Date: Tuesday, 23 July 2024
Ref: CBN/MPC/COM/153/296

MONETARY POLICY RATE HIKED TO 26.75 PER CENT

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN)
held its 296th meeting on the 22nd and 23rd of July 2024 to review recent
economic and financial developments as well as assess risks to the outlook.
Eleven members attended the meeting.

Decisions of the MPC

The Committee’s decisions are as follows:
1. Raise the MPR by 50 basis points to 26.75 per cent from 26.25 per cent.
2. Adjust the asymmetric corridor around the MPR to +500/-100 from
+100/-300 basis points.
3. Retain the Cash Reserve Ratio of Deposit Money Banks at 45.00 per
cent and Merchant Banks at 14 per cent.
4. Retain the Liquidity Ratio at 30.00 per cent.

Considerations
The Committee was mindful of the effect of rising prices on households and
businesses and expressed its resolve to take necessary measures to bring
inflation under control. It re-emphasized its commitment to the Bank’s price
stability mandate and remained optimistic that despite the June 2024 uptick
in headline inflation, prices are expected to moderate in the near term. This is
hinged on monetary policy gaining further traction, in addition to recent
measures by the fiscal authority to address food inflation.

In its consideration, the Committee noted the persistence of food inflation,
which continues to undermine price stability. It was observed that while
monetary policy has been moderating aggregate demand, rising food and
energy costs continue to exert upward pressure on price development. The
prevailing insecurity in food producing areas and high cost of transportation
of farm produce are also contributing to this trend. Members were, therefore,
not oblivious to the urgent benefit of addressing these challenges as it will
offer a sustainable solution to the persistent pressure on food prices.
Also noted in its consideration, is the increasing activities of middlemen who
often finance smallholder farmers, aggregate, hoard and move farm
produce across the border to neighbouring countries. The Committee
suggested the need to put in check such activities in order to address the
food supply deficit in the Nigerian market to moderate food prices. The MPC,
therefore, resolved to sustain collaboration with the fiscal authority to ensure
that inflationary pressure is subdued.
In addition, the Committee expressed optimism with the recent stop gap
measures by the Federal Government to bridge the food supply deficit. In
particular, the 150-day duty free import window for food commodities
(maize, husked brown rice, wheat and cowpeas), amongst others, will
moderate domestic food prices. It is noteworthy that these measures will not
lead to direct injection of liquidity into the economy as to cause further
inflation. While the measure is a welcome development and may prove
effective in the short run, it is expedient that it is implemented with a defined
exit strategy to avert a possible rollback of the recent gains in domestic food
production. To support these initiatives, the Bank is already engaging
Development Finance institutions like the Bank of Industry (BOI) to ensure
adequate support to industries with a focus on Small and Medium Scale
Enterprises (SMEs).
The MPC noted the narrowing spread between the various foreign exchange
segments of the market, an indication of price discovery and improved
market efficiency, thus reducing opportunities for arbitrage and speculation.
The Committee noted that the increase in the level of external reserves would
further build confidence for a more stable exchange rate and thus urged the
Bank to explore available avenues to improve inflows, especially through
diaspora remittances. In addition, Members noted the efforts of the Federal
Government and private sector towards improving domestic refining
capacity as this is expected to reduce foreign exchange currently being
expended on the importation of refined petroleum products.

The MPC noted the sustained resilience of the banking system, reflected in
improvements of key financial soundness indicators (FSIs). Members further
encouraged the continued need for close monitoring of the system, as the
implementation of the recapitalization exercise progresses.
To consolidate on the gains thus far achieved, the Committee re-emphasized
its commitment to stay on course with its tightening cycle in view of the
urgent need to address inflationary pressures.
Key Developments in the Domestic and Global Economies
According to the National Bureau of Statistics, domestic headline inflation
rose marginally to 34.19 per cent in June 2024 from 33.95 per cent in May
2024, driven by the continued rise in the year-on-year components of food
and core inflation. Similarly, month-on-month headline inflation rose to 2.31
per cent in June 2024, from 2.14 per cent in the preceding month. The food
and core components rose to 2.55 and 2.06 per cent in June 2024 from 2.28
and 2.01 per cent in May, respectively.
Real GDP (year-on-year) grew by 2.98 per cent in the first quarter of 2024,
compared with 3.46 per cent in the fourth quarter of 2023, driven by both the
oil and non-oil sectors. Staff forecasts, however, suggest that the domestic
economy will grow by 3.38 per cent in 2024, while the IMF has projected
growth at 3.1 per cent in 2024.
As of July 18, 2024, external reserves stood at US$37.05 billion, compared with
US$34.70 billion as at end-June 2024. This represents eleven (11) months of
import cover for goods and services.
The global economy, according to the IMF, is forecast to grow at 3.2 and 3.3
per cent in 2024 and 2025, respectively. Headwinds to the global projection
remain the tight global financial conditions and ongoing geopolitical tensions
associated with the wars in Gaza and Ukraine, both of which have significant
impact on commodity prices and the global supply chain.
Global inflation is forecast to continue to decelerate marginally in 2024 but
may stay above the long-run objectives of most advanced economy central
banks. Global financial conditions may, therefore, remain broadly tight
through 2024 and into 2025.
The Committee reaffirmed its commitment to continue to monitor
developments in the global and domestic economies to guide policy and
ensure that inflation expectations are adequately anchored.

The next meeting of the Committee will be held on the 23rd and 24th of
September 2024.
Thank you.
Olayemi Cardoso
Governor,
Central Bank of Nigeria
23rd July 2024

PERSONAL STATEMENTS BY
THE MONETARY POLICY COMMITTEE MEMBERS
MPC MEETING JULY 22 – 23, 2024

1. AKU PAULINE ODINKEMELU
I vote to raise the Monetary Policy Rate (MPR) by 50 basis points from 26.25
per cent to 26.75 per cent, adjust the asymmetric corridor around the MPR to
+500/-100 basis points, retain the Cash Reserve Ratio for Deposit Money Banks
at 45.00 per cent and Merchant Banks at 14.00 per cent, and the Liquidity
Ratio at 30.00 per cent.
My decision is influenced by the following developments:
1. Global Economic Developments
The International Monetary Fund revised Global Economic Outlook for July
2024 indicates that the outlook for global growth remains cautiously optimistic
despite tight financial conditions and heightened geopolitical tensions.
Global growth is forecasted to stabilize at around 3.2 per cent in 2024, with
modest improvements anticipated in 2025 and 2026 as trade growth
strengthens and monetary policy eases. The Advanced Economies are
projected to grow by 1.7 per cent in 2024, rising to 1.8 per cent in 2025, while
the Emerging Markets and Developing Economies are expected to maintain
a growth rate of 4.1 per cent in 2024, slightly increasing to 4.2 per cent in
2025. Growth in Sub-Saharan Africa is revised downward due toa 0.2
percentage point downward revision to Nigeria’s growth outlook given the
weaker than expected output in the first quarter of 2024.

The weaker than expected performance of the Nigerian economy during a
period of tight monetary policy stance is consistent with theory, and signals
that the impact of the previous rate hikes may still be permeating the
economy. I, therefore, vote for a further but moderate rate hike. This would
ensure that the fight to reduce inflation through the aggregate demand and
exchange rate channels is sustained while paying attention to output
performance. I expect that demand for consumer goods would reduce while
individuals and firms would prefer to earn intertemporal returns on their
investments in fixed income assets. I also expect that an increase in the policy
rate would attract foreign capital which should bolster the supply of foreign
exchange.
The International Monetary Fund and the World Bank project a decline in
global inflation, with IMF estimating a drop from 6.8 per cent in 2023 to 5.9 per

cent in 2024, and further to 4.5 per cent in 2025. The World Bank forecasts a
decline to 3.5 per cent in 2024 and 2.9 per cent in 2025. However, several
risks, including climate change, supply chain disruptions, and geopolitical
tensions, pose challenges to achieving the desired inflation levels. In the
Advanced Economies, tight monetary policies are expected to bring inflation
down from 4.6 per cent in 2023 to 2.6 per cent in 2024 and further to 2.0 per
cent in 2025. This alignment with long-term central bank objectives indicates
a stabilizing economic environment. While global inflation is receding in
Advanced Economies, Emerging Markets and Developing Economies face
persistent inflationary pressures, projected to remain high at 8.3 per cent in
2024. Nigeria is no exception as inflationary pressures persist, with headline
inflation rising to 34.19 per cent in June 2024, driven by high food and core
components. Thus, further but moderate rate hike is necessary to effectively
anchor inflation expectation.
2. Domestic Economic Developments and Outlook
Year-on-year real GDP growth slowed to 2.98 per cent in Q1 2024, from 3.46
per cent in Q4 2023. Growth was supported by both the oil and non-oil
sectors. This performance was subdued due to persisting inflationary pressures
which had depressed consumer demand and tightened domestic financial
conditions. These factors muted the positive low base effects from the
corresponding period of 2023. Headline inflation (year-on-year) rose to 34.19
per cent in June 2024 from 33.95 per cent in May 2024, driven by increases in
both the food and core components. Major factors which precipitated the
uptrend include persistent security challenges in food producing areas; high
cost of energy impacting on logistics and manufacturing; exchange rate
pressures driving money growth; and unfavourable climatic conditions
hampering food supply.
My decision to vote for further but moderate hike given the above
developments in the domestic economy is influenced by the following: First,
the impact of the previous rate hikes may still be permeating the economy,
and the rise in inflation to 34.19 per cent in June 2024 from 33.69 in the
previous month, resulted in further widening of the negative real rate. Second
is the need to promote exchange rate stability. I understand that the major
driver of inflation is food inflation which is largely driven by legacy issues such
as inadequate power supply, poor road networks, and high insecurity in
farming communities, as well as currency depreciation. Third is the growth in
money supply. Credit has continued to grow, thus keeping aggregate
demand relatively strong and putting upward pressure on inflation. Further
tightening of monetary policy is essential to curtail credit growth. I, however,
feel strongly that further tightening would moderate the monetary drivers of
overall headline inflation, while I encourage the Management of the Bank to

effectively collaborate with the fiscal authority to essentially address the
drivers of food inflation.
Taking a nuanced view of these arguments coupled with the pressing need
to effectively anchor inflation expectations and promote price stability, I vote
for a further but moderate rate hike.

2. ALOYSIUS UCHE ORDU
GLOBAL ECONOMIC DEVELOPMENTS
In its June Global Economic Prospects, the World Bank projected global
economic growth at 2.6 per cent in 2024, despite heightened geopolitical
tensions and tight borrowing costs. The projections also show global inflation
moderating to an average of 3.5 per cent during the same period.
Among the advanced countries, the US economy recorded an impressive
performance, with solid growth. The latest jobs report for July showed that
unemployment rose to 4.3 per cent, its highest level in almost three years,
reflecting a weaker than expected labor market and raising concerns that
interest rates have been too high for too long. The June data from the Bureau
of Labor Statistics show inflation close to the Fed’s 2.0 per cent target. Given
the Fed’s role to boost employment, to keep prices stable, and to maintain
financial stability, the central bank will most certainly lower interest rates at its
next meeting in September.
In the UK, economic growth at 0.7 per cent in the first half of 2024 was
stronger than earlier anticipated and with inflation at the Bank of England’s
2.0 per cent target in both May and June, the Bank cut lending rate to 5.0
per cent for the first time in four years, in an effort to stimulate growth.
In the Euro area, the ECB cut its key policy rate by 0.25 percentage points
earlier in June, on account of progress in taming inflation and improved
growth prospects. Six weeks later in July, the ECB kept rates on hold as it
expects inflation to stay above its 2.0 per cent target in the period ahead.
Other central banks in the advanced economies (Australia, New Zealand)
and most emerging market economies (Indonesia, Philippines) also kept
interest rates on hold on account of persistent inflation risks.
In Africa, the burgeoning external debt and macroeconomic reforms
continue to dominate the agenda. Remarkably, for the first time this century,
in a move designed to improve trade competitiveness and the investment
climate, Ethiopia liberalized its foreign exchange market and floated the Birr
vis-à-vis major currencies. These reforms will be underpinned by external
financing of about US$10 billion.
In Egypt, the ongoing reforms have benefited from substantial external
financing inflows, including from the IMF, which is helping to stabilize the
Egyptian Pound. At 27.5 per cent in June, inflation is at its lowest level since

early 2023, and the Central Bank of Egypt has kept interest rates unchanged
at 27.25 per cent to dampen food and energy inflation.
In Ghana, although inflation trended downward to 22.8 per cent in June, the
Bank of Ghana maintained interest rates unchanged at 29.0 per cent in
anticipation of increased campaign spending, during this highly contested
Presidential election, coinciding with food price pressures and currency
depreciation. And in South Africa where the new Government of National
Unity has made great progress, the Reserve Bank has kept interest rates on
hold to support the Rand and to keep inflation in check.
DOMESTIC ECONOMIC OUTLOOK
During the MPC meeting in July, CBN staff presentations highlighted recent
developments on the domestic scene, a few of which are particularly
noteworthy. First, as at mid-year, the composite Purchasing Managers Index
(PMI) showed continued contraction, unemployment increased, and real
GDP growth remained low in per capita terms.

Second, inflation rose to 34.19 per cent in June, driven by continuing
increases in food and energy prices. On a month-on-month basis, inflation
increased to 2.31 per cent in June, marking a reversal of the declining trend
recorded in the preceding three months. High food and fuel prices have
driven an acute and prolonged cost-of-living crisis in which millions of
Nigerians are struggling.

Third, the federal government’s budget data, for the period January to April,
showed that revenues underperformed by 56.13 per cent vis-à-vis projections,
and actual spending was 38.60 per cent below budget. These are worrisome
numbers given the country’s enormous development needs – poverty has
increased with over 18 million Nigerians estimated as food insecure by the
IMF, unemployment is high, human development indicators are below
comparators, and deficiencies abound in the number and quality of
infrastructure. Meanwhile, public debt grew from N97.34 trillion in Q4 2023 to
N121.67 trillion in Q1 2024.

On monetary policy, the MPC has raised borrowing costs in an effort to tame
high inflation and stabilize the naira and this is yielding some dividends. We
need to remain vigilant and continue to monitor the impacts of our policies
very closely. Indeed, the art of stabilization policy is about knowing just how
hard and how long to push each policy component.

The balancing act facing the MPC is difficult in the best of times. It is far much
more difficult when other policies – structural and fiscal – are not entirely
pulling their weights. The monetary policy measures taken thus far are
severely hemmed in by fiscal stresses that are making it difficult for monetary
policy to do its job. Now more than ever, monetary policy needs much more
help from fiscal and structural policies.

In this regard, the government’s recent mandate that the NNPC should sell
450,000 barrels of crude oil per day directly to the Dangote and other local
refineries is a welcome development, estimated to save over US$7 billion in
foreign exchange.

Second, intense drive to clamp down on oil theft and vandalism, to bring
marginal oil fields into production, and to reactivate dormant wells could
raise oil production to the 1.78 million barrels per day assumed in the 2024
Federal budget.

Third, with tax revenues constituting less than 8% of GDP, it is worth repeating
that Nigeria urgently needs to fix the structural weaknesses of our tax system.
These measures combined with a commitment to reduce the overall cost of
governance will dampen fiscal pressures and bolster the effectiveness of
monetary policy.

Clearly, it matters that fiscal expectations are anchored. Indeed, our ability to
control inflation and influence real economic activity rests fundamentally on
fiscal behavior and Nigerian’s expectations of appropriate fiscal behavior.
Otherwise, the task of monetary policy in controlling inflation and stabilizing
real economic activity is much more difficult.

Taking into account the wider context, including the evident hardships in the
real sectors of the economy, I vote for a hold in policy rate at this time. We
must minimize the risk that a further hike could backfire, especially at such a
time of increased unemployment, rising poverty numbers, and nationwide
protests about declining living standards and the exceptionally high cost of
governance.

3. BALA MOH’D BELLO MoN
Opening Statement
The Monetary Policy Committee held its July 2024 meeting amidst prospects
of continued global economic recovery despite lingering risks such as tight
global financial conditions, high public debt levels, and sustained
geopolitical tensions, all of which have adverse implications for commodity
prices and the global supply chain.
Considerations
The global economy has demonstrated remarkable resilience, with steady
growth and declining inflation. This trend has reinstated confidence in the
effectiveness of coordinated tightening of monetary policy worldwide to
dowse price hikes driven mostly by the sharp rise in food and energy prices
triggered by various geopolitical events. As a result, most major economies
are gradually reaching their inflation targets, and the resilience of global
trade amidst worldwide geopolitical tensions is a cause for optimism. These
factors, taken together, suggest that global output and inflation are
anticipated to continue their stable trajectory in the foreseeable future, a
view I share and advocate.

In the light of the foregoing, the Committee broadly appraised its existing
policies and their impact on domestic developments since the beginning of
the year, with particular focus on its price stability mandate.

Data presented at the July 2024 meeting clearly suggests that the
Committee’s previous policies are yielding positive results, given the
moderating pace of the uptick in headline inflation in recent months. On a
year-on-year basis, headline inflation rose at a much slower pace in June
2024 to 34.19 per cent from 33.95 per cent in the previous month. On a
month-on-month basis, headline inflation also increased moderately in June
2024, after four consecutive months of decline (between February and May
2024). This development highlights the efficacy of the tight stance of
monetary policy as reflected by a cumulative 750 basis points increase in the
Monetary Policy Rate (MPR) over the year, upward adjustment in the Cash
reserve ratio (CRR) and other administrative policies to help curb inflation.

To consolidate on the gains recorded so far, it is pertinent that monetary
policy remains on course with the tight stance to curb monetary-induced
inflation while complementary fiscal measures are being explored to stem the
hike in food prices – a key driver of headline inflation. Notably, the proposed
measures by the Federal Government to bridge the food supply deficit, such
as the 150-day duty-free import window for food commodities (maize, husked

brown rice, wheat and cowpeas), amongst others, are expected to
moderate domestic food price pressures in the short-term as more
sustainable initiatives are being pursued by Development Finance Institutions
such as the Bank of Industry and the Bank of Agriculture, with focus on
supporting small and medium scale enterprises in the agriculture value chain.

Real Gross Domestic Product (GDP) maintained a positive trajectory with 2.98
per cent (year-on-year) growth reported for the first quarter of 2024,
compared with 3.46 per cent in the fourth quarter of 2023. This was driven
majorly by the services and industry sectors. Staff estimates project that real
GDP will grow by 3.10 per cent and 3.22 per cent in the second and third
quarters of 2024 respectively, reflecting the impact of coordinated efforts to
support and boost output.

It is essential to maintain exchange rate stability to ensure stable prices, given
the significant impact of exchange rate pass-through on import prices and
inflation. The central bank has made substantial efforts to stabilize the foreign
exchange market, which has led to increased foreign portfolio investment
inflow and a reduction in exchange rate volatility. In addition to current
measures being taken by the Bank, medium and long-term strategies are
being explored to ensure that the exchange rate settles at a market
determined equilibrium level.

In addition, the external reserves increased to US$37.88 billion as of July 15,
2024, from US$34.76 billion as of end-June 2024, a development that will
further sustain the current exchange rate stability and narrowed premium
across market segments, with positive implications for domestic prices.

A strong and robust financial system also propelled the resilience of the
domestic economy. Banking system data presented at the July 2024
meeting, showed stability in broad financial soundness indicators and
sustained improvement in asset quality. Of particular interest is the nonperforming loans (NPLs) ratio, which declined further to 3.9 per cent in June
2024, compared with 4.8 per cent in April 2024. This reflects improvement in
industry risk management practices and implementation of regulatory
policies to manage NPLs, such as the Global Standing Instruction policy.

Also, the results of stress tests conducted by staff showed that financial
soundness indicators remained above minimum regulatory thresholds under
mild to severe shocks. Nonetheless, the Bank must remain vigilant and
proactively manage any operational, asset quality and other risks to financial
system stability.

Policy Decision
In summary, recent domestic economic developments present the need for a
delicate balance between containing inflationary pressures and maintaining
a conducive environment for economic growth. It is, however, comforting
that the growth outlook offers some buffers for a continued anti-inflationary
stance as previous and ongoing support for the real sector of the economy
works their way through. Tightening the stance of monetary policy to curb
inflation would ensure that exchange rate stability is maintained, the negative
real effective interest margin continues to narrow, market sentiment
improves, and investor confidence is ultimately restored, all of which would
translate to improved economic performance over time.

Moreso, the deceleration in the rate of increase in inflation suggests that
previous tightening policies in the year are gradually yielding positive
outcomes. I am, therefore, persuaded that a further increase in the Monetary
Policy Rate (MPR), combined with ongoing administrative policies of the
Bank, would continuously anchor inflation expectations of economic agents
and consolidate the decline in the inflation acceleration rate.

Thus, I vote to increase the Monetary Policy Rate by 50 basis points to 26.75
per cent from 26.25 per cent, adjust the asymmetric corridor around the MPR
to +500/-100 basis points from +100/–300 basis points, retain the Cash Reserve
Ratio (CRR) for Deposit Money Banks (DMBs) at 45.00 per cent and Merchant
Banks at 14.00 per cent while retaining the Liquidity Ratio (LR) at 30.00 per
cent

4. BANDELE A.G. AMOO
Having reviewed the empirical developments in both the domestic and
international economies since the last MPC meeting of May 26, 2024, I hereby
vote as follows:

(a) Raise the Monetary Policy Rate (MPR) by 50 basis points from 26.25 to
26.75 per cent.
(b) Adjust the asymmetric corridor around the MPR to +500/-100 basis
points from +100/-300 basis points.
(c) Retain the Cash Reserve Ratio (CRR) at 45.0 per cent for Deposit
Money Banks (DMBs) and 14.0 per cent for Merchant Banks.
(d) Retain the Liquidity Ratio (LR) at 30.00 per cent.

My decision is influenced by the following developments.

1 Global Economic Developments

The resilience witnessed in the global economy in the recent past continued
in July 2024. This was attained despite heightened geopolitical tensions and
higher than average inflation rates witnessed in many countries. The
downside risks have, however, persisted as escalating geopolitical tensions
could further disrupt commodity prices, and increase fragmentation for trade
networks.
Consequently, global growth is projected at 3.2 per cent in 2024 and 2025
each, (IMF WEO April 2024), consistent with the World Bank (June 2024)
projection of subdued global growth at 2.6 per cent in 2024 reflecting the
impact of the prevailing restrictive monetary policies on growth and
consumption.
Inflation has been decelerating globally and is now approaching the long
run objectives of several central banks especially in the Eurozone where
inflation is on a clearer downward trajectory towards the set 2.0 per cent
threshold in 2024.
Policy rates have, however, remained extremely high compared with the
levels seen in the past decade. With inflation declining, however, several
central banks are beginning to ease rates or giving indications to do so in the
short to medium term. Consequently, some AE central banks including the

Bank of Canada (BoC), the European Central Bank, and the Swiss National
Bank (SNB) have begun their rate-cutting journeys while the Bank of England,
has given indications of a near-term commencement of monetary easing.
The United States Fed has, however, exhibited some caution, given that
inflation, even though on the decline, has persisted above its long-run
objective.
Global trade is projected to gradually rebound in the third quarter of 2024
and 2025 driven by declining inflation and a fast-recovering US economy. The
IMF-WEO projected global trade to grow at 3.0 per cent in 2024 and 3.3 per
cent in 2025, a downward revision of 0.3 percentage point compared with
January 2024 projections. The Organization for Economic Co-operation and
Development (OECD) and the World Trade Organization (WTO) also
forecasted an uptick in global trade flows in 2024 (CBN, 2024).
A report by the Organisation of Petroleum Exporting Countries (OPEC) in June
2024 showed that global crude oil supply in the year would remain stable at
2.2 mbpd into the medium term on expectation that non-OPEC countries
would ramp up production to offset ongoing production cuts by the OPEC+
countries.

2 Domestic Economic Developments and Outlook

The CBN, World Bank, IMF and FMFBNP projection that the Nigerian economy
will expand by 3.38, 3.30 3.30 and 3.88 per cent, respectively in 2024 still
subsists. The forecast is predicated on increased crude oil production levels,
and the sustained growth momentum in the services sector.
As at end-June 2024, developments in selected macro-economic indicators
such as external reserves, current account balance, government finances,
balance of trade, crude oil price and production, monetary aggregates,
average interest rates, and exchange rates were mixed. While external
reserves, current account balance, and balance of trade increased, those of
current account balance, government finances, average crude oil prices
and production recorded varying levels of decreases.
Available information shows that the banking industry was relatively stable
and sound as at end June 2024 given that the solvency and liquidity ratios,
amongst other indicators, remained within the set regulatory thresholds. The
NPL, CAR and LR remained within the maximum regulatory thresholds.
Data from the NBS reported that the headline inflation rate for June 2024 was
34.19% from 33.95% in May 2024. On an annual basis, the headline inflation
rate stood at 11.40% points higher compared with June 2023 which was

22.79%. Food inflation increased by 0.27 percentage point to 40.87% in June
2024 from 40.66% in May. Evidently, data showed that food inflation drives
MoM inflation in Nigeria. Core inflation increased by 0.36% to 27.40% in June
2024 from 27.04% in May. On an annual basis, it decreased by 20.06%
compared with its level in the preceding year. A further breakdown of the
inflation data shows that Food and Non-Alcoholic beverages were the major
drivers of both year-on-year and month-on-month Headline inflation,
contributing 17.7 and 1.2% respectively.
It is worthy to note that the rate of increase in headline inflation has been
declining since February 2024 attributed to the impact of tightening measures
and efforts by the MPC and fiscal authorities to subdue inflation. Further
moderation in food prices is expected in the coming weeks as the harvest
season sets in.
I therefore stress the urgency of addressing inflationary pressures, particularly
persistent food inflation, which has continued to undermine price stability.
While monetary policy has moderated aggregate demand, production
bottlenecks, rising food and energy costs continue to drive price increases.
High transportation costs for farm produce and insecurity in food-producing
areas also continue to play a key role in the food price pressure being
experienced.
To address these concerns, the Federal Government recently (May/June
2024) introduced and implemented some measures tagged “Inflation
Reduction and Price Stability Fiscal Policy Measures etc) Order 2024” which
gave specific tariff waivers on some specific items of food; manufacturing
raw materials; agricultural production inputs; pharmaceutical products and
poultry feeds; flour and grains for a period of 150-days.
Other measures in “Order 2024” include: authorisation of millers and other
specific producers to import paddy rice, raw materials for food, electricity,
pharmaceuticals and public transportation at zero duty and VAT for a period
of six months to improve production and delivery capacities in those sectors.
suspension of taxes and levies for SMEs and further suspension of VAT on
diesel (AGO) for six months. A concessionary import duty exchange rate was
also granted for such specified imports. These measures are aimed at
moderating domestic food prices.
More importantly, the Federal Government has also taken a critical action
towards reducing the pump price of petroleum products to the Nigerian
market. It has approved and directed the NNPCL to transact all crude oil
supply transactions with the local refineries (including Dangote) in Nigerian
Naira. The eventual abolition of petroleum imports will further reduce the
retail prices of petroleum products in Nigeria which will quickly transmit to

moderation of general price levels. We expect the inflation trend to reduce
over a short span of time into the third quarter 2024.
While we heartily welcome these measures which will rapidly improve real
sector production and price outcomes over the short-term horizon, it is crucial
to implement them with a defined exit strategy to avoid reversing gains in
domestic food and aggregate goods production/output.

3 My Concern
Fiscal developments so far in Nigeria have heightened my recourse to promarket approach to economic management. Given the afore-mentioned
issues, it is imperative that the current monetary tightening regime which
commenced at the February 2024 meeting of the MPC should continue, to
allow complete policy pass-through in the Nigerian economy.
Expectedly, I believe that moderate tightening (50bps increase in MPR) is
significant now, as it allows previous hikes to permeate the economy, aiming
to rein in rising inflation. However, I am not unaware that the further hike in
the MPR may negatively affect real sector players, particularly regarding
interest expenses on debt funding. The massive rebate on taxes, duties, levies
granted to small and big businesses by the Order 2024 should confer
extensive financial relief to the product pricing for the affected sectors.
When these happens, inflation will be subdued in the interim and may further
abate when other long run measures set in. I believe that the expected net
positive impact of the staggered reforms so far under implementation will
assist Nigeria to relatively contain inflationary pressure and improve the inflow
of foreign investment (portfolio and direct), amid strong domestic growth
potential.
The ongoing structural and policy reforms in Nigeria will continue yielding
positive outcomes and mirror the impact of the base effect. While I greatly
commend the efforts of the fiscal authorities that complemented the
restrictive monetary arena started by the Committee in the past few months, I
believe the positive reaction will continue on other outstanding issues. Other
areas of concern include curbing smuggling activities, reduce social
insecurity, improve legal system and administration, reduce aggregate food
supply deficit, improve income inequality and administer efficient social
safety nets over time. Addressing these issues by monetary-fiscal relationship
and cooperation would greatly help to maximize the impact of monetary
policy on the Nigerian economy.

5. EMEM USORO
1.0 My Considerations
Global developments since the last MPC meeting
In the period under review, global geopolitical risk, occasioned by
heightened tensions in the Middle East and Eastern Europe, persisted with
attendant global and domestic macroeconomic impact.
Notwithstanding, however, global economic activities expanded, though at
a slower pace, driven by moderate expansion in both the manufacturing
and services sectors. Generally, inflation tended to converge towards central
banks’ targets in the advanced and emerging markets & developing
economies, although the deceleration in inflation rates across economies
varied and was generally slower-than expected. Consequently, monetary
authorities in major economies have maintained high policy rates, taking into
cognisance the outlook for medium-term price development and financial
conditions.
Global financial conditions eased in the review period, despite yields
trending northwards, buoyed by higher corporate earnings and lower
external financing risks. Though capital flows to emerging markets and
developing economies rose in the review period, high U.S. interest rates
tempered the outlook for such flows. According to the IMF, the projection for
global growth remained optimistic, as the global economy is expected to
remain resilient, however, at varied momentum across regions, due to
recovery in trade.
Domestic Developments
On the domestic front, year-on-year inflation inched up, although at a
decreasing rate, driven largely by persisting effects of food inflation, which is
not unconnected with the consequences of age long rural-urban drift,
climatic factors (flooding), security and infrastructural challenges, which
have culminated in low agricultural output. Rising energy prices, high
exchange rate pass-through and pessimistic inflation expectations also
contributed to exacerbating the inflationary trend. Furthermore, liquidity
level increased in June 2024, occasioned by high seasonal demand.
Economic activity improved during the review period, driven by fiscal
discipline/operations and consumer demand for services. Particularly, crude
oil production rose, buoyed by increased investment and reduction in theft
and pipeline vandalism. Activities in the services sector also expanded due
to improving consumer demand. Expansionary fiscal operations, particularly
around infrastructural development, played a key role in supporting

economic activities, though constrained by the tight fiscal space, debt
dynamics and inflationary pressure.
Moreso, while the financial system remains resilient as indicated by several
financial soundness indicators and scenario-based stress-tests, threats
emanating from FX revaluation might ensue, necessitating the need to
contain exchange rate fluctuations and negative inflation expectations.
From an outlook perspective, the domestic economy remains cautiously
optimistic as growth is expected to expand in the near term. This assumption
is predicated on the implementation of the minimum wage, enhancement
of the fiscal space through the issuance of FCY-denominated debt
instruments, and other welfare-enhancing policies of the monetary and
fiscal authorities yielding sectoral gains.
The outlook for the external sector also remains optimistic on the account of
favourable crude oil prices, increased domestic oil production, and
expansion of the sector value chain through the operationalisation of the
Dangote and Port Harcourt refineries.
Risks to this outlook remain elevated, stemming largely from the likelihood of
escalating geopolitical tensions, potential shift in US foreign policy due to the
forthcoming Presidential elections and the increasing risk of climate change.
All these factors collectively pose significant risks to the domestic economy.
While I reckon that rising inflation has eroded real income of economic
agents and dampened economic activity, it is imperative to anchor
inflationary expectations and most importantly enhance policy coordination
with the fiscal authority to avoid divergent objectives. I am also aware that
strengthening the naira is essential to achieving price stability. Thus,
narrowing the negative interest rate gap and making domestic assets
attractive to foreign investors will facilitate exchange rate and price stability.
2.0
My Decision
While striving to attain price stability, I’m aware of the potential short-term
impact of tight monetary policy on borrowing costs, economic growth, and
financial stability. However, the opportunity costs of de-anchoring inflation
expectations and leaving inflation unchecked pose a more significant risk to
long-term economic performance and the stability of the financial system.
Thus, consequent upon the above factors and outlook for both the global
and domestic economies, and in line with the Committee’s commitment to
price stability to improve the well-being of the Nigerian citizenry, I voted to:

I.
Raise the MPR by 50 basis points to 26.75%, to narrow the negative
interest gap and attract more capital inflows to stabilize the naira
exchange rate.
II.
Adjust the asymmetric corridor to MPR +500/-100 basis points from MPR
+100/-300 basis points.
III.
Retain the CRR for Merchant banks and Commercial banks at 14% and
45%, respectively; and
IV.
Retain the LR at 30.0%.

6. LYDIA SHEHU JAFIYA
The July 2024 MPC meeting held against the backdrop of modest global
economic growth, and inflation moving towards central bank targets in
Advanced Economies and Emerging Market and Developing Economies
(EMDEs), resulting from tight financial conditions associated with disinflation
process. While current growth rates are in line with expectations, some signs
of moderation are emerging, particularly in EMDEs as deepening geopolitical
tensions and tight financial conditions remain major challenges. The IMF
World Economic Outlook (WEO) for July 2024, has forecast global growth at
3.2 per cent in 2024 and 3.3 per cent in 2025, driven by stronger than
expected resilience in the Advanced Economies and some Emerging
Markets and Developing Economies, particularly in the US, China and India.
Inflation continues to reduce globally, on account of strong commitment by
central banks to price stability and lower inflation expectations. Indeed, for
most Advanced Economies and EMDEs, inflation has started to move towards
their long run targets, but at a slower pace than earlier predicted.
Accordingly, the IMF-WEO of July 2024, projects global inflation to decline to
an annual average of 5.9 per cent in 2024, reflecting moderation in energy
and goods prices, and supported by easing supply-chain disruptions and
decline in Chinese export prices. While significant risks of geopolitical tensions
continue to create inflationary pressures, especially in EMDEs, global inflation
is forecast to moderate to 4.4 per cent in 2025.
Although inflation is moderating in many Advanced Economies, central
banks may remain in a tightening mode in the near term, with adverse
implications for capital flows to EMDEs.
International trade is expected to grow to 3.1 per cent in 2024 and 3.4 per
cent in 2025. The projection is premised on sustained growth in output in the
Advanced Economies and EMDEs, as well as further moderation in inflation
and the normalization of monetary policy. Downside risks to the outlook
include the spill over effects of geopolitical tensions on supply chains and
trade routes.
THE DOMESTIC ECONOMY
On the domestic front, Real GDP (year-on-year) remained positive, growing
by 2.98 per cent in Q1 2024 compared with 3.46 per cent in Q4 2023 and 2.31
per cent in Q1 2023. Non-oil GDP maintained an impressive contribution to
real GDP on account of fiscal measures that improved revenue collection
and trade facilitation. Oil GDP increased for the second consecutive quarter
due to improved crude oil production. Overall, the outlook for the economy
suggests that output is projected to grow by 3.10 per cent in Q2 2024.

Headline inflation (year-on-year) increased to 34.19 per cent in June 2024
from 33.95 per cent in May 2024, driven by both the food and core
components of the index. It is noteworthy however, that the rate of increase
in headline inflation decelerated further in June 2024. A breakdown of the
components of the Headline index reveal that food inflation (year-on-year)
increased to 40.87 per cent in June 2024 from 40.66 per cent in May 2024,
while core inflation (year-on-year) rose to 27.40 per cent in June 2024 from
27.04 per cent in May 2024.
On the external sector front, foreign exchange inflows improved by 38.26 per
cent (month-on-month), between April and May 2024, driven by increased
receipts of oil and non-oil proceeds. Gross external reserve position at endJune 2024 could provide 7.59 months cover of import of goods and services
and 10.88 months cover of import of goods. The foreign exchange market
also witnessed relative stability and convergence of rates.
Despite current macro-economic challenges, the banking industry remained
sound, as Financial Soundness Indicators (FSIs) were within their regulatory
provisions.
CONSIDERATION FOR VOTING
The Nigerian economy continues to face high and persisting inflation. The
Monetary Policy Committee (MPC), in response, has remained steadfast in
deploying orthodox monetary policy tools to address the rising spate of
inflation. Since February 2024, the Committee has raised the Monetary Policy
Rate (MPR) by a cumulative of 750 basis points to contain the inflationary
pressures. While inflation persistence may seem that the tightening stance of
policy has not had impactful effect on domestic price developments, the
counterfactual is that in the absence of the tight policy regime, inflationary
pressures could have been a lot worse. For instance, while inflation remains
elevated, the magnitude of increase in the rate decelerated in the last
couple of months. Similarly, the foreign exchange market has witnessed
relative stability in the recent past, as indicated by the narrowing spread in
different segments of the market, driven by the efficiency of the market
mechanism in foreign exchange allocation and price determination.
I am of the view that the current inflationary trend is propelled by a mix of
monetary and structural factors. Hence, there is a need to implement an
optimal policy blend that combines demand management and supply-side
enhancement measures to stabilize the general price level and boost
economic growth.

In addressing food inflation, the fiscal authority has initiated robust short and
medium term non-inflationary measures to ramp-up food supply and
accommodate demand pressure. Amongst these are: 150-day duty free
import window for food commodities particularly (maize, husked brown rice,
wheat, and cow peas) and importation of 250,000 metric tonnes of wheat
and 250,000 metric tonnes of maize in their semi processed form for supply to
small scale processors and millers. Other measures include stakeholder
engagements to set Guaranteed Minimum Price and facilitate storage of
excess supply in the National Strategic Food Reserve.
Furthermore, ongoing investment in the transport infrastructure (CNG
vehicles), energy and power sector projects, including investments in oil and
gas and national grid electricity projects are expected to reduce
transportation costs, and increase energy supply to households and
businesses, amongst others. I am confident that these fiscal interventions
would lead to domestic price moderation and spur growth momentum in the
near to medium term.
Whilst not being insensitive to the role a sustained tightening policy measure
could
play
in
anchoring
inflationary
expectations
in
the
current
circumstance; considering that monetary policy affects economic activity
and inflation with a lag and taking note of the robust policy measures by the
MPC since February 2024, I feel that a rate hike at this time may not be
essential.
I, therefore, voted at this meeting to retain the MPR and other policy
parameters at their extant levels to enable the observation of previous
monetary policy actions as they work their way through the economy.

7. MUHAMMAD SANI ABDULLAHI
My Vote
The challenging inflationary environment leading to this meeting remains
within the contemporary context. The previous three meetings have revealed
our strong resolve to rein in inflationary pressures through a cumulative policy
rate hike of 750 basis points. We are already seeing some positives as the
trajectory of inflation is becoming flatter, suggesting that we are on the right
path. This notwithstanding, we are yet to reach the turning point as inflation
appears not to have plateaued, suggesting that the challenges are deeprooted in global uncertainties and domestic structural issues. Consequently, I
am constrained to aver that the option at this meeting is significantly
restricted to remaining in tightening mode to ensure that the subsisting gains
are not eroded. Given the tough policy environment and the need to allow
the impact of the transmission lag from the three previous rate hikes to filter
through the system, I am convinced that a moderate hike will be a sufficient
response at this time, to not only signal our resolve, but also be consistent with
our avowed commitment to subdue inflation. Staying true to this
commitment, complimented with a further adjustment of the asymmetric
corridor is essential to ensure that rates in the interbank market respond
appropriately to signal the Bank’s policy stance. I have no doubt that this is a
pragmatic consideration.
Therefore, at this meeting, I voted to:
1) Increase the MPR by 50 basis points to 26.75 per cent from 26.25 per
cent.
2) Adjust the asymmetric corridor to +500/-100 basis points from +100/-300
basis points around the MPR.
3) Retain the CRR for Deposit Money Banks at 45.00 per cent.
4) Retain the CRR for Merchant Banks at 14.00 per cent; and
5) Retain the Liquidity Ratio at 30.00 per cent.
My Considerations
At previous meetings of the MPC, I was assertive that the inflationary tailwinds
were far from clear, and that the operating economic and policy
environments were challenging. I also restated our resolve to tirelessly
engage appropriate monetary policy instruments to address these
inflationary concerns. The MPC was unequivocal in providing clarity
regarding the major drivers of headline inflation in Nigeria. We identified
some binding constraints to domestic food production and other factors that
shape Nigeria’s inflation trajectory. Notwithstanding the lag in the transmission
of our previous actions which resulted in the policy rate hike of 750 basis
points between February and May 2024 to address inflationary concerns, our

commitment to the inflation fight remains sacrosanct, and encouraged by
the slowdown in the rate of increase across all measures of inflation. Even
though the rate of increase in headline halved between February and May
2024, we are clearly not yet where we want to be as the pressures remain.
The June 2024 inflation data released by the National Bureau of Statistics
(NBS), revealed that year-on-year headline inflation inched higher albeit at a
slower pace (0.24 basis point) to 34.19 per cent from 33.95 per cent in May.
The renewed focus of the fiscal authorities in deploying non-monetary
measures to curb domestic food inflation will complement the Bank’s current
efforts to a very significant extent. Ramping up domestic food production,
however, remains key to moderating headline inflation. To achieve this, the
improvement in security around the food producing belts should be
complemented with deliberate actions by local government authorities
towards the revamping of or establishing farm settlements to galvanise the
resources of smallholder farmers and gender groups through the provision of
basic amenities. This would strengthen food production at the subsistence
level and for families as well as minimize the national food deficit.

On a positive note, the extreme swings in capital flows which has long been a
cause for concern because of the potential risks to macroeconomic and
financial system stability have moderated as a result of previous actions by
the MPC. We have observed significant influx of foreign investment and other
inflows in volume and composition from February to June 2024. This response
clearly indicates the growing confidence in the Nigerian market and the
belief that the risks of capital flow reversals may have waned.

The recent deceleration in inflation was disrupted by the June uptick albeit at
a slower pace, highlighting the persistent nature of inflationary pressures. A
combination of monetary and other structural factors have been identified
as the factors at work in explaining Nigeria’s inflation dynamics. Inflation
remained high in June 2024 at 34.19 per cent, 40.87 per cent and 27.40 per
cent for headline, food and core components, respectively. Food inflation
persists due to supply chain disruptions, impact of climate change, insecurity
and other lingering challenges in the sector. The increase in the core inflation
index in June 2024 was not unexpected because of higher transportation
costs and exchange rate pressures. Regarding food inflation, it is expected to
moderate as we approach the 2024 harvests season and as security
improves around the food belts of the country.
Rising food, transport and energy prices and the challenges faced by farmers
in food producing regions in Nigeria, remain the key risks to inflation outlook.

Reflecting the need for economic growth, one thing is clear, reducing
inflation remains a top priority in ensuring that inflation expectations stay well-

anchored to allow for investment and sustained economic growth. Thus, the
Bank’s response must be geared towards deliberate measures to ensure a
stable naira in view of the exchange rate passthrough to domestic prices and
support access to affordable credit.

As the fiscal operations of the FGN resulted in a higher deficit, 4.0 per cent of
GDP in June 2024, expectations of a quick turnaround in the fiscal deficit may
be deferred against the backdrop of the planned fiscal stimulus package by
the FGN and the implementation of a new minimum wage. Monetary policy
must stand ready in order not to be presumptively ineffective in addressing
inflation concerns as the new policies may necessitate recourse to borrowing
and a rise in interest payment. Nonetheless, continued fiscal retrenchment,
improved oil production, and enhanced revenue receipts are positive signs
for the economy and could moderate the likely impact of this development
and the overall fiscal outlook for 2024.

Regarding inflows, our recent decisions have been very instrumental in
rendering significant outcomes and providing the needed support for
exchange rate stability and market efficiency which remains the big push for
price stability. Our inflows doubled during the first quarter of 2024 compared
with the corresponding period in 2023. encouraging inflows maybe a priority,
we are optimistic that improvements in local refining capacity will support
measures to spur foreign exchange savings.

Economies within the emerging markets group will continue to compete with
the advanced economies for capital inflows to the extent that the rates
remain competitive. Notwithstanding, market data shows increased monthon-month inflows with total inflows into the economy at US$29.75 billion as of
April 2024. The inflows reflect investor perception of the reforms and have
supported efforts to stem volatility in the foreign exchange market with
greater potential for price stability.

Global and Domestic Developments
The IMF WEO update for July 2024 showed that global growth would continue
to remain positive in 2024 and 2025, though subdued, reflecting the broadly
restrictive monetary policy. Global growth is forecast at 3.2 per cent in 2024
and 3.3 per cent in 2025. Growth is projected to expand to 1.7 per cent in
2024 in the Advanced Economies before rising to 1.8 per cent in 2025,
reflecting stronger than expected output in the US and other large
economies. Growth in the Emerging Markets and Developing Economies is,
however, expected to remain at 4.3 per cent apiece in 2024 and 2025,
despite the expected mixed performance across the various regions. Growth
in EMDEs is susceptible to shocks arising from rising energy prices, exchange

rate pressures, labour market friction, and socio-political crisis. Thus, the
recovery in the EMDEs is expected to progress moderately with China and
India leading the pack with output growth at 5.3 and 7.8 per cent,
respectively, in the first quarter of 2024.
Driven majorly by the services sector which recorded a growth of 4.32 per
cent in Q1:2024, Nigeria’s gross domestic product (GDP) expanded (year-onyear) by 2.98 per cent in Q1 2024 compared with 3.46 per cent in Q4 2023,
indicating that the economy remains on a growth trajectory. Services
contributed 58.03 per cent to aggregate GDP in the first quarter of 2024. The
oil sector also showed improvement in June as it grew by 2.4 per cent to
1.28mbp from 1.25mpbd in the month of May due mainly to increased
production from various terminals because of improved security around oil
infrastructure.
The negative output gap of -6.18 per cent in Q1 2024 is expected to narrow
towards the end of the year based on GDP growth projections. The
Composite Purchasing Managers Index (PMI) improved slightly to 48.8 index
points in June 2024, from 46.0 index points in May 2024. Agriculture and
industry PMI contracted, while services PMI expanded during the period.
Nigeria’s external sector has remained resilient with the current account
posting a surplus of US$2.66 billion or 5.82 per cent of GDP in Q1 2024 on
account of a surplus in the goods accounts, and current transfers
(remittances and grants).
The trend of financial soundness indicators shows that overall, the financial
system remains liquid, sound, and safe as the industry Non-performing Loans
(NLs), remain below the prudential maximum of 5 per cent. It decreased
slightly to 3.9 per cent in June 2024 from 4.1 per cent in December 2023
attributable to the impact of the depreciation of the naira. It is expected that
the recently announced banking system recapitalization will propel Nigerian
banks to be better positioned to contribute to the real sector growth and
financial inclusion agenda.
Overall, the balance of risks necessitated a cautious but firm approach to
monetary policy. My vote for a moderate increase in the policy rate along
with adjustments to the standing facility corridor, will signal an unwavering
commitment to fight inflation and stabilize the economy.

8. MURTALA SABO SAGAGI
Context
The transition of the CBN from Heterodox monetary policies to the current
orthodoxy regime was deliberate and not prescriptive. This bold effort became
necessary in view of the inflationary and distortive outcomes of the previous
government’s excessive interventions which were believed to be poorly
managed. The massive injection of the naira into the economy through ways of
means totaling 22.7 trillion in 2023 created unprecedented economic dislocation.
With the eventual free fall of the naira after the removal of fuel subsidy and the
deregulation of exchange rates, the CBN had limited options but to embrace
conventional monetary policy tools to ensure price and exchange rate stability
and restore domestic and international confidence in the economy. Indeed, the
actions taken by the MPC from February 2024 have moderated the exchange
rate and month-on-month Headline inflation rate had decelerated in the last four
months.
While the tight monetary stance of the Bank is yielding positive results, market
imperfections and market failures abound and can lead to unintended outcomes
in terms of distortions in resource allocation leading to sub-optimal performance of
the conventional policies deployed, especially in the face of fiscal dominance.
Therefore, an alignment of monetary policies with fiscal interventions is critical in
sustaining the CBN’s consistent efforts to attain macroeconomic stability. This is
more so because improvements in government expenditure, interest rate,
inflation, exchange rate, money supply and export could fast track economic
growth in Nigeria. Achieving a balanced approach, however, remains a
challenge because the dynamics and unstable nature of the Nigerian economy
make conventional tools less effective and modelling solutions particularly difficult.
Nevertheless, constant evaluation of policy actions to determine effectiveness in
terms of outcomes and impact on the general economic health of the country
should inform policy decisions.
Global and Domestic Economic Environment
The global economy is showing signs of resilience and recovery. The massive
injection of funds into economies by various countries in response to the
COVID-19 pandemic and heightened regional conflicts induced volatilities
and disruptions which, in turn, fueled global inflation. Recent estimates have
shown relative easing in global inflation and thus projected to continue its
downtrend from 6.6% in 2023 to 5.9% in 2024 (IMF, 2024). This was mainly as a
result of sustained tight monetary stance by central banks and fiscal
measures to stabilize global supply chains. A more promising projection by
the World Bank (2024) shows that global inflation will drop to 3.5% in 2024. The
projected ease in inflation has encouraged many central banks to halt tight

monetary regimes and, some countries, have started bringing down rates.
Global economic growth projections remain at 3.2% (IMF, 2024). The outlook
for the global financial market is also positive as policy rates begin trending
downwards and growth potentials appear realistic. For the Emerging Markets
and Developing Economies (EMDEs) there are signs of inflation moderating
mainly due to the reduction in energy and food prices. Also, output in EMDEs
is expected to grow by 4.1% in 2024. In the Sub-Saharan Africa, economic
growth is expected to rise from 3.4% in 2023 to 3.8% in 2024 (IMF, 2024).
However, potential disruptions in economic activities in Kenya and Nigeria
are envisaged due to the public pushback on government economic reform
policies.
In Nigeria, headline inflation increased to 34.19% in June 2024 driven by
continued upward pressure mainly from food prices. Real GDP growth is
projected at 3.10% and 3.22% for Q2 2024 and Q3 2024 respectively. The
projected growth, however, is insufficient to generate enduring wealth
considering the population growth rate of 2.42% (WPR, 2024) and
unemployment rate of 5.0% (NBS, 2023). Remarkably, the exchange rate is
gradually stabilizing and the naira regaining its value with an appreciation of
0.85% recorded in June, 2024. In addition, the convergence of rates at the
parallel market and the Nigerian Autonomous Foreign Exchange Market
(NAFEM), has reduced the risk of arbitrage substantially, enabling domestic
productivity to improve.
Major Considerations
1. Positive global economic outlook: There are indications of reduced global
risks to the Nigerian economy increasing the possibility of its inflation
moderating in the short to medium term.
2. Positive domestic economic outlook:
a. Inflation is projected to moderate to 26% by the end of 2024 (Augusto
& Co, 2024).
b. Real GDP growth will reach 3.22% in Q3, 2024 and the external reserve
has increased to US$37.91 billion in July (CBN, 2024).
c. Debt-service- to-revenue ratio improved to 74.3% (N1.3 trillion) in QI,
2024 lower than 149.5% (1.97 trillion) in Q1, 2023 (CBN, 2024).
d. Windfall tax is likely to support budget implementation without recourse
to excessive borrowing.
3. Positive Investor confidence: Beside rates, investors are cognizant of
Nigeria’s high investment potential made possible by its teeming youth

population (15-35 years) estimated by the National Youth Survey, 2020, at
95,315,144, nearly 50% of the total population; emerging creative industry;
natural resource endowment; resilient informal sector; and improved
macroeconomic governance. With coordinated investment promotion
efforts, Nigeria’s investment diversification is feasible in the medium term.
4. Planned and on-going Economic stimulus initiatives: in response to
worsening food crisis, increasing cost of living and cost of doing business, and
deteriorating purchasing power of the citizens, the FGN is intervening to
restore growth and improve welfare. To this end, $1.3 billion has been
earmarked to boost agriculture, energy, health and social welfare; palliatives
distribution, tax relief and tariff waivers granted to certain businesses and
sectors; as well as granting financial autonomy to local governments to spur
growth, especially in rural communities, among others. The cumulative effects
of fiscal interventions would result in significant recovery in the economy.
5. Planned increase in ways and means: the FGN increased ways and means
from 5% to 10%. This is likely to increase the government appetite to spend
more, thereby generating excess liquidity.
6. Weak policy coordination and policy transmission mechanism: assessments
by BMI (2024), Fitch ratings, (2024) and Augusto & Co, (2024) indicated
systemic gaps in policy coordination and institutional mechanisms to transmit
the monetary policy thereby limiting the potency of continued rate hikes to
tame inflation in Nigeria. Instead, persistent rate hikes engender high
borrowing costs, heighten credit risks and limit lending to the real sector.
Conclusion
The last three MPC meetings have consistently raised rates in addition to
adjusting the Asymmetric Corridor around the MPR with the aim of mopping
up excess liquidity in the banking system. An evaluation of the outcome of
the sustained monetary tightening is instructive at this stage. Recent
experiences in developed and developing countries suggest that improved
policy coordination will help achieve a good mix of orthodox and heterodox
policies to achieve stability and fast track inclusive growth. This suggests that
efforts aimed at reducing excess liquidity should extend beyond rate hikes. By
so doing, the Bank’s tight monetary stance can be sustained, investor
confidence enhanced and the flow of finance to the real sector achieved.
The CBN, as a critical economic manager, is in a unique position to lead
towards achieving a balance between price stability and forging
partnerships to boost the local economy in view of the positive global
economic outlook and the renewed hope summarized by the Agusto & Co
(2024) as “Nigerian economy is unlikely to be as poorly managed in the next
four years as it was in the previous eight.”

My Vote
I vote to:
• Retain the Monetary Policy Rate (MPR) at 26.25%
• Adjust the Asymmetric Corridor around the MPR to +500-100 basis
points.
• Retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per
cent.
• Retain the Cash Reserve Ratio of Merchant Banks at 14.0 per cent.
• Retain the Liquidity Ratio at 30.0 per cent.

Recommendations
To increase the effectiveness of monetary policy in taming inflation, stabilizing
exchange rates and enhancing productiveness of the economy, the
following are proposed:
I.
Reform NNPC: Immediate overhaul of the NNPC is instructive to reduce
inefficiencies and enhance inflows to stabilize the exchange rate.
II.
Ways and Means Advances: FGN to consider reversing its decision to
increase ways and means to promote fiscal discipline and improve
investor confidence.
III.
Stimulus package to MSMEs: The problem of Nigeria is production not
necessarily consumption. The CBN and Fiscal authority should develop
a common approach to channeling funding to small businesses to fast
track growth and job creation in a manner that would curtail excess
liquidity.
IV.
Investment promotion: the FG and the Bank should develop a holistic
framework for engaging, attracting and facilitating investments in high
potential sectors.
V.
Replenish food strategic reserve: in view of the fast-approaching
harvest season, the need to restock the country's strategic reserve is
paramount. This should be complemented by working with supply
chain actors to discourage hoarding and unregulated exports of staple
food items.
VI.
Infrastructure: Fast track the completion of on-going rail projects to
enhance efficiency in the supply chain thereby reducing cost of food
in the country.
VII.
Export promotion: to rapidly remove binding constrains to exporting
made-in-Nigeria products.

9. MUSTAPHA AKINKUNMI
Context
Recent indicators suggest that the tightened measures implemented in
previous meetings are beginning to yield positive results. This is evidenced by
the moderation in the rate of increase in inflation. While farm produce has
increased, there is an increased trend of cross-border trade of farm produce
with neighboring countries, made attractive by the weak naira. In the
domestic market, however, the exchange rate has effectively converged
across various market segments, thus moderating the opportunity for naira
arbitrage. Although the Naira depreciated just before the July MPC meeting,
it has since gained value as of the time of writing of this statement.
In light of the above and the proposed expansionary fiscal policy, I supported
a marginal increase in the Monetary Policy Rate (MPR) and proposed
tightening the asymmetric corridor.
The Global Economy
The global economy is projected to grow by 3.2 per cent in 2024 and 3.3 per
cent in 2025, bolstered by resilience from major advanced economies and
fiscal support from China. Advanced economies are expected to grow by
1.7 per cent in 2024 and 1.8 per cent in 2025, driven by stronger-thanexpected growth in the US, which will offset weaker growth in the Euro Area.
However, the key driver of global growth will be emerging markets and
developing economies (EMDEs), projected to grow by 4.3 per cent in both
years, mainly due to robust growth in India and moderate performance in
China.
In the US, real GDP grew at an annual rate of 2.8 per cent in Q2 2024,
exceeding the 2.1 per cent forecast, following a 1.4 per cent rise in Q1 2024,
driven by increased consumer spending and business inventories. Similarly,
the European economy grew by 0.4 per cent in Q1 2024 compared to 0.2 per
cent in Q4 2023, aided by wage-induced private consumption. The UK
economy emerged from recession with 0.2 per cent growth in Q1 2024,
reflecting strong expansion in the service sector. In contrast, Japan's
economic growth fell to 0.2 per cent in Q1 2024 from 1.2 per cent in Q4 2023
due to reduced consumer spending driven by high living costs and sluggish
wages.
In 2024, growth in the advanced economies will be led by the US at 2.6 per
cent, the Euro Area at 0.9 per cent, Japan at 0.7 per cent, and the UK at 0.7
per cent.

In the EMDEs, China and Ghana had economic expansions of 5.3 per cent
and 4.7 per cent, respectively, in Q1 2024. China's annual growth dropped to
4.7 per cent in Q2 2024 due to a persistent property market downturn and
weak domestic demand. India,
Kenya,
Nigeria,
and
South
Africa
experienced declines in their growth rates to 7.8, 5.0, 2.98, and 0.5 per cent,
respectively. Nonetheless, strong growth is expected in EMDEs, with growth in
India and China in 2024, projected at 7.0 and 5.0 per cent respectively.
Nigeria is expected to grow by 3.1 per cent, driven by improved oil and
agriculture outputs and improved security. Capital inflows into emerging
markets increased significantly to US$16.1 billion in June 2024 from US$5.5
billion in May.
While the synchronized rate hike cycle in the advanced economies has been
paused global inflation is expected to decline as policy rates within this group
of economies remain broadly elevated. The IMF forecasts global inflation at
5.0 per cent in 2024 and 4.5 per cent in 2025, down from 5.2 per cent in 2023.
Inflation in the advanced economies is projected at 2.7 per cent in 2024 and
2.1 per cent in 2025. However, inflation risks could rise due to ongoing
conflicts in Europe and the Middle East. In the US, inflation moderated to 3.0
per cent in June 2024 from 3.3 per cent in May 2024, due to declines in
shelter, gasoline, and air transport prices. Eurozone inflation dropped to 2.5
per cent, while in Japan and the UK inflation remained at 2.8 per cent and
2.0 per cent, respectively.
In the EMDEs, inflation is expected to remain at 8.3 per cent in 2024 before
declining to 6.2 per cent in 2025, driven by anticipated decline in food and
energy prices supported by continued monetary tightening. Inflation in China
decreased to 0.20 per cent in June 2024, while in India, it increased to 5.08
per cent. In South Africa, inflation remained steady at 5.1 per cent in June
2024, while it declined to 4.60 and 22.80 per cent in Kenya and Ghana,
respectively. In Nigeria, however, inflation rose, at a moderated pace, to
34.19 per cent in June 2024.
The Domestic Economy
High inflation remains an obstacle to robust economic growth in Nigeria.
Annual real GDP declined to 2.74 per cent in 2023 from 3.10 per cent in 2022.
Additionally, the country's growth rate recorded a weaker-than-expected
2.98 per cent in Q1 2024, compared to 3.46 per cent in Q4 2023, driven
mainly by the services sector, which accounted for 58.04 per cent of GDP.
While the services sector grew by 4.32 per cent in Q1 2024 compared with
3.98 per cent in Q4 2023, the agriculture and industry sectors witnessed

declining growth. Factors such as rising prices, exchange rate pressures, and
increasing energy costs contributed to this weaker-than-expected growth.
Headline inflation in Nigeria rose to 34.19 per cent in June 2024 from 33.95 per
cent in May 2024. This increase was mainly driven by food supply deficits
caused by a weak naira, which increased neighboring countries’ demand for
Nigerian agricultural produce and ongoing insecurity in farming communities.
This is compared with South Africa's 5.1 per cent, India's 5.08 per cent, and
Russia’s 8.6 per cent inflation rates. Year-on-year food inflation in Nigeria,
increased slightly from 40.66 per cent in May 2024 to 40.87 per cent in June
2024.Month-on-month core inflation also rose, due to the rising price index of
processed food, driven by security challenges, infrastructure constraints, high
farm input costs, and seasonal factors.
The naira depreciated to N1,605.50 on July 19, 2024, from N1,525.00 on June
28, 2024. Gross external reserve stood at US$34.88 billion as of June 2024,
projected to be about US$32.93 billion at the end of May 2024. This reserve
could cover imports for about 11 months of goods and about 8 months of
goods and services.
Crude oil production in Nigeria increased slightly to 1.28mbpd in June 2024
from 1.25mbpd in May 2024, attributed to reduced oil theft and increased
output from Qua Iboe and Erha terminals. However, production remains
below the OPEC quota of 1.58mbpd. Government revenue performance
remains below target, with total FGN retained revenue at N2.87 trillion as of
April 2024. The fiscal deficit was N3.01 trillion as of April 2024, 0.7 per cent
below the budget projection. Nigeria’s debt-GDP ratio increased from 41.5
per cent in Q4 2023 to 51.2 per cent in Q1 2024, with external debt
constituting 46.1 per cent of the public debt stock.
Decision
Nigeria's public debt-to-GDP ratio has risen to about 53 percent, surpassing
the sustainability threshold of 40 percent, primarily due to exchange rate
depreciation. The debt service burden now consumes approximately 56
percent of tax revenues, exceeding the 30 percent threshold.
The country's monetary policy aims to contain inflation, strengthen real
income and improve household welfare as well as boost foreign investment
inflows. The 2023 introduction of the willing buyer/willing seller model in
Nigeria has significantly narrowed the spread in the exchange rates, thus
enhancing transparency in the foreign exchange market.

In view of the above developments and their likely impact on the domestic
economy, I voted to increase the Monetary Policy Rate (MPR) by 50 basis
points to 26.75% and to tighten the asymmetric corridor around the MPR to
+500/-100 from +100/-300. Consequently, the CBN’s Standing Lending Facility
(SLF) rate stood at 31.75% and the Standing Deposit Facility (SDF) rate at
25.75%. In joined my colleagues to emphasize our commitment to price
stability, noting the adverse impact of high inflation on household welfare
and economic activities.

10.
PHILIP IKEAZOR
In view of the need to consolidate the gains of the previous rate hikes,
considering the continued uptick in the general price level, I was of the view
that the only way forward to rein in inflation would be to stay on course with
the rate hike cycle, albeit moderately. I thus voted as follows:


1. Raise the MPR by 50 basis points to 26.75 from 26.25 per cent.
2. Adjust the Asymmetric Corridor around the MPR to +500/-100 basis
points.

3. Retain the Cash Reserve Ratio (CRR) of DMBs at 45.00 per cent.

4. Retain the Cash Reserve Ratio of Merchant Banks at 14.00 per cent.

5. Retain the Liquidity Ratio at 30.00 per cent.

Developments in the Global and Domestic Economy
The trajectory of the global economic recovery is projected to be stable but
sticky in line with the April 2024 forecast, at 3.2 per cent in 2024 and 3.3 per
cent in 2025, driven by the persistence in services inflation. According to the
IMF, services inflation is constraining disinflation, thereby complicating the
normalization of monetary policy and the upside risk to global inflation.

Though inflation continues to decelerate, the slowdown in its momentum is
an indication that monetary authorities will unlikely achieve the price stability
objectives of monetary policy in the medium term. As such, the prospects of
ending the global tightening cycle might be longer than initially projected.

In all, and unlike in the first quarter of 2024, central banks are now cautious in
their approach to monetary easing, due to the persistent elevated
uncertainty around the inflation outlook, especially in major advanced
economies. Amidst escalating trade tensions and increased policy
uncertainty, addressing the challenges, therefore, requires a carefully
selected approach to policy sequencing to achieve the objectives of low
inflation and stable growth.

In the domestic economy, the outlook for growth remains positive, even as
the IMF revised the 2024 growth projection downwards by 0.2 percentage
point to 3.1per cent, from the initial projection of 3.3 per cent. This revision
was hinged on the continued inflationary pressure and the slower-thanexpected growth in real domestic output in Q1-2024 compared with Q1-2023.

In Q1-2024, real gross domestic product, grew by 2.98 per cent, 0.67 per cent
higher than the growth recorded in the corresponding quarter in 2023, and
0.49 per cent less than the growth recorded in Q4-2024, driven by the higherthan-expected 114.35 per cent growth in metal ores and the continued
dominance of the services sector.

To further propel growth and slowdown the general price level, the fiscal
authority is currently executing a short-term stimulus plan. Under the
accelerated stabilization and advancement plan (ASAP), about N2 trillion is
expected to be injected into the economy over the next 6 (six) months to set
the economy path to long-term recovery. The focus of this intervention is on
critical areas like agriculture, health, and energy – all of which are key drivers
of non-core inflation.

Globally, a windfall tax is becoming a promising tool to curb inflation,
dampen the effects of the cost-of-living crisis on lower-income households
without shifting the tax burden. In line with the global trend, the amended
Finance Act 2023 provided for the imposition of a Windfall Tax of 70.0 per
cent on bank’s foreign exchange revaluation gains from the favourable
foreign exchange market condition. In furtherance of the fiscal consolidation
plans, the FGN introduced a 150-day window for duty-free importation of
food commodities; in addition to the proposed importation of 500,000 MT of
wheat and maize under a price control system to boost domestic supply of
staples and curb food inflation.

Inflation year-on-year at end-June 2024 stood at 34.19 per cent, up from
33.95 per cent at end-May driven primarily by food inflation. While there is a
marginal increase in all the metrics of inflation, the tight monetary policy
stance of the Bank has contributed significantly to decelerating the inflation
momentum, signaling a foreseeable turning point in the near term. The
projection by the CBN, IMF and the World Bank also supported a favourable
near-term outlook for inflation.

My Considerations
Fiscal injections arising from short term fiscal stimulus and other government
fiscal
obligations,
commodity
and
energy
prices,
exchange
rate
depreciation and the associated pass-through, are binding constraints on the
moderation of the aggregate price level. These are complex factors; and to
keep inflation under control, we need to maintain a tight stance, in addition
to the deployment of administrative tools, to signal to the market our
commitment to ensuring stable prices. Moreover, it is important to
consolidate on the gains of the previous hikes to continue to address the
challenges posed by system-wide liquidity.

Nonetheless, it is important to note that some of the recent policies by the
fiscal authority, especially the stimulus policy, will rein in both the expected
and actual food inflation, especially in the short run. In the spirit of monetaryfiscal policy coordination, monetary policy is under obligation to support
these fiscal initiatives by deploying its policy tools to optimize the expected
benefits. In the present circumstance therefore, aggressive tightening could
negatively affect the redistributive effects of the policies that the fiscal
authority intend to use to complement the instruments of monetary policy, to
effectively dampen food inflation.
In deciding whether to raise the policy rate and to what magnitude, I was not
oblivious of the fact that stimulus policies that have elements of passthrough
to inflation are usually spiral in nature. On one hand, food importation and
the temporary removal of the customs duties on imported food will boost
domestic supply, discourage further hoarding of food because of its
expected and actual disinflationary effect. On the other hand, its impact on
the depreciation of the domestic currency, due to an increase in foreign
exchange demand, could spike pass-through to inflation. The overall effect,
therefore, will be significantly dependent on the net effect between the passthrough to inflation and the dampening effect on domestic prices. The
response of monetary policy must thus be focused on offsetting the identified
net effect on the general price level.
To accommodate these policies, monetary policy should follow a balanced
path by counteracting the inflationary effect of government spending
without constraining the aggregate demand effects of these stimulus
policies. I thus, supported a moderate and systematic response of monetary
policy to avoid offsetting the intended growth potentials of these fiscal
actions.
As the net banking system liquidity persisted, the interbank market needs to
be made more responsive, to ensure the effective transmission of monetary
policy. To this end, it is important to adjust the asymmetric corridor to reflect
the realities in the money market and discourage the attraction to the Bank’s
lending window.
To conclude, my view at this meeting was focused on the need to stay on
course with our objective of price stability, while also being sensitive to the
general plight of the macroeconomy and its impact on ordinary Nigerians.
These views and the developments outlined above guided my decision to
vote for a moderate rate hike and adjust the asymmetric corridor to ensure
the proper transmission of monetary policy.

11.
OLAYEMI CARDOSO
Governor of the Central Bank of Nigeria and Chairman, Monetary Policy
Committee
With inflation in advanced economies having been on the decline for the
past two years and now approaching the long-run objectives of several
central banks, there are clear signals suggesting that the earlier synchronized
policy rate hike cycle by monetary authorities globally may have plateaued,
thus ushering in a new era of possible rate cut cycles. Global food and
energy prices are also expected to continue to moderate in the short to
medium term, even in the face of prolonged geopolitical tensions, conflicts
and risks of further supply chain disruptions. Global growth is expected to
remain resilient despite the continued tight global financial conditions and
ongoing geopolitical tensions.
Although the pace of growth in domestic inflation has slowed significantly
compared with where we were at the beginning of the year, the modest rise
in month-on-month headline inflation to 2.31 per cent in June 2024 from 2.14
per cent in May was a source of concern to the MPC. This suggests that
inflationary pressures have not totally abated despite the successive
tightening of monetary policy in the last three meetings.
Several identified emerging risks to the inflation outlook further suggest the
need to tread cautiously towards disinflation as these risks imply that inflation
may not be moderating at our desired pace. Some of these emerging risks
include the recent increase in minimum wage, a supplementary budget that
is poised to increase government spending, energy price adjustments for
households and businesses, and the pass-through effect of the exchange
rate depreciation to food, energy, and transportation prices.
Food inflation has remained worryingly high, leading to the continued rise in
headline inflation. The upward pressure on prices of domestically produced
food is being driven by the continued high level of insecurity in several
farming communities. In addition, the increased smuggling of food produce
from border farming communities to neighboring countries with fixed
exchange rate regimes is a major drain on scarce domestic food supply. For
imported food items, however, the depreciating exchange rate play a key
role in the observed upthrust.
Whilst the ongoing policy reforms and tight monetary conditions may have
adverse short-term effects on the domestic socio-economic environment, we
have a responsibility to ensure we continue to make the right decisions based
on the evidence of the economic data before us and within the tenets of our
mandate.

There is no doubt that the actions of the MPC over the previous 3 meetings
has had significant effect on slowing down the inflation trajectory, and
forecasts shows that we are on track to see a decline in headline inflation in
the coming months. The elevated risk in the outlook however dictates that we
must remain on the tightening trajectory using as much of the monetary tools
at our disposal as possible, and more importantly lay the right expectations
for the market on our resolve to stay the course even in the face of negative
public opinion.
Particular attention needs to be paid to developments in the foreign
exchange markets and the outlook for the exchange rate in the short to
medium term, given its major impact on inflation. The recently observed
relative stability of the exchange rate is owed to the increased confidence of
the market in the actions of the MPC to deliver the objective of bringing
inflation within target. This fragile equilibrium must, however, be carefully
managed in order not to jeopardize the achievements so far in attracting
more capital flows to help sustain the recent stability in the market.
On the whole, both monetary and fiscal policy must work actively to fully
arrest inflationary pressures and lay the foundation for sustainable growth of
the economy. While the bulk of the necessary work rests in resolving the array
of non-monetary issues facing the economy, the MPC must continue doing
all that is in its powers in the short run, to curb inflationary pressure. The
Committee remains conscious that the continued rate hike cycle may have
some negative consequences on output growth in the short term, but also
realizes that inflation could have a more devastating consequence on
growth in the medium to long term if allowed to fester.
After careful consideration and weighing the balance of risks, I was
convinced of the need to further tighten the stance of policy, albeit,
moderately, taking into consideration our mandate for ensuring price
stability.
I therefore voted to:
1. Increase MPR by 50 basis points to 26.75 per cent from 26.25 per cent.
2. Adjust the asymmetric corridor to -100/+500 basis points around the MPR
from -300/+500.
3. Retain the Cash Reserve Requirement (CRR) for deposit money banks and
merchant banks at 45.00 and 14.00 per cent, respectively.
4. Retain liquidity ratio at 30.00 per cent.

OLAYEMI CARDOSO
Governor
July 2024