases and death soar. The
lockdown and other forms of restrictions to the economy may reduce the
strength of expected recoveries and impacts on demand for oil and gas and
other commodities. Counterbalancing this, however, are the exciting news
about
several vaccines
which
are
expected
to
receive
emergency
authorization in most countries. Hence, global output growth for 2021 is forecast
to improve to 5.2% in 2021 from -4.4% in 2020.
Domestic Economic Performance
The presentations by Bank Staff show that Real GDP declined by -3.62% in
Q3.2020, an improvement over the -6.10% recorded in Q2.2020. The oil and nonoil sectors contracted by -13.89% and -2.51% in Q3.2020, respectively. Equity
market indices, the All-Share Index (ASI) and Market capitalization rose
significantly between September and November 2020. All components of
inflation rose in October 2020; however, food inflation rose the highest. Headline
inflation rose to 14.23% in October, up from 13.71% in September 2020. The
increase in inflation is due to increase in food and non-alcoholic beverages and
core inflation. Broad Money in October 2020, which stood at 3.53% was below
the revised provisional benchmark of 4.66%. Exchange rate continues to be
under significant pressure as the gap between the I&E rate and the BDC rate
widened.
The CBN monthly Purchasers Market Index shows that employment recovery lags
output recovery. The unemployment rate is above NAIRU, and the negative
output gap widens significantly to -9.10% in Q2.2020, from -2.1% in Q1, 2020.

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Capital inflow remains low and fiscal position of the Government is weak. Oil
production and export are below 2020 budget provisions.
However, the relative health of the financial sector is strong. The financial
soundness indicators for the month of October 2020 were generally good. The
Non-Performing Loans Ratio improved over the last MPC meeting. The Liquidity
Ratio remain above the minimum prudential requirement. The Returns on Equity
and Returns on Assets for the Banking Industry are steady and perform relatively
better than for comparator countries. Aggregate deposits continue to grow
despite the sharp fall in deposit interest rates. Other major industry size indicators
like Assets and Credits continue their upward positive trajectories. There is
improved lending to the real sector by both the deposit money banks and the
other financial institutions. These suggest that the CBN is managing the impacts
of the pandemic shocks on the financial sector relatively well. Allowing banks to
restructure their loans portfolio was a wise decision. However, the CBN should
continue to maintain strong surveillance over the industry and guide the orderly
winding down of the policies put in place to control the impacts of the
pandemic on the banking sector.
The impressive performance of the various intervention funds also show that
Nigerians are taking advantage of the funds to boost households demand and
improve output of small and medium scale enterprises. The Bank should
continue to monitor the disbursement of the funds to ensure wide access and
efficient performance of the funds. Information presented by Bank staff show
that there is geographical coverage in the disbursements of the funds.
General Considerations
The Nigerian economy slipped into recession in Q3. 2020, following two
consecutive contractions of output growth. This is not peculiar to Nigeria, as
general expectation is that vast majority of countries will record negative GDP

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growth rates in 2020. Inflation has also ticked up in most emerging and
developing countries, while several countries also experienced depreciation in
their local currencies against the dollar for most of 2020.
However, the rise in inflation in Nigeria is not totally unexpected. The current
strategy to expand aggregate domestic supply to boost economic growth and
employment rates and consequently reduce general price level is not a shortterm objective. This strategy of expanding credit, to boost supply and growth, in
my view, contributed to the less than steep decline in economic growth in
Q3.2020, as vast majority of sectors improved on their growth performance in
Q3. 2020 relative to Q2.2020. Business optimism for December 2020 and January
2021, reflected in the Business surveys by the Bank is on the rise. Empirical studies
have shown that sectors like trade, agriculture and education will help inclusive
recovery and deserve support.
However, there is a need to address the wide divergence in the exchange rates
in the BDC and I&E windows. The current intervention focuses more on demand
management, rather than on finding ways to expand alternative sources of
foreign exchange supply to the market. The country must reverse the current
significant deficit in the balance of trade account. If imports continue to exceed
exports, our foreign reserves will continue to be under significant pressure. We
must focus attention on export competitive and local competitive industries.
While there is a marginal downward trend in retail lending rates, the gap
between the lending and deposit rates remain unacceptably high. The banks
should be persuaded to do more to lower retail lending rates to complement
the current policy stance of the CBN.
As was suggested in my previous Personal Statement, there is a need to
frontload some of the intervention programmes under the Economic
Sustainability Plan. In addition, the Federal Government interventions should

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focus more on public works, and capital projects, that offer direct employment
to Nigerians, rather than direct cash transfers, given especially the lack of
supporting data and institutional weaknesses around direct money transfers in
Nigeria.
Decision
I believe ongoing intervention policies and programmes should be allowed to
work, while we monitor their developments and improve on their effective
implementation. I have not really seen anything in Q3.2020 that I was not
expecting after our earlier decisions in sectoral output relative to Q2.2020,
though prices also rose largely reflecting both supply and distributional issues, as
well as pressures from the foreign exchange market. There is a need to look at
the exchange rate policy to ensure we are not unduly penalizing the supply side
of the market. A review of the land border closure to provide respite on
pressures within the local market is also due.
Based on the above I cast my vote at this meeting to maintain all existing
monetary policy parameters:
1. Keep MPR at 11.5%
2. Maintain CRR at 27.5%
3. Maintain Liquidity Ratio at 30%
4. Maintain Asymmetry Corridor around the MPR at +100 / -700 basis points.

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3. AHMAD, AISHAH N.
The November 2020 MPC meeting and last for the year held against a backdrop
of promising results of COVID-19 vaccine trials by at least three major global
pharmaceutical companies. Whilst oil prices and stock markets rebounded on
this positive news, emergence of a second and in a few cases, third wave of
infections in some countries slightly dampens the hopes of return to normalcy by
the global economy.
The domestic economy on its part, formally entered a recession given the
release of the third quarter 2020 (Q3 2020) real GDP figures of -3.62 per cent.
Though negative for the second consecutive quarter, it is notable that this
performance was a marked improvement (40.7 per cent) from the Q2 2020 GDP
figure of -6.10 per cent. Further assessment of the GDP data showed that 17 out
of 46 sectors grew in Q3 2020, compared with 13 sectors in the previous quarter,
providing cautious optimism that the recession will be short lived.
This positive outlook of a rebound in economic activity over the medium term is
further supported by the gradual improvement in the Manufacturing and Nonmanufacturing 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. The employment level index component of both PMIs
also improved in November 2020 to 47.3 index points and 46.7 index points,
respectively, from 46.0 index points and 44.2 index points in October 2020.
Downside risks to growth prospects – limited fiscal space and volatile crude oil
prices persist, amidst recent unrests in the country, requiring focused and
coordinated fiscal and monetary policy actions to drive a quick and sustainable
recovery. Opportunities to ramp up fiscal revenue, improve FX supply and
stabilize the exchange rate exist in rigorous pursuit of export proceeds from the
non-oil sector of the economy, which thankfully contributed significantly to Q3

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2020 GDP growth. Intensified implementation of the Economic Sustainability Plan
alongside ongoing targeted interventions by the Bank, which have been
expanded to cover more sectors, such as health, education and particularly the
youth population, will be critical in accelerating the recovery.
The persistent rise in domestic prices remains a concern, with headline inflation
(year-on-year) rising for the fourteenth consecutive month to 14.23 per cent in
October 2020 from 13.71 per cent in September 2020. This was attributed, as
presented by data from the National Bureau of Statistics, to increases 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. Structural issues
such as insecurity, supply chain disruptions due to the pandemic combined with
impact of exchange rate adjustment and increases in VAT, price of PMS and
electricity tariff continue to drive domestic prices northward. Further uptick in
prices may also be expected in the near term as the traditional end of year
spike in economic activities sets in; however, this should taper in the first quarter
of 2021 as the harvest is concluded and food production improves.
Exchange rate pressures persisted in response to low foreign exchange supply
and rising FX demand as domestic and global travels and economic activities
resumed. The Bank’s strategic exchange rate management initiatives including
adjusting the exchange rate in response to market fundamentals, eliminating
over-invoicing and mispricing of imports into the country via an independent
Product Price Verification Mechanism to ensure that quoted prices are
validated before Forms M are approved, are expected to help moderate the FX
supply - demand imbalance. These initiatives would also help reduce spurious
and speculative demand, improve receipts of legitimate FX earnings and
attract foreign portfolio investment, thereby stabilizing the exchange rate. With
the gradual recovery in crude oil prices, currently over US$40 per barrel from low

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levels of US$20 per barrel in Q1 2020, FX inflows are expected to improve, while
other more sustainable sources of FX supply continue to be explored.
The financial system retained its operational and financial resilience, sustaining
critical support to the economy through the crisis. Credit growth remained on an
upward trajectory with robust soundness indicators and sustained decline in
average lending rates.
For instance, gross credit grew by N290.13 billion between end-August 2020 and
November 13, 2020 while total gross credit growth of N3,976.34 billion was
recorded from N15,567.66 billion at end-May 2019 to N19,544.00 billion at
November 13, 2020. Much of this credit was channeled to manufacturing,
consumer, general commerce and agriculture - all key employment generating
sectors. This was broadly driven by effective implementation of the Loan to
Deposit Ratio, Interventions and other complementary policies to ramp up
credit to the economy.
The gradual decline reported in lending rates is a positive development that
improves access to credit for more households and businesses with a view to
stimulating economic activity, creating jobs and driving a more sustainable and
inclusive growth. 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; an improvement from 76.43 per cent as at
July 2019.
This low interest rate environment was also reflected in the Open Buy Back rate
which stood at 1.88 per cent at end-October 2020, an indication of a highly
liquid banking system. Under this scenario, the Bank must maintain vigilance to
ensure optimal liquidity levels to support price stability and sustainable
economic growth.

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Industry financial soundness indicators strengthened with non-performing loans
ratio declining to 5.7 per cent at end-October 2020, from 6.1 per cent (endAugust 2020), while capital adequacy improved to 15.5 per cent from 15.3 per
cent over the same period. Profitability performance also remained satisfactory
buoyed by improvement in non-interest income. Financial sustainability of banks
will be paramount as moratoriums on restructured loans lapse in the near term
to strengthen absorptive capacity for any potential losses and maintain lending
support to the real economy.
Policy decision
Although the global economy witnessed a better-than-expected recovery in
the third quarter of 2020, headwinds largely associated with the COVID-19
pandemic and weak crude oil prices persist. Nonetheless, news of a likely
effective corona virus vaccine on the horizon raises hopes of a more robust
global economic recovery.
Whilst the domestic economy formally entered into recession in Q3, outlook for
the economy remains broadly positive given an expected return to normalcy in
global travels and economic activity - as vaccines are administered - and
trends observed from the Q3 2020 GDP numbers, which suggest an upward
trajectory in domestic output. Nonetheless, it is imperative to facilitate a strong
and inclusive economic recovery through expansionary fiscal policies if the
country is to exit recession quickly, especially given the significant negative
impact of the pandemic on key macroeconomic variables.
The fiscal space however, remains significantly constricted, requiring monetary
policy to step in further. This is even as Inflation continues on its upward trend, a
threat to the primary remit of the Committee requiring tighter monetary policy,
which would be counterproductive for an economy in recession. As noted in my
September statement, the monetary authority is thus faced with very difficult

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tradeoffs, making the case for maintaining the policy stance very strong at the
moment.
A number of factors support this assertion. Although output growth remains
challenged, it is expected to turn the corner in the near term, fueled by
increased lending to the manufacturing, agriculture and consumer goods
sectors and a progressively lower interest rate environment.
I also reckon that sustaining and ramping up ongoing fiscal and monetary
initiatives to stimulate the domestic economy, which are beginning to yield fruit,
would accelerate growth and help reduce supply shocks to inflation in the
medium term. More so, given the understandably lengthy lag of monetary
policy, the effects of previous decisions are still permeating the system. In my
view, a policy adjustment could trigger unwarranted shocks and derail an
imminent recovery; thus, presenting no compelling reason to alter the monetary
policy stance at this time.
Based on the foregoing, I vote to hold all parameters at existing levels; Retain
the MPR at 11.5 per cent; Retain the asymmetric corridor of +100/-700 basis
points around the MPR; Retain the CRR at 27.5 per cent; and Retain the Liquidity
Ratio at 30 per cent.

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4. ALIYU, AHMED
INTERNATIONAL AND DOMESTIC ECONOMIC DEVELOPMENTS
The global economy has continued with an uneven recovery path following the
lifting of institutionalized lockdowns in most countries. However, output growth is
being threatened by the emergence of the second wave of the COVID-19
global pandemic in many jurisdictions which has engendered renewed
inhibitive measures to curb the spread. Against this backdrop, the recent
development of effective vaccines to combat corona virus has generated
some excitement and cautious optimism that the global economy would
experience a slower than expected deceleration in output at end-Q4 2020.
The revised October 2020 forecast of the International Monetary Fund (IMF)
shows that global output is expected to contract by -4.4 per cent at year-end
rather than the -4.9 per cent projected in June due to better than anticipated
economic performance in most advanced economies in Q2 2020 and an even
better expected outturns in the third quarter. Moreover, the synchronized efforts
of fiscal and monetary authorities in both Advanced and Emerging Market
Economies in providing liquidity support to economic agents is a significant
factor in the moderation of the deep global recession envisaged at end-2020.
Thus, the Advanced Economies are now expected to contract by -5.8 per cent
in 2020 and rebound to a positive growth of 3.9 per cent in 2021 compared with
the June IMF projection of -8.0 and 4.8 per cent, respectively. The new IMF
update also indicates that the Emerging and Developing Market Economies
(EDMEs) will witness growth of -3.3 and 6.0 per cent in 2020 and 2021,
respectively.
There is a strong positive correlation between global economic performance
and external trade flows. The pandemic and the accompanying containment
measures dealt a debilitating blow to cross-border supply chains and resulted in

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a precipitous fall in aggregate demand and global output, never seen since the
end of World War II. Large-scale and widespread economic disruptions of this
magnitude constrained regional and global trade. Consequently, the IMF
forecast that global trade will nose-dive by -10.4 per cent in 2020 – a slight
upgrade from the forecast of -11.9 per cent in June 2020, this has serious
implications for Government revenue in developing countries like Nigeria.
The persisting lull in the international crude oil market has kept prices muted
around US$40 per barrel. Although this trend is much below the pre-pandemic
level, the picture may get better in the foreseeable future as the development
of effective COVID-19 vaccines is giving rise to renewed impetus in the global
economy. Moreover, should the plan by OPEC+ to extend production cut to the
first quarter of 2021 crystalize, the horizon for oil price would brighten further in
the near term. This scenario may improve strategic foreign exchange
management by the Bank to maintain exchange rate stability and douse the
pass-through of imported inflation into domestic prices. Moreover, the Bank
should continue to identify and remove deleterious inhibitions to autonomous
inflows of foreign exchange into the Nigerian economy. Besides, the need for a
conducive and secured business environment cannot be over-emphasized as it
will encourage the inflow of foreign portfolio and other investments.
Price development data from the National Bureau of Statistics (NBS) reveals that
headline inflation (year-on-year) continued its upward trajectory as it rose to
14.23 per cent in October 2020 from 13.71 per cent in the preceding month.
Food and core inflation (year-on-year) also climbed to 17.38 and 11.14 per cent
from16.66 and 10.58 per cent, respectively in the review period. On a month-onmonth basis, headline, core and food inflation soared to 1.54, 1.25, and 1.96 per
cent in October 2020. The principal drivers of headline inflation are food, nonalcoholic beverages, housing, water, electricity, gas as well as other fuel. Both
food and core inflation are majorly propelled by processed food. The on-going

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massive interventions in the area of agricultural production is yielding favourable
outcomes as the average price of farm produce (m-o-m) declined by 0.41
percentage point from 1.16 per cent in September 2020 to 0.75 per cent in
October.
According to the data recently released by NBS, the Nigerian economy slipped
into recession – the second since Q2 2016 – after output contracted for the
second consecutive quarter. Real GDP shrunk by -3.62 per cent in Q3 2020
compared with -6.10 per cent in the preceding quarter. The resilience of the
Nigerian economy came to the fore as the negative growth moderated by 2.48
percentage points in Q3 2020. Sectorial consideration indicates that the oil
sector performance worsened in Q3 2020 by recording a contraction of -13.89
per cent compared with -6.63 per cent in the previous quarter, while the non-oil
sector grew by -2.51 per cent in Q3 2020 which is a remarkable improvement of
3.54 percentage points over the -6.05 per cent in the previous quarter. CBN staff
projections based on several oil price scenarios show that negative real GDP
growth will persist up to Q1 2021. The Purchasing Managers Index (PMI)
corroborates the uptrend in economic activities as the Manufacturing PMI
crossed the breakeven point to 50.2 index points in November 2020 compared
with 49.4 index points in October. The Non-Manufacturing PMI, although below
the 50.0 mark, improved nevertheless to 47.6 index points in November 2020
over the 46.8 index points in the preceding month.
The salutary growth outcome is strongly driven by the synchronized fiscal,
monetary and regulatory responses that provided massive credits and other
support to households and businesses to enhance personal consumption,
investment and aggregate demand. For instance, the Government is
implementing the Economic Sustainability Plan, the SME Survival Funds initiative,
mass housing schemes, solar-powered homes, 798 km road network by the
private sector (in return for tax rebates), massive job creation activities in all the

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774 LGAs, amongst others. Moreover, the Central Bank of Nigeria has made
great strides with its COVID-19 credit facilities, including the healthcare fund,
targeted credit facility, real sector funds, the Agri-Business Small and Medium
Enterprises Investment Scheme (AGSMIS) and the Creative Industry Financing
Initiative (CIFI). These interventions constitute veritable game changers in the
present recessionary economy.
Monetary developments indicate that broad money (M3) grew by 3.53 per cent
in October 2020 compared with 3.20 per cent in September. Likewise, banking
system deposits rose by 23.6 per cent to N30.92 trillion in October 2020
compared with N25.02 trillion in January 2020. The net banking system liquidity
closed at N655.42 billion on October 30, 2020. Hence, it is necessary to continue
the use of relevant policy tools to mop-up excess liquidity above the safe
threshold. Concurrently, well-targeted credit delivery to productive economic
sectors should be sustained to rapidly expand aggregate demand. Total credit
increased by 10.5 per cent to N19.39 trillion in October 2020 from N17.54 trillion in
January 2020. The momentum of implementation of the Loan-to-Deposit Ratio
Policy and other growth-enhancing policies should be geared up to assure a
quick exit from recession.
The improved Q3 2020 growth outcome is in harmony with the rising positive
sentiments in the equity market due to portfolio rebalancing from fixed income
securities to equities. Thus, the All-Share Index (ASI) increased by 20.55 per cent
to 30,530.69 on October 30, 2020 from 25,327.13 in the preceding month. Market
capitalization also recorded a leap of 20.82 per cent to N15.96 trillion from
N13.21 trillion during the review period. These trends sign-post an economy on a
recovery track. In general, the banking sector remains stable as key financial
soundness indicators and stress test portray a robust system capable of
withstanding destabilizing shocks and delivering the growth agenda.

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CONSIDERATION FOR VOTING
In determining policy choice, I considered the various competing objectives of
monetary policy, which include: output growth, taming spiraling inflationary
pressure and maintaining stability in the foreign exchange market. On output
growth, I observed that the policy rate was cut in the previous Monetary Policy
Committee Meeting and knowing that monetary policy operates with a lag,
some reasonable amount of time is required to allow the effect of policy
measure to get underway. For instance, the short term interest rate (represented
by Open-Buy Back – OBB – rate) appears to be responding to policy as it
declined from 1.34 per cent in September 2020 to 0.75 per cent in October. The
short term rate may transmit into lower commercial bank lending rate.
Importantly, the growth momentum is expected to heighten further as the
implementation of COVID-19 stimulus package continues to unfold. On
persistent inflationary pressure, the recent deceleration in the average price of
farm produce from 1.16 per cent in September 2020 to 0.75 per cent in October
is indicative that the upward price trend may reverse in the near term.
Moreover, the Bank is expected to continue its aggressive mop up of excess
liquidity with the CRR policy and other means to curtail inflation. On exchange
rate stability, the development of corona virus vaccines and possible extension
of OPEC+ oil cut may translate into higher crude oil prices, increase in external
reserves and better exchange rate management.
In view of the above considerations and taking into cognizance the need to
allow the extant policy thrust to permeate through the economic system, I voted
to retain all policy parameters at their present levels:
▪ MPR at 11.5 per cent
▪ The Asymmetric Corridor at +100/-700 basis points around the MPR
▪ Liquidity ratio at 30.0 per cent/annum
▪ CRR at 27.5 per cent/annum

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5. ASOGWA, ROBERT CHIKWENDU
Background:
The resurgence of the COVID-19 pandemic since September 2020, particularly in
Europe and North America has created disruptions and considerable
uncertainty about the future. The darkened economic picture since November
has triggered some changes in policy outlook as many countries now expect a
setback in recovery. While this second wave of the pandemic may result in very
different economic outcomes
across the developed and developing
economies, the recovery prospects will largely depend on the new spread of
the virus, the sectoral growth drivers of the national economies as well as the
strength of national policy responses. Monetary policy decisions in the near
term, should therefore reflect these expectations at the global and domestic
levels as well as uncertainties surrounding the new forecasts.
Global Economic Outlook rebound appears Interrupted in Q4 of 2020:
The global economy suffered a severe shock in the first half of 2020 but
rebounded strongly with impressive third quarter GDP growth across several
developed economies. However, this rebound has been interrupted by the
unfolding second and third waves of the Covid-19 pandemic. The incomplete
recovery has introduced some considerable uncertainty in the economic
forecast for the fourth quarter of 2020 and the first quarter of 2021.
CBN staff report show some sharp quarter 3 recovery in many economies which
earlier appeared to maintain solid economic performance heading into quarter
4. In the US, growth expanded in the third quarter of 2020 by 33.1 percent
compared with a contraction of -31.4 percent in the second quarter. In the Euro
Area, GDP grew by 12.7 percent in the third quarter of 2020 after it contracted
by 11.8 percent in the second quarter, but in China, growth slowed in quarter 3
to 2.7 percent after a sharp recovery to 11.7 percent in the second quarter.

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The outlook for the global economy for now remains highly uncertain and
largely depends on the future path of the virus and if there are early successes in
bringing the second and third waves of infections under control. The recent
forecast based on the possibility of a protracted new wave of the pandemic is
that global growth will fade in the closing months of 2020 and up to the
beginning of 2021. In the Eurozone, real GDP is expected to contract in the
fourth quarter of 2020, while recovery will be limited in the first quarter of 2021.
Growth in the US is now expected at 3.7 percent in the fourth quarter with
average growth in four quarters of 2021 projected at only 1.9 percent. In the UK,
growth is also expected to fall by 11 percent in 2020, which may be the largest
drop in annual output in more than a century. The outlook is however brighter in
most parts of Asia and it is anticipated that global growth in the next few months
will depend on Asian countries, notably China, where the threat of a second
wave of infections are reduced. For the emerging markets and developing
economies, given the negative spill overs from the growth weakness in major
economies alongside the disruptions associated with the individual country
outbreaks, growth outcomes in the last quarter of 2020 and first half of 2021 are
expected to contract, but at varying degrees and may be worse for commodity
exporting countries with the persisting weak demand.
Inflation remains subdued in a number of developed economies eventhough
there are nascent fears of money flooding the economies given the significant
fiscal stimulus programmes in recent times, which may possibly result in runaway
inflation further down the line. In the Euro Zone, headline inflation has been
benign and even pushed into negative territory in recent months with the steep
fall in energy prices. This is similar to the United States where inflation has not
markedly changed since the start of 2020. Several emerging and developing
countries are also experiencing moderated rates of inflation, while in a few
others, especially in Africa, where food supply shortages have continued to put
upward pressure on the general price level.

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Expectedly, monetary policies are set to remain supportive in a number of
countries. As many Central Banks appear to have reached lower limits with
respect to interest rate cuts, the announcements in the last six months have
been much more of unconventional policy tools- than they are about interest
rates. The various asset purchase programmes including the pandemic
emergency purchase programme which the European Central Bank introduced
had by mid-2020 surpassed 1,350 billion euros. The sharpness of recovery from
the second and third waves especially for developed countries will depend
largely on the willingness of governments to extend and possibly increase the
recovery support programmes which they already started at the beginning of
the crisis. The encouraging news about the vaccine shows that the stimulus
packages can be phased out early next year especially given the noted
concerns about possible potential inflationary impact of these additional money
supply.
Domestic Economic Recovery also looks bumpy:
Both positive and negative factors, partly counteracting each other have
characterised recent domestic economic outlook. Although the quarter 3
output growth figures which as was widely expected remained at negative
territory of -3.62 percent, it is an improvement from the -6.10 percent growth
recorded in quarter 2. There are also indications of a strong economic
momentum heading into quarter 4. Besides, the gradual recovery in oil prices,
CBN Staff data show that the Nigerian Manufacturing PMI improved in
November 2020, rising above the 50 index points benchmark for the first time in
six months. Similarly, the non-Manufacturing PMI also improved in November
when compared to the position in September and October 2020.
Also, on the positive side are the developments in the equity market and the
banking system. The increase in equity market capitalization by 20.82 percent
between September and October 2020 is an indication of growing local market

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sentiments and investors continuing trust that the supportive fiscal and monetary
policies by Government will probably lead to a faster economic rebound.
Similarly, banks performance data still show strong resilience in the industry,
similar to the situation at the September 2020 MPC meeting. The decline in the
non-performing loans ratio between August and October 2020 as well as the
strong profitability indicators certainly rules out the possibility of any financial
market risk in the near term.
The rising inflationary trend and the growing public debt however remain the
principal risk factors on the negative side which have created considerable
uncertainty. Inflation rate in Nigeria had by October 2020 climbed to a 30
month high up to 14.23 percent from 13.71 percent in September 2020. Recent
projections by CBN Staff suggest further increases in both headline and core
inflation in December 2020 and January 2021, especially as food supply
shortages as well as rising petrol and electricity prices remain unaddressed.
The pandemic has put the public finances at the national and sub-national
levels in a weaker position and fiscal deficit is expected to be very significant in
Nigeria in 2020 as Government social and infrastructure spending rises and
revenue falls especially for crude oil receipts. Staff report show that in
September 2020, Federal Government fiscal operations recorded a 60 percent
deficit in expenditure as revenues could only cover 40 percent of total
expenditure. These recent increases in borrowing renders Nigeria’s public
finances more vulnerable to changes in financing conditions and other future
shocks. Arresting the continued rise in public debt is likely to require some fiscal
adjustment and expenditure efficiency especially after the COVID-19 pandemic
has run its course.
Looking beyond the next few months, we see a rosier economic picture that will
emerge progressively in Nigeria, particularly from the second half of 2021. There
is growing optimism that local consumption and investment which has been

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spurred by CBN’s recent credit interventions in various sectors will catalyse
normalization of growth dynamics. Moreover, the post-Trump era and Brexit
conclusions will likely spur global trade and improve demand for commodities.
Decision:
While the third quarter GDP data points to a notable rebound of economic
activity from the slump in Quarter 2, the recent spike in the COVID-19 virus and
the gradual re-introduction of restrictions in a number of advanced countries
has heightened uncertainty which may probably weigh on the output growth in
Q4. Against this background, monetary policy stance should remain fairly
expansionary in order to support the recovery in economic activity, eventhough
on the price front, the upward pressures arising from supply shortages remain
unabated.
Despite some speculation about another cut in policy rates, this position seems
unlikely now given the existing uncertainties and the need to allow the effects of
the last policy adjustments permeate in the financial system. A wait-and–see
approach with benchmark rates unchanged whilst ensuring that monetary
policy remain supportive and synchronised with developments on the fiscal side
is the best option. An expansion of the existing easing package and the
Government COVID-19 support programmes will help to mitigate the adverse
impact of the COVID-19 health crisis and sustain the economic recovery
process. As it stands now, the Central Bank of Nigeria may be expected to
continue to shoulder much of the burden of this expanded easing package
given the persisting revenue challenges on the part of the fiscal authorities.
I will thus vote to:
• Retain the MPR to 11.5 %
• Retain the CRR at 27.5%
• Retain the Asymmetric Corridor at +100/-700 basis points

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• Retain the Liquidity Ratio at 30.0%

6. OBADAN, MIKE I.
INTRODUCTION
Like the 275th meeting, the 276th meeting of the Monetary Policy Committee was
held in the environment of covid-19 pandemic. This pandemic has continued to
impact global economic developments and performances of individual
economies. Following the easing of economic lockdowns and gradual
relaxation of restrictions to movements of goods and persons within countries
and between countries, economic activities started to revive impacting
positively global demand and growth. However, it seems that some countries
relaxed the coronavirus containment measures rather prematurely or the
governments did not have the political will to implement them so as to have an
effective handle on the pandemic. Hence, the emergence of second wave of
COVID-19 in several advanced countries including the United States, United
Kingdom, France, Ireland, Belgium and Australia. A third wave of covid-19 is
being experienced by Japan. The first wave covid-19 caused huge contractions
in countries’ national productivity and output. Now, the relatively weak
recoveries achieved after the first wave is being threatened by a second and
even third wave of the pandemic. In these countries economic activity and
return to normal economic activities are being undermined by rising cases of
covid-19. Strong containment measures, including the re-introduction of local
and nation-wide lockdowns in some cases, to tackle the pandemic have
negative implications for global demand, recovery and growth. The implications
of weak recovery for global demand for crude oil, upon which Nigeria depends
for its fiscal and foreign exchange sustenance, are very grave. There is the good
news though that in the short to medium-term, there is likely to be light at the
end of the tunnel following the November 9, 2020 report that the United States

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pharmaceutical company, Pfizer and its German partner, BioTech SE, have
developed a covid-19 vaccine that is over 90 percent effective in addressing
covid-19. Some other companies have also announced break-throughs on
corona-virus vaccine. It is to be hoped that the vaccines will be accessible to
the poor countries and that their governments would do the needful to
enhance access of their citizens to the vaccine when available. Successful
vaccine will boost confidence, reduce uncertainty and boost global economic
activities including trade.

MAJOR GLOBAL DEVELOPMENTS
Until the resurgence of fresh waves of covid-19 in some advanced countries,
global growth prospects seemed good. Among the advanced countries, the
United States, Eurozone, United Kingdom and Japan recorded notable positive
growths in the third quarter: 33.1, 12.7, 15.5 and 5.0 per cent, respectively,
compared to huge contractions in the second quarter of 2020. Among the
Emerging Market and Developing Economies (EMDEs), China is still operating in
the positive growth territory. It recorded positive growth of 2.7 percent in the
third quarter although much lower than its 2nd quarter growth rate. And from the
IMF’s growth forecast for 2020, China stands out as the only country likely to
achieve positive growth rate: 1.9 percent. With effective containment of the
fresh waves of covid-19 and the availability of effective vaccines, the growth
prospects for 2021 seem good considering the projections of the IMF and World
Bank: -4.4 and 5.2 per cent in 2020 and 2021, respectively. One rather curious
thing about the corona virus is that China, which first reported the virus, has long
had a good handle on the disease, revived economic activities, and
experiencing positive growth that is projected to be higher than those for other
countries in 2021. Other countries have not learned lessons from China on how it

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contained the virus. It is possible that that country’s known political and social
discipline must have been a major factor.
Output and trade are very closely related. And so, the uncertainties surrounding
global growth arising from second/third waves of the corona virus and the
associated containment measures including lockdowns also apply to global
trade. Consequently, the realisation of the IMF’s projected recovery of global
trade by 8.3 percent in 2021 compared to -10.4 percent contraction in 2020
depends on the impacts of the fresh lockdowns.
Generally, global commodity prices have remained weak due to the downturn
in businesses and caution being exercised by individuals that are wary of a
rebound of coronavirus and the prospects of another downturn in global
economy. Crude oil which is of particular interest to Nigeria and other OPEC
member countries has continued to be characterised by low prices. Weak
demand has continued to affect the market for oil adversely. Coronavirus
containment measures, especially lockdown which restricted travel and
movements, seriously reduced fuel consumption globally. Consequently, oil
prices have continued to move within the US$40 - 45 per barrel range. As at
November 21, 2020, the prices per barrel were as follows: OPEC basket: US$
43.12; Bonny Light: US$ 44.56; UK Brent: US$ 44.96; and West Texas Intermediate
(WTI): US$ 42.42. These prices are very much below the pre-pandemic levels of
between US$65 and US$70 per barrel that prevailed in early 2020. The futures oil
market projections are not better as they are expected to remain in the US$
40.00 – US$45.00 range. This is not good news for Nigeria which has in 2020
recorded oil production and export that are below the 2020 budget projections.
Continuing weak oil market compounds the challenges in Nigeria’s fiscal
operations and is not helpful to the country’s external sector and
macroeconomic stability objectives.

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One thing that stands out in the global developments is the response of national
governments, especially in the advanced countries, to the coronavirus-induced
economic crisis. Because of strong concerns for economic recovery, growth
and employment, national governments have continued to deploy fiscal and
monetary tools to inject stimulus needed to reflate the economies. Expansionary
fiscal policy through stimulus packages has been used to ease the impact of the
coronavirus-induced economic and health crises. This though has resulted in
increased fiscal deficits and public debt. Accommodative monetary policy has
also continued to be pursued. In this direction, direct liquidity injection into the
economies is being resorted to by central banks as most advanced economy
central banks have exhausted their monetary policy headroom with the policy
rates straddling the zero-lower bound, for example, US: 0.00 – 0.25%; Japan: -
0.10%: Euro Area: 0.00%; UK: 0.10%. Thus, in line with the accommodative
monetary policy stances, most central banks maintained their low policy rates or
reduced them where feasible. The Nigerian economy is in a similar position that
requires fiscal and monetary measures to quicken economic recovery.

LINGERING DOMESTIC ISSUES
Until the corona virus struck the country in the first quarter of 2020, the Nigerian
economy’s growth was not outstanding but the growth rates were positive. The
successive increases in quarterly growth rates in 2019 were encouraging: from
2.1 percent in Q1 to 2.12 percent in Q2, 2.28 percent in Q3 and 2.55 percent in
Q4 giving an average of 2.27 percent for the year. Oil prices were also
encouraging along with other macroeconomic indicators. This pattern was
disturbed by the coronavirus pandemic which has worsened macroeconomic
indicators and public finances. The country has been faced with the challenges
of stagflation (recession and rising inflation), exchange rate depreciation,
dwindling government revenue/rising public expenditure, growing fiscal deficits

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and public debts, capital flows reversals, growing incidences of rising
unemployment and poverty, among others. Both the fiscal and monetary
authorities promptly deployed their respective tools to address the fall-outs of
the coronavirus-induced economic lockdown.
Output growth
Understandably, the Nigerian economy, like most other economies experienced
contraction in Q2. But the Nigerian economy experienced rather milder
contraction, perhaps, because of the proactive fiscal and monetary stimulus
packages implemented by the government. Against the backdrop of gradual
easing of the lockdown and implementation of various interventions, the Q3
growth figures are encouraging. Although the Q3 growth figure of -3.62 percent
put the economy into a recession, it was far lower than the -6.1per cent growth
rate in Q2 suggesting improvement in growth. And there are signs that the
recession could be short-lived:
• Encouraging re-opening of businesses and lifting of restrictions on
movements within country and international travels and trade;
• Q3 growth pattern shows signs of a V-shaped economic recovery. 18
sectors recorded positive growth in Q3 compared to 13 in Q2. Although 23
sectors recorded negative growth in Q3, their rate of contraction was far
lower than in Q2, suggesting that the sectors had improved growth. Thus,
with less and less covid-19-induced restrictions, and more businesses
coming back to life, a positive growth rate could happen in Q4 or first
quarter of 2021;
• Encouraging performance of the Manufacturing Purchasing Managers’
Index (PMI) and Non-manufacturing Purchasing Managers’ Index. The
Manufacturing PMI crossed the 50.0 index points to 50.2 in November 2020
from 49.4 index points in October. Although the Non-manufacturing PMI

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has not crossed the 50.0 benchmark, it increased from 46.6 in October to
47.6 index points in November;
• The industrial production index improved in Q3 as it rose by 3.6 percent in
that quarter from 106.6 index points in the second quarter.
For the country to exit recession quickly:
▪ There is need for government to ensure that a second wave coronavirus
pandemic does not occur in the country. A second wave will be
catastrophic for the economy and the citizens. Therefore, the citizens must
be continuously sensitized on the need to comply with covid-19 safety
protocols until there is a good handle on the virus. The good news is that
an effective vaccine will soon be available. The government must plan to
access the vaccine for Nigerians. It should pay for the vaccine on behalf
of the vulnerable groups while others should pay for their vaccinations.
▪ Government should focus interventions on the components of agriculture,
manufacturing, construction and housing, real estate and transport
sector. The latter is still very much in the doldrums.
▪ Need to speed up implementation of the very well designed Economic
Sustainability Plan by front-loading implementation of priority income and
employment generating activities, for example, those relating to MSMEs,
agriculture, public works and road construction, mass housing, solar home
systems, digital technology hubs and aviation industry support.
▪ The Central Bank of Nigeria (CBN) would need to ensure effective
implementation of its laudable intervention programmes and beef up
those where demand is very high, for example the Targeted Credit Facility
aimed at households and MSMEs.
▪ Re-invigorate efforts to significantly improve the operating environment of
economic activities, particularly, by addressing growing insecurity of lives
and property, inefficient and cumbersome ports which encourages

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diversion of imports to neighbouring countries, epileptic and costly power
supply and infrastructure deficits.

Rising Inflation
This is a serious challenge in a period of output contraction, thus compounding
the problem of policy response to recession. For the tenth consecutive month,
inflationary pressure has persisted. The inflation rate (headline) climbed to a
thirty-month high of 14.23 percent in October 2020 (13.22% in September), with
the other measures of inflation were also trending upwards: food inflation, 17.38
percent (16.0% in September); core inflation, 11.14 percent (10.52% in
September). The drivers of the inflationary pressure seem to be largely nonmonetary, arising from disruptions in the supply chain and supply bottlenecks,
insecurity and banditry in the food producing areas, ravaging flood in food
producing areas of the North, border closure, increasing energy costs which
increase transport costs, legacy infrastructure deficits, etc. Although the fiscal
and monetary injections have tended to increase liquidity in the economy, it is
not clear the extent to which this is translated to consumer prices, especially
under conditions of continued weak aggregate demand. Therefore, in
addressing the inflationary spiral, it is important for government to focus on
resolving the non-monetary issues, while the Central Bank will continue to do the
needful to ensure an optimal level of money supply that will drive growth. It
should also continue with implementation of the development finance
interventions aimed at tackling inflation from the supply side of the economy.

Financial Sector Performance
The financial sector has continued to demonstrate soundness and resilience
even under a debilitating covid-19 environment. The performance confirms the
robustness and efficacy of the monetary policy measures. The financial

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soundness indicators reflect good performance: Capital Adequacy Ratio at
15.5%; Reduced Non-Performing Loans Ratio at 5.72% even though a little higher
than the prudential benchmark; and Liquidity Ratio of 35.6% very much above
the benchmark. The total assets, deposits and credit of the banking industry
have also grown remarkably. For example, because of the Loans to Deposit
Ratio policy of the CBN and other related measures such as the Global Standing
Instruction, the total gross credit to the economy by the deposit money banks
increased by N3,976.34 billion from N15,567.66 billion at end May, 2019 to
N19,544.00 billion as at November 13, 2020. Credit growth was largely recorded
in Manufacturing, Consumer credit, General Commerce, Information and
Communication, Construction and Agriculture.
However, although the CBN’s measures influenced interest rates downwards,
lending rates are still high and there is unacceptable disparity between lending
and deposit rates. The spread between the two rates is wide standing at 26.47
percentage points in November. Such a wide spread discourages savings and
unnecessarily favours the Deposit Money Banks (DMBs). After some months of
implementation, there is need for the Bank to review two extant policies relating
to savings/deposit interest rates and corporate savings/deposits. They have
been described as promoting financial repression.
▪ The abolition of savings accounts by corporate enterprises/organisations –
micro, small, medium and large enterprises including private educational
institutions, foundations and even small associations/clubs, and so on.
There is need to review this policy to allow corporate MSMEs to operate
savings accounts just as the DMBs save money even through investment in
government securities. To the extent that the savings account is one of
the financial products of the DMBs, MSMEs have a right to put some
money in savings deposits for the rainy day. Importantly, i) Savings
deposits will help them to withstand shocks to which they are highly

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vulnerable by putting their small balances in savings accounts to earn
interests which contribute to their sustenance; ii) MSMEs will be able to
avoid double jeopardy which they suffer at present; not only do they lose
interest income, they are now exposed to all sorts of charges on the
current accounts which they operate; iii) The abolition of corporate
savings deposit accounts could undermine the attainment of the
objective of reducing the size of the informal sector as some informal
sector operators could be discouraged from assuming the character of
formal sector operators.

No doubt, the CBN has good intentions but the policy is having
unintended adverse effects that are larger than the benefits to the banks.
And so, allow corporate savings deposits for MSMEs but direct the DMBs to
charge stamp duties on such accounts, if it was not done before. Also,
large enterprises that have huge amounts of surplus funds can be barred
from operating corporate savings accounts. They have more negotiating
power and easier access to other savings instruments than the vulnerable
MSMEs.

▪ Reduction of the minimum savings deposit rate to a minimum of 10
percent of the MPR subject to negotiation of the rates with customers. The
banks never negotiate with customers but fixed the rate at 1.25 percent
with MPR of 12.5% and later 1.15 percent from September under 11.5%
MPR regime. Again, like the above policy, stakeholders perceive this
policy as promoting the profit interests of the DMBs. I know that this is not
the intention. But with widening disparities between lending and savings
deposit rates, the DMBs are smiling at the expense of ordinary citizens and
MSMEs. Therefore, there is the need to review the minimum savings

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deposit rate upwards to encourage small savings and narrow the
unacceptable interest rate spread.

OPINION
Against the backdrop of the foregoing real sector developments in Nigeria, the
need for measures to quicken economic recovery and exit recession is not in
doubt and, indeed, a priority. But the fact of rising inflation due largely to nonmonetary factors remains a major challenge. Therefore, tightening or loosening
monetary policy is not an option in the present circumstance. Loosening will
compound the inflationary pressure, while tightening will hurt the desired
economic recovery. The downward adjustment of the MPR last September will
need time for the expected effects to manifest while the CBN’s development
interventions continue to influence aggregate supply and hence the price level.
Therefore, my vote is to hold all the parameters constant:
MPR:


11.5%
CRR:


27.5%
Liquidity Ratio:

30.0%
Asymmetric Corridor: +100/-700 basis points

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7. OBIORA, KINGSLEY ISITUA
In light of the dual macroeconomic challenges of a declining growth and
rising inflation, and given the monetary policy actions that we have already
taken, I voted to: retain the MPR at 11.5 percent, the CRR at 27.5 percent,
the LR at 30 percent and the Asymmetric Corridor of +100/-700 basis points
around the MPR. I believe that this stance will best support our ongoing
efforts to reboot the economy, protect livelihoods and secure financial
stability.

Despite promising vaccine announcements, the Novel Coronavirus Disease
(COVID-19) has intensified its spread across the world. The earlier-thanexpected successful vaccine trial results are highly encouraging and suggest
that a complete global economic recovery is on the horizon. However, the
immediate path of the COVID-19 virus and contagion remains concerning.
Since the last MPC meeting in September, global cases have almost doubled
from 30 million to 58 million, with deaths rising from 950,000 to 1.4 million. After the
initial success in flattening the curve, several major economies have seen a
recent surge in infections. In response, some governments, such as France,
Germany and the United Kingdom, have decided to re-impose national
lockdowns. I am also concerned that while the news on vaccines is spectacular,
plans for actual vaccinations appear to be fragmentary with enormous
challenges that are yet to be fully calibrated.

These headwinds may partially set back the economic recovery that began in
the third quarter of 2020. The economies of the United States, the United
Kingdom, France and Germany expanded by 33.1, 15.5, 18.2 and 8.5 percent,
respectively, offsetting significant contractions in the second quarter. J.P.
Morgan’s Global Manufacturing Purchasing Manager’s Index (PMI) rose further
to 53.0 points in October 2020, indicating the fastest growth in global

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manufacturing output in over two-and-a-half years. Accordingly, the IMF’s World
Economic Outlook in October revised upwards its projections for global output
to a contraction of -4.4 percent in 2020, compared to -4.9 percent previously,
and a rebound of 5.2 percent in 2021. Despite these positive developments,
however, the recent rise in cases and the consequent increase in restrictions
suggest a challenging outlook for the immediate future. To quote German
Chancellor, Angela Merkel, it is likely to be a “long, difficult” winter, albeit
perhaps not as grave as the second quarter of this year.
Domestically, the Nigerian economy has slipped into a recession, although the
pace of contraction has slowed. According to the National Bureau of Statistics
(NBS), following a decline of -6.10 percent in the second quarter, the Nigerian
economy contracted by -3.62 percent in the third quarter. Whilst this brought
the economy into a recession, the contraction was less severe and better than
previously expected. Several key sectors experienced positive growth, for
example Information & Communication, Financial & Insurance, Construction
and Agriculture, grew by 14.56, 3.21, 2.84 and 1.39 percent, respectively. Even
though the overall decline is concerning, with only 17 out of 46 activity sectors
experienced growth, there are some tentative signs of recovery. The
Manufacturing PMI moved into expansion territory at 50.2 index points in
November 2020, building from 49.4 index points in October. The NonManufacturing PMI, although remaining below 50.0, has risen to 47.6 index points
in November 2020 from 46.8 index points in October. The latest round of the NBS
National Longitudinal Phone Survey (NLPS) suggests that the proportion of
people who are working has stabilized at 85 percent, close to pre-COVID levels.
The proactive policy measures taken by the Federal and State Governments, as
well as by the Central Bank of Nigeria (CBN), have cushioned the full economic
impact of the pandemic and are beginning to support recovery. Accordingly,
the IMF has revised upwards its forecasts for Nigeria, projecting a -4.3 percent
contraction in 2020, compared to -5.4 percent previously.

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The banking system remains resilient amidst these fragile macroeconomic
conditions. Non-Performing Loans (NPLs) decreased to 5.72 percent in October
2020 compared to 6.60 percent in the corresponding period of 2019, reflecting
recoveries, write-offs and disposals. Furthermore, the CBN has put in place
strategies to bring this ratio below the 5 percent benchmark, including the
Global Standing Instruction (GSI) policy and forbearance that allows banks to
restructure credits impacted by COVID-19. As at 13 November, 2020, total gross
credit stood at N19.54 trillion, reflecting an increase from N19.46 trillion at the last
MPC meeting in September and from N15.57 trillion in May 2019. Notably,
lending interest rates have also declined. In October 2020, 86.23 percent of
loans issued by Deposit Money Banks (DMBs) were at rates below 20 percent,
compared to 76.43 percent in July 2019. The weighted average Open Buy Back
(OBB) rate declined to 1.88 percent in October 2020 from 3.50 percent in
September 2020, due to existing liquidity levels in the system.

Nonetheless, our policy decisions continue to be constrained by multiple
macroeconomic challenges. Inflationary pressures persist, as headline inflation
increased to 14.23 percent from 13.71 percent in September 2020 and is at its
highest level since March 2018. The increase was driven largely by the food
component, which rose to 17.38 percent in October from 16.66 percent in
September 2020. This appears to be caused by insecurity in agricultural
producing areas of the country, coupled with increases in the pump price of
Premium Motor Spirit (PMS) and in electricity tariffs. It is anticipated, however,
that this recent uptick should begin to retract, with the commencement of the
harvest season and the various interventions of the CBN to boost food supply. In
anticipation of this need, the CBN recently launched the Private Sector-Led
Accelerated Agriculture Development Scheme (P-AADS), which will provide
loans of up to N2 billion per obligor and will engage 370,000 youths in

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agricultural production. This will also complement other efforts to address
Nigeria’s severe level of youth unemployment, such as the N75 billion Nigerian
Youth Investment Fund (N-YIF).

Overall, the global and domestic outlook remains uncertain. The risks associated
with COVID-19 have not waned in the short-term, even though vaccine
prospects indicate some promise for 2021. It must also be noted that full
restoration of the global economy will not be achieved until vaccines are
distributed to all in order to enable a somewhat normal return to full activities. As
such, it is not vaccines that truly matter, but rather vaccinations. While vaccines
are a necessary condition to this outcome, vaccinations are the sufficient
condition. We must therefore make comprehensive and adequate preparations
for vaccine acquisition and distribution in Nigeria, to build on our existing policies
to support economic recovery. The CBN has collaborated extensively with the
Federal and State Governments and the private sector on significant
interventions targeted at increasing aggregate demand, boosting domestic
agricultural production, driving lending to MSMEs and investing in critical
infrastructure. These are beginning to bear fruit, alongside this year’s cumulative
200 basis point reduction in the Monetary Policy Rate.

We must cogently continue in these efforts to drive our economy out of
recession, whilst also prudently ensuring that inflationary pressures are
contained. On this basis, I voted to:

Retain the Monetary Policy Rate (MPR) at 11.5 percent;
Retain the Cash Reserve Requirement (CRR) at 27.5 percent;
Retain the Liquidity Ratio (LR) at 30.0 percent; and
Retain the asymmetric corridor of +100/-700 basis points around the MPR.

Classified as
8. SANUSI, ALIYU RAFINDADI

1.0
Decision:
The last MPC meeting for the year 2020 held in the wake of the continued
upward trending inflation and the official confirmation of the well-anticipated
technical recession following the release of GDP figures for the third quarter of
2020. While I believe the optimal policy is one that accelerates output growth to
quicken the recovery, my concern for the rising inflation and exchange market
pressure informed my decision to vote for a hold on all the parameters at their
current levels. I believe on-going disbursements of the various COVID-19
intervention funds would continue to provide the requisite liquidity at low-cost to
support quicker output recovery with reduced risk of exacerbating the
inflationary and exchange market pressure.

2.0
Background and Justification
2.1
Global Economic Developments
Several developments in the international economy have significantly improved
the prospects for economic recovery. The announcements of vaccines that are
over 90% effective against the COVID-19 virus have dampened the prospect for
another round of economy-wide shut-downs in the second and the third waves
of the pandemic, while the outcome of the US elections has improved the
prospects for oil market recovery in the medium term.

Review of the recent global economic developments suggests that, although
uncertainties remain, there is a strong basis for some optimism about global
economic growth prospects. Key amongst these encouraging developments is
the announcements of the discovery of COVID-19 vaccines that are over 90%
effective against the virus. On 9th November, 2020, the US pharmaceutical giant,
Pfizer and its German partner, BioNTech, announced the results of the clinical

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trials of their mRNA-based vaccine candidate, BNT162b2, demonstrating over
90% effectiveness against COVID-19. Soon after, the Sputnik V vaccine,
developed at the National Research Centre for Epidemiology and Microbiology
in Moscow, was announced with 92% effectiveness in preventing COVID-19
symptoms. AstraZeneca, in partnership with the University of Oxford, has also
announced that its vaccine had an average efficacy of between 70 and 90 per
cent in preventing COVID-19. Moderna has also reported their discovery of
another highly efficacious vaccine. Given the logistical, planning and other
regulatory issues, it is estimated that vaccinations could be started before the
end of the year 2020. This singular development has raised the hope for the
return of normality within the year 2021, thereby improving the prospects for a
full recovery of economic activities. This is especially so as the world faces the
second and third waves of the pandemic with rising cases of new infections
The prospects for the exit of US president, Donald Trump, following the
outcome of the US elections also has important implications for the global
economic and diplomatic relations. It raises the possibility of the resolution of the
lingering trade war between the US and China which shaped the global
economic plane for the best part of the last four years. It also has implications for
the global oil market, given the potential for some restrictions in the production
of shale oil in the US and the return of the US to the Paris Agreement on Climate
Change.
Recent developments in the global economy reveal sluggish output recovery
path, albeit slightly faster than earlier expected, with IMF's upward review of its
forecast for 2020 from -4.9% to 4.4%. This is premised on the development of
effective vaccines and stronger output in the advanced economies as well as
the impact of the global fiscal and monetary stimuli. In 2020Q3, output
expanded (q-o-q) in most of the advanced economies. In the US, output (q-o-q)
expanded from -31.7% in Q2 2020 to 33.1% in 2020Q3. In the Euro area, the UK
and Japan, output also expanded by -12.1%, -20.4% and -8.2% in Q2 2020, to

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12.7%, 15.5% and 5.0%, respectively, in 2020Q3. Output has, however,
contracted (q-o-q) in most of the Emerging Markets and Developing Economies
(EMDEs), except in China that recorded a (slower, but) positive growth of 2.7% in
2020Q3. Brazil, India, Russia, South Africa and Nigeria have all recorded another
contraction (q-o-q) in 2020Q3, and have been in recession for the third quarter,
except for Nigeria which has just slid into recession. Also, data shows that the
output contractions recorded in these selected EMDEs in 2020Q3 are
significantly deeper than those of previous quarters, except in Nigeria where the
contraction in 2020Q3 (-5%, q-o-q) was much shallower than that of the 2020Q2
(-14.3%, q-o-q). The year-on-year output contraction moderated from -6.1% in
2020Q2 to -3.62% in 2020Q3. Therefore, although Nigeria has slid into a technical
recession following the negative output growth in the third quarter of 2020, there
are indications that output may already be on a recovery path.

In the Advanced Economies, inflation rates continue to trend below their prepandemic levels and are projected to slow to 0.5% in 2020 from 1.3% in 2019 due
to weakening aggregate demand. In the Euro Area, inflation in both September
and October 2020 was -0.2%, indicating a deflation. In the US, inflation has
decreased (year-on-year) from 1.4% in September 2020 to 1.2% in October 2020.
In the UK, inflation inched up from 0.5% in September 2020 to 0.7% in October
2020 due to rebound in food and transport prices. In Japan, inflation rate
declined to -0.4% in October from 0% in September 2020, a deflationary situation
like the Euro Area. In the EMDEs, however, price developments remained mixed,
with a rising trend in Kenya, Egypt, and Nigeria, but a declining trend in China
and Ghana. IMF forecasts suggest that inflation in EMDEs will slightly decline to
5.0% in 2020 compared with 5.1% in 2019.

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2.2
Domestic Economic Developments and their Implications
Output data from the NBS confirmed that the Nigerian economy has slipped
into recession following a second consecutive negative growth in the third
quarter of 2020. Real output had declined (y-o-y) by -3.62% in 2020Q3
compared with the decline of -6.1% in 2020Q2. Although negative, the relatively
smaller contraction relative to that of the previous quarter indicates that
recovery may have started, and the recession may not be long-lasting. It also
reflects the positive effects of the various heterodox monetary interventions and
credit policies in response to the COVID-19 pandemic. The data shows that both
oil and non-oil output had contracted, reflecting the lag effects of the
movement restrictions and economic activities. Oil GDP, which contributed
8.73% of the GDP, contracted by -13.89% during the third quarter of 2020,
compared with -6.63% in 2020Q2. The contraction was due to the decline in oil
price and oil production during the period. The non-oil GDP, which contributed
91.27% of the total GDP, contracted by -2.51% in 2020Q3 compared with -6.05%
in 2020Q2. The CBN's monthly Purchasing Managers Index (PMI) has continued
to trend upwards since June 2020. The Manufacturing PMI, which stood at 48.5
index points in August 2020, has crossed the 50-point neutral mark to 50.2 index
points in November 2020, thereby suggesting an expansion in manufacturing
activities. The non-manufacturing PMI has also improved from 44.3 in August
2020 to 47.6 index points in November 2020. These improvements reflect the
gradual recovery of the domestic economy as a result of increased business
activities supported by the various monetary and fiscal interventions.

Crude oil production and export have increased marginally by 1.98% (mo-m) to 1.54 mbpd at the end of October 2020 compared to 1.51 mbpd in
September 2020 following increased investment in production activities. The
production level continues to be well below the budget benchmark of 1.94
mbpd. Notwithstanding the average oil price being above the revised fiscal
benchmark of US$ 28pb (projected to stay between $40/b and $42/b), the

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lower production benchmarked is likely to adversely affect fiscal performance
and external reserves accretion.

Available data from the NBS shows that headline inflation has continued
on the upward trend that started in September 2019 following the closure of
land borders. In October 2020, headline inflation rose to 14.23% (y-o-y) from
13.71 in September 2020, driven by increases in both food inflation and core
inflation. Food price inflation (y-o-y) rose to 17.38% in October 2020, from 16.66%
in September 2020, driven by an increase in the prices of processed food and
farm produce. Core inflation (y-o-y) rose from 10.58% in September 2020, to
11.14% in October 2020, due to increase in the prices of processed food,
housing, water, gas & other fuels, health, transport, education and restaurants &
hotels. Staff forecasts suggest that inflation would continue on the upward trend
through 2020, largely reflecting the rising cost of food due to disruptions in the
supply chain; the continued closure of the land borders; rising spates of
insecurity in the food-producing areas; hikes in the price of PMS; hike in
electricity tariff; exchange rate adjustment as well as the liquidity impacts of the
various fiscal and monetary interventions aimed at reflating the economy.

Domestic money supply has continued to expand, as expected, owing to
the liquidity injections needed to revamp the economy. The broadest money
supply, M3, increased by 3.53% in October 2020 relative to December 2019.
Annualized at 4.23%, this growth rate is below the provisional benchmark of
6.84% for 2020. Reserve Money also increased (by 69.86%) in October 2020
relative to December 2019 and was 4.79 % above its provisional benchmark for
Q4 2020.
The Banking System Stability report reveals that the banking industry
continues to be resilient in the face of the COVID-19 pandemic. The NPLs
continued its downward trend, declining to 5.72% at end-October 2020 from
6.56% at end-October 2019. Total credit to the economy increased by N3.976.34
trillion, due to the CBN's LDR policy, which encourages banks to lend. The largest

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recipient of the new credit remains the manufacturing sector, consumer credit,
general commerce, ICT, construction and agriculture. The report also shows that
more bank customers are getting loans at lower interest rates. For instance, as of
October 2020, 86% of the total loan portfolio were granted at less than 20%
interest rate compared with 76% in June 2019.

3.0
The Basis for My Policy Choice
Although there is a significant threat to inflation, which is forecasted to rise in the
medium term, tightening the policy stance amidst recession will not only delay
the recovery but may also exacerbate the inflationary pressure by further
depressing aggregate supply. Although loosening may help improve aggregate
supply, the rising inflation and negative real yields have reduced the headroom
for a further rate cut at the moment. It could further intensify the exchange rate
pressure and adversely affect capital flows. I believe that on-going
disbursements of the various COVID-19 intervention funds by the Bank would
continue to provide the requisite liquidity at low-cost to support quicker output
recovery with reduced risk of exacerbating the inflationary and exchange
market pressure. I, therefore, voted for a hold on all the parameters, for now, to
allow for the effects of these interventions to work themselves out.

Consequently, I voted to:
Retain the MPR at 11.50 per cent;
Retain the CRR at 27.5 per cent;
Retain the Asymmetric Corridor at +100/–700 basis points; and
Retain Liquidity Ratio at 30.0 per cent.

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9. SHONUBI, FOLASHODUN A.
As nations struggle to overcome the pandemic and the ensuing socioeconomic impact, the world is set to witness the end of 2020, with a recession
that is projected to be second, in severity, only to the great depression of 1930s.
The global economy remained constrained by subdued economic activities,
muted trade, depressed commodity markets, cautious financial conditions and
swelling debt profile, amidst the second wave of a pandemic that is ravaging
most developed economies. Notwithstanding the far-reaching implications of
this situation for the Nigerian economy, dogged actions by the monetary and
fiscal authorities have significantly moderated the negative impact on lives and
livelihood of the populace. Importantly, as the result of recent actions continue
to manifest, the scope for policy options to support sustainable growth of the
domestic economy has indeed become clearer and enhanced. We must
remain focused on helping households, businesses and communities to cope,
adjust and recover.

Global and Domestic Economic Developments
Signs of improvement in global economic recovery during the third quarter of
2020 was buoyed by enhanced vaccine prospects and slight recovery in intraregional trade. Predicated on the expectation that the development would
support risk sentiments going forward, the International Monetary Fund (IMF)
revised its projected contraction of global growth to -4.4 per cent in 2020,
against its earlier -4.9 per cent. Downward risk to global growth, however,
persisted with slowdown in US fiscal stimulus and spread of a second wave of the
pandemic, leading to rapid re-introduction of lockdown measures in several
developed economies. Inflation remained muted in the advanced economies,
while exchange rate pressures and structural bottlenecks have precipitated
high inflation in emerging and developing economies.

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On the domestic scene, recently released data by the National Bureau of
Statistics (NBS) indicated that the Nigerian economy contracted by -3.62 per
cent in the third quarter of 2020, lower than the -6.10 per cent in the second
quarter of 2020. This reflected the significant decline of 13.89 per cent in the oil
sector and much lower than expected contraction of -2.51 per cent in the nonoil sector. Though second consecutive quarter of contraction effectively pushed
the economy into recession, a glimpse of hope exists in the future trajectory of
growth as indicated by the trend of activities in most of the sub-sectors. Also
important is the improvement in manufacturing and non-manufacturing
Purchasing Manger’s indices which, rose to 50.2 and 47.6 index points,
respectively, in November 2020.
Stability of the banking system has been sustained throughout the year. Industry
capital adequacy and liquidity ratios were 15.5 and 35.6 per cent in October
2020, compared with the respective prudential thresholds of 15.0 and 30.0 per
cent. Non-performing loans ratio improved further to 5.72 per cent, though
slightly higher than the regulatory limit of 5.0 per cent. The trend generally
indicated a preservation of the sound health of the banking industry, and
underscored efficacy of regulatory/supervisory measures.
Inflationary pressure persisted as the major consumer price indices rose further in
October 2020. Headline inflation rose to 14.23 per cent at end-October 2020,
from 13.71 per cent in the previous month. This reflected further increase in food
and core inflation to 17.38 and 11.14 per cent, respectively, attributed mainly to
the lingering disruptive effects of the pandemic on supply chain, impact of
increase in energy price on transportation/logistic cost on food prices and
exchange rate passthrough to prices.
Developments in the money and financial markets were mixed. Increase in
aggregate domestic credit, aided by the LDR policy and CBN intervention

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credit, pushed growth in broad money supply further to 3.53 per cent in October
2020, compared with 3.20 per cent in the previous month. Ample liquidity in the
banking system have, however, depressed the money market rates, with OpenBuy-Back rate falling to 1.88 per cent, while the inter-bank segment was
generally dry. Low yield in the money market and enhanced investors’
confidence have led to the bullish rally in the capital market, as the all-share
index and equity market capitalization rose to 34,136.82 and N17.85 trillion,
respectively, as at November 20, 2020.
Though the Bank has sustained its effort at effectively managing activities and
vulnerabilities in the external sector, slow accretion to external reserves, mainly,
as a result of reduced low oil prices, and dwindling capital inflows continued to
cause pressure in the sector. In the fiscal sector, slump in oil price and global
demand constitutes severe fiscal burden for the Government. Consequently,
persisting revenue shortfall, rising fiscal deficits and increasing debt profile have
significantly limited the scope and depth of operations of the Government.
Overall Considerations and Decision
Outlook for global economic recovery, on account of promising developments
around the discovery of vaccines has been dampened by the likely impact of
widespread lockdown in major developed economies, due to a second wave
of the pandemic. The global economy is therefore weighed down by low
productivity, muted trade, bloated debt profile and delicate financial
conditions. Persisting low inflation in most advanced economies and cost push
inflation in many emerging and developing economies have also constituted a
clog on the wheel of the global economy. With low prospect of global growth
rebounding quickly, we must sustain our rethinking of the Nigeria economic
policy direction vis-à-vis the global economy and intensify our focus on
rebuilding the domestic economy such that it relies more on its inner strength
and is self-sustaining.

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Clearly, the issues we must address are diverse. While we seem to have gotten it
right with low and stable interest rate to drive increased and cheaper credit to
the real sector, high inflation, economic recession and pressured exchange rate
remain critical to improving the fortunes of the populace. The situation
therefore raises pertinent questions about the efficacy of our policy measures.

Recent data on domestic output indicated better-than-projected contraction
on account of stronger quarter-on-quarter improvement in more sectors,
compared with previous quarter. This is a signpost of encouraging trend in
output growth. The uptick in inflation is as a result of many factors, foremost of
which is the lingering disruption of supply chain by the pandemic-induced
lockdown/restrictions
and
effect
of
higher
energy
price
on
transportation/logistic cost, thereby fueling cost push inflation. Accordingly, I
believe that by further intensifying our LDR policy and targeted interventions to
ease constraints to output expansion, we would have achieved the multiple
objectives of raising output, bringing down production cost through economies
of scale, improving employment and eventually moderating inflation.
It is heartwarming that despite operating in an environment of faded growth,
stunted yield and elevated risk, the stability of the domestic banking system was
pleasantly preserved in 2020. The Bank’s innovative regulatory interventions
have ensured that imminent risks are avoided or mitigated. I am optimistic that
to build more confidence on the potency of our approach, we must sustain our
regulatory ingenuity to ensure that trend of improved financial intermediation,
at moderated cost and overall relative stability is not short-lived. As I mentioned
in one of my previous statements, rebound in the capital market is a good omen
that is expected to encourage asset reallocation towards the equity segment to
support the real sector, thereby providing greater scope for policy maneuver.

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To consolidate on the progress made so far, the fiscal authority Is encouraged
not to relent on the giant strides already achieved. Government is advised to
swiftly invoke components of Economic Sustainability Plan that support
households and small businesses, and impact on youth employment, to sustain
the gains of ongoing intervention measures like the Nigeria Youth Investment
Fund, SME support facility, etc. I recommend urgent and aggressive
implementation of initiatives that focuses on public works and Public Private
Partnership.
I am delighted with the outcomes of the current measures so far. The pattern
and strength of growth in the third quarter provides a glimpse of hope and basis
for cautious optimism. We just must continue to improve the operating
environment to sustain the positive trend. In this regard, I want to encourage
that we leverage the collaboration with Banker’s Committee on effort to
improve infrastructure as a way of enhancing the quality of output for export.
Tangential to this, and to improve conditions in the external sector, is the need
to examine deeper, foreign exchange market activities with a view to
discouraging identified entities from practices that fuel supply/demand in the
parallel market. This will go a long way to reduce vibrancy and curb pressure in
that segment of the market.
I believe strongly that we are on the right track. Though the road to recovery
remain steep and uncertain. As we strive to steer the economy in the right
direction, I must advise that the impact of the digital revolution witnessed during
this crisis should not be lost. We must factor the lessons and gains into our
strategic plans to encourage skill and knowledge building, enhance innovation,
facilitate expansion of economic activities, growth and revenue, for a resilient
future. As we strategize on what more to do, we must sustain and intensify
ongoing interventions designed to stimulate consumption, further de-risk the
operating environment and encourage investment to promote productivity.

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I therefore vote to retain the:
• MPR at 11.50 per cent;
• Asymmetric Corridor of +100/-700 basis points around the MPR
• Cash Reserve Ratio (CRR) at 27.5 per cent; and
• Liquidity Ratio at 30.0 per cent.

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10. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
At the back of a challenging first half of the year, global economic output
showed improvements in the second half of 2020. This comes as the world
learns to live with COVID-19 and as containment measures were eased,
allowing businesses to reopen. Uncertain global outlook seems to be dissipating
as various national governments adopt expansionary policy measures to boost
domestic confidence and fast-track recovery. Given the renewed outbreak in
many countries, the pace of recovery will depend on how quickly business and
consumer confidence are restored. Although 2020q3 GDP outturn could
outperform 2020q2, most advanced and emerging market economies, except
for China, will record recession in 2020. In the short-term, the newly announced
COVID-19 vaccine could restore economic confidence and quicken global
recovery. For 2021, though a fragile recovery is expected in many countries,
output may be below projected pre-pandemic levels.
Domestic economic conditions and short-term outlook improved noticeably in
2020q3 as lockdowns were increasingly eased and activities progressively
normalise. This followed the prompt and extensive reaction of policymakers to
cushion the adverse effects of the pandemic, restart the economy, and
accelerate recovery. Though current macroeconomic conditions remain
fragile, steeper rebound could begin by 2020q4. From -6.1 percent in 2020q2,
output contraction improved to -3.6 percent in 2020q3. This trajectory was
significantly better-than-envisaged and suggests the likelihood of a positive
outcome by 2020q4. It derived from improved performance of the non-oil
sector which eased from a contraction of -6.1 percent to -2.5 percent as
against the worsening pace of oil GDP from -6.6 percent to -13.9 percent in the
same period. The non-oil sector remains the bedrock of the domestic economy.

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Hence, the various efforts at stimulating and bolstering productivity in the nonoil sector must be reinforced. With prevailing disruptions in the international oil
market, the need to rebalance our economy and strengthen its structural base
remains sacrosanct. A complete and quickened diversification from oil is
needed to insulate the economy and reduce our vulnerability to undue
external shocks.
After fourteen consecutive months of uptick, year-on-year headline inflation, at
14.2 percent in October 2020 vis-à-vis 13.7 percent in September showed
persistent pressures. This reflected the 72 basis points increase in food inflation to
17.4 percent and 56 basis points rise in core inflation to 11.1 percent. Disruptions
to supply network (either due to COVID-19 or insecurity) and the concomitant
food shortages significantly elevated headline inflationary pressure and may
persist if not corrected. Nonetheless, the envisaged increase in the volume of
domestic supply, following CBN interventions to boost production and speedup recovery, may asymptotically lower inflation inertia by mid-2021.
Again, the current stagflation poses a dilemma for policy making and continues
to highlight the importance of a strengthened productive base. It underscores
the need for fast-tracked diversification and sustained support of the real sector
through growth enhancing policies. I note the CBN’s development finance
initiatives to minimise the adverse impact of the COVID-19 Pandemic, resolve
underlying structural deficiencies, and speed-up recovery. The liquidity support
covers various economic activities and aims to narrow supply shortages within
the economy and boost consumer spending. I remain confident that an
effective correction of the supply shortages (especially in farm produce) will
have the dual effects of boosting output and moderating inflation.
Domestic financial market conditions were diverse, with a bullish stock market,
liquid money market, and persisting exchange market pressure. Analysis of

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liquidity conditions indicates expansion in monetary aggregates in October
2020 as broad money supply recorded an annualised growth of 4.2 percent.
This follows the 9.1 percent annualised growth in aggregate domestic credits,
highlighting the efficacy of our interventions and LDR policy. Since May 2019,
gross banking system credit grew by nearly N4 trillion to N19.5 trillion at midNovember 2020. Yet, the Nigerian banking system remained largely sound as
key FSI including NPLs and CAR showed continued improvements. Amidst
exchange market pressure, external reserves stayed above US$35 billion though
uncertainty could undermine expectations of future output and price
trajectories.
In my consideration, I stress the need for policy that impact positively on the
lives and livelihoods of Nigerians. I note that we have entered a second
recession in 4 years, due largely to our vulnerability to external shocks. As the
biggest economy in Africa, we need to reverse this trend, diversify away from
oil and insulate our economy from undue shocks. I emphasise the need for
policymaking that will bolster the productivity of non-oil sector and boost local
production especially in the agriculture and industry sectors. At this critical time,
I note again the need to resolve structural constraints, sustain real sector
support, stimulate aggregate supply and enhance job creation.
I note again the dilemma of stagflation as inflation ascends and output
contracts. The undesired policy trade-off from this requires delicate balancing.
While the primacy of price stability is acknowledged, I note that ignoring the
need for output stabilisation at this critical time could have severe long-term
consequences for the economy. Though inflation expectations are elevated,
growth outlook is fragile. It is imperative and urgent to restart the economy now
rather than later. I am inclined towards measures to boost domestic supply
capacity and bolster production as this will not only foster a quick and strong
recovery but will also lower the long-run path of inflation.

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I note the need, in this regard, for the CBN to sustain and strengthen its
development finance interventions in agriculture, manufacturing, MSMEs, etc,
to bolster local capacity and domestic production, enhance job creation, and
reduce poverty. I note the need for well-balanced policy decision. Tightening,
at this time, to curb inflation will worsen recession, while loosening will
exacerbate inflationary pressure. The recent easing of monetary stance, the
LDR policy and the various interventions of the Bank are providing adequate
liquidity impetus for the real sector. I am of the view that the impact of these
actions should be allowed to completely unfold as the needed impetus to
rectify the supply shortage is sufficiently in place. Alterations of policy
parameters today, could in my view introduce undue impulses and cause
indeterminate equilibrium. My inclination is, thus, to hold all parameters. I
believe the current stance is adequate to attain the long-run objectives of
price stability and output stabilisation without complicating recovery.
Accordingly, I vote to:
1. Retain the MPR at 11.5 percent;
2. Retain the Asymmetric Corridor at +100/–700 basis points;
3. Retain the CRR at 27.5 percent; and
4. Retain liquidity ratio at 30.0 percent.

Godwin I. Emefiele, CON
Governor
November 2020