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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 140 OF THE MONETARY POLICY
COMMITTEE MEETING HELD ON MONDAY 24th AND TUESDAY 25th JANUARY,

The Monetary Policy Committee (MPC) held its first meeting for the year 2022 on
the 24th and 25th of January 2022 in the light of waning optimism for a robust
rebound in global recovery in 2021. This resulted from the persistence of the
COVID-19 pandemic and emergence of new variants of the virus; persisting
supply
bottlenecks;
global
inflationary
pressures;
and
the
imminent
commencement of monetary policy normalization by some major central
banks. In the domestic economy, output growth recovery was relatively strong
in 2021. It is however, expected to continue reasonably in 2022, following
considerable improvement in the third quarter of 2021 and a positive outlook
for the fourth quarter. This was hinged on the continued support of the monetary
and fiscal authorities to sustain the current momentum. The Committee
reviewed the developments in the global and domestic economic and
financial environments in 2021, as well as the outlook and risks for 2022.
Ten (10) members of the Committee attended this meeting.
Global Economic Developments
The Committee noted that while the recovery of the global economy in 2021
fell
below
the
initial
forecast,
final
estimates showed
considerable
improvements over the 2020 outcome, evidence that the global economy was
pulling out of the doldrum associated with the pandemic. Consequently, the
recovery is gaining momentum with increasing consumer spending, upswing in
investments and soaring world merchandise trade, above pre-pandemic levels.
This reflects the resilience of economic agents in the face of new strains of the

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virus and rising infection rates. The Committee, however, took cognizance of
significant headwinds confronting the global economy in 2022, largely
associated with the persisting threats of new variants of the coronavirus. The
Advanced Economies are however, in a strong position to offset the impact of
these headwinds with stronger policy support and better access to COVID-19
vaccines. Consequently, this group of economies have shown better resilience
towards disruptions to the recovery. In the medium term however, the rising
inflationary pressures and the gradual withdrawal of both monetary and fiscal
stimuli may dampen the recovery in 2022.
In the Emerging Market and Developing Economies (EMDEs), poor access to
vaccines and limited policy support meant that this group of economies have
been harder hit by the Covid-19 health crisis and its associated
macroeconomic downturn. In China, one of the few countries that stayed out
of recession in 2020, output weakened in the third quarter of 2021 and has
continued to weaken as the Covid infections continue to rage amid power
supply shortages and a turbulent property market. Following the containment
of the infections in India, the economy has commenced a sharp recovery and
is set to continue on an upward trajectory. Overall, growth in the EMDEs is
expected to slow in 2022 due to the low level of vaccination and limited policy
support in several economies in this group.
On price development, the MPC observed that inflation, in most Advanced
Economies remained high and unlikely to abate in the short to medium term.
This is driven by the persistence of supply side disruptions and pent-up demand
associated with economic recovery. In the EMDEs, inflation has remained high
due to a combination of persisting exchange rate pressures and supply
bottlenecks associated with the lockdown restrictions. With the US Fed and
central banks of other advanced economies now moving towards monetary
policy normalization, the eventual interest rate hike may likely trigger huge
capital outflow from the EMDEs which will further aggravate exchange rate
pressures with a pass-through to domestic prices.

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Global financial markets data show significant sell-off, as investors continued to
rebalance their portfolios with the shift from assets such as gold and emerging
market securities to securities of Advanced Economies suggesting market
response to the impending interest rate hike. Thus, global financial conditions
are expected to tighten as risk averse portfolio investors reassign their portfolios
from perceived riskier emerging market securities, to less risky advanced
economy securities with the expectation of improved yields.
Domestic Economic Developments
Staff projections showed that the economy is expected to remain on a path of
positive growth, given the impressive performance in the third quarter of 2021
and continuing rebound in economic activities. The Committee noted with
satisfaction, the significant improvement in the Manufacturing Purchasing
Managers’ Index (PMI), which rose to 52.0 index points in December 2021,
compared with 50.8 index points in November reflecting the continuing
economic recovery. This expansion was driven largely by increasing business
activities in the economy, leading to increase in new orders and uptrend in
employment and production levels. The Non-Manufacturing PMI, however,
declined marginally to 48.0 index points in December 2021 from 48.6 points in
November, largely reflecting a decline in services.
The Committee noted with concern, the slight increase in headline inflation
(year-on-year) to 15.63 per cent in December 2021 from 15.40 per cent in
November following seven consecutive months of decline. The unexpected
increase was attributed to both the food and core components, which rose to
17.37 and 13.87 per cent in December 2021 from 17.21 and 13.85 per cent in
November, respectively. The Committee, however, expressed confidence in
the Bank’s sustained intervention programmes, noting that inflation will continue
to abate as food supply improves. Members also noted that the seasonal drive
in price development associated with the December festive period was largely
contributory to the marginal increase in price levels, and as such, believe that
this episode of increase may be temporary.

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Reviewing the developments in monetary aggregates, the Committee noted
that broad money supply (M3) rose further to 13.77 per cent in December 2021,
compared with 10.10 per cent in November 2021. This upthrust was largely
driven by the growth in Net Domestic Assets (NDA) of 15.58 per cent in
December 2021, compared with 9.40 per cent in November 2021. Net Foreign
Assets (NFA), however decreased to 6.06 per cent in December 2021,
compared with 14.98 per cent in November 2021. The sharp growth in Net
Domestic Assets (NDA) was largely attributed to an increase in claims on the
Federal government and other sectors. The slowdown in growth of Net Foreign
Assets (NFA) resulted from a decrease in foreign assets holdings of the banking
system in favour of more domestic investments.
The Committee reviewed the performance of the Bank’s intervention
programmes aimed at stimulating productivity in manufacturing/industries,
agriculture, energy/infrastructure, healthcare and Micro, Small and Medium
Enterprises (MSMEs). Between November and December 2021, under the
Anchor Borrowers’ Programme (ABP), the Bank disbursed N75.99 billion to
support the cultivation of over 383,000 hectares of maize, rice and wheat during
the 2022 dry season, bringing the cumulative disbursements under the
Programme to ₦927.94 billion to over 4.5 million smallholder farmers cultivating
21 commodities across the country. All excess output aggregated from the
financed farmers will be released to the Nigeria Commodity Exchange (NCX)
to help moderate the prices of food in the market. The Bank also released N1.76
billion to finance two (2) large-scale agricultural projects under the Commercial
Agriculture Credit Scheme (CACS).
In addition, the Bank disbursed the sum of ₦151.23 billion under the Real Sector
Facility to 15 additional projects in agriculture, manufacturing, mining, and
services. The funds were utilized for both greenfield and brownfield (expansion)
projects under the Covid-19 Intervention for the Manufacturing Sector (CIMS)
and the Real Sector Support Facility from Differentiated Cash Reserve

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Requirement (RSSF-DCRR). Cumulative disbursements under the Real Sector
Facility currently stood at ₦1.40 trillion disbursed to 331 projects across the
country. As part of its effort to support the resilience of the healthcare sector,
the Bank also disbursed ₦498.00 million to two (2) healthcare projects under the
Healthcare Sector Intervention Facility (HSIF), bringing the cumulative
disbursements to ₦108.85 billion for 118 projects, comprising of 31
pharmaceuticals, 82 hospital and 4 other services.
To support households and businesses affected by Covid-19, the Bank disbursed
N20.29 billion to 40,521 beneficiaries, comprising 35,340 households and 5,181
small businesses under the Targeted Credit Facility (TCF) within the period. The
cumulative disbursements under the TCF stood at N369.78 billion to 777,666
beneficiaries, comprising 648,052 households and 129,614 small businesses. To
further promote entrepreneurship development among Nigerian youths, the
Bank disbursed N293 million to 59 beneficiaries under the recently introduced
Tertiary Institutions Entrepreneurship Scheme (TIES).
Under the National Mass Metering Programme (NMMP), the sum of ₦47.83 billion
was disbursed for the procurement and installation of 858,026 electricity meters
across the country under the Scheme’s Phase-0. The Committee also noted the
improved collections by DisCos as a result of increased meter installations. The
Bank released ₦274.33 billion to power sector players, as part of its effort to
support the sector under the Nigeria Bulk Electricity Trading Payment Assurance
Facility (NBET-PAF). This was in addition to the ₦20.58 billion released to
Distribution Companies (DisCos) under the Nigeria Electricity Market
Stabilisation Facility – Phase 2 (NEMSF-2). To further support the development of
enabling infrastructure in the gas industry, the Bank released additional ₦3.00
billion for the augmentation of an existing infrastructure, bringing the
cumulative disbursements under the Intervention Facility for National Gas
Expansion Programme (IFNGEP) to ₦42.20 billion for six (6) projects.
Furthermore, under the 100 for 100 Policy on Production and Productivity (PPP),
which was introduced to stimulate the flow of finance and investments to

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enterprises and projects with potential to kick-start a sustainable economic
growth trajectory, accelerate structural transformation, promote diversification,
and improve productivity, the Bank has received 224 applications, valued at
₦294.91 billion for real sector projects in agriculture, energy, healthcare,
manufacturing and services. The applications are currently being processed
and the first batch of beneficiaries under the intervention will be announced on
31st January 2022, with their names published in national dailies. These projects
have been carefully selected in line with the approved selection criteria as
contained in the guidelinesq
Money market rates fluctuated within and above the asymmetric corridor,
reflecting prevailing liquidity conditions in the banking system. The monthly
weighted average Open Buyback (OBB) rate increased to 12.75 per cent in
December 2021 from 10.61 per cent in November 2021. The increase in the Open
Buyback (OBB) rate reflected the tight liquidity conditions in the banking system.
The MPC noted the continuing positive performance in the equities market in the
review period, with the All-Share Index (ASI) and Market Capitalization (MC)
increasing by 1.61 and 1.63 per cent to 42,716.44 and N22.30 trillion on
December 31, 2021, from 42,038.60 and N21.94 trillion on October 29, 2021,
respectively. This positive performance reflected improved corporate earnings
as investors participation increased in the market.

The MPC also noted the sustained resilience of the banking system, following the
progressive improvement in the Non-Performing Loans (NPLs) ratio from 5.10 per
cent in November 2021 to 4.85 per cent in December 2021- a first in a long time.
The Committee also noted that the liquidity ratio remained well above its
prudential limit at 41.3 per cent, though Capital Adequacy Ratio (CAR) declined
marginally to 14.53 per cent in December 2021 from 14.90 per cent in the
previous month. The Committee thus, urged the Bank to sustain its firm regulatory
surveillance.

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Members also noted the continued improvement in the external reserves despite
ongoing foreign exchange market pressures. The reserves stood at US$40.20
billion as at December 2021.
Outlook
The broad outlook for the recovery in both the global and domestic economies
is clouded with uncertainty such as the resurgence of the COVID-19 pandemic,
driven by new and mutating strains of the coronavirus; persisting supply
bottlenecks; high and rising inflationary pressures; and dwindling monetary and
fiscal stimuli.
The Emerging Markets and Developing Economies are likely to experience a
sharp downturn as a result of the identified headwinds confronting the outlook.
This is hinged on the back of the ongoing two-speed recovery of the global
economy, driven by continued disparities in the administration of vaccines
between the Advanced Economies and the Emerging Markets and Developing
Economies. While the Advanced Economies will also experience a downturn
in 2022, this group of economies are expected to take a less severe hit as most
of them have achieved significant high levels of vaccination.
Staff forecast project output growth at 3.10 per cent in 2021 with an expected
better
outcome
in
2022,
consistent
with
the
expected
improved
macroeconomic performance. The economic recovery is therefore expected
to progress gradually with the ongoing support by the monetary and fiscal
authorities, progress in COVID-19 vaccinations and continued high crude oil
prices.
After a moderate increase in December 2021, headline inflation is expected to
trend marginally upwards in the short-term before moderating towards the end
of the first quarter of 2022. This is expected as food harvests progress towards
the end of the first quarter of 2022 and improve food supply. In general, with the
Bank sustaining its intervention programmes through the year, food inflation is
expected to trend downwards in 2022.

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Available forecasts for key macroeconomic variables for the Nigerian
economy, indicated expected rebound in output growth for most of 2022,
sustained by ongoing broad monetary and fiscal stimuli. Accordingly, the
Nigerian economy is forecast to grow in 2022 by 2.86 per cent (CBN), 4.20 per
cent (FGN) and 2.76 per cent (IMF).

The Committee’s Considerations
The Committee accessed the balance of risks confronting the domestic
economy in the near term as they impact output growth and price stability.
Members noted the unrelenting effort by the monetary and fiscal authorities in
mitigating the impact of the virus on the economy. It observed the continued
moderate recovery of the domestic economy but requires further concerted
policy effort by both the monetary and fiscal authorities to improve the
momentum and strengthen the recovery. Members were thus of the view that,
building on the improved growth in the third quarter and the positive PMIs in the
fourth quarter of 2021, output growth is expected to strengthen into 2022.
On the Pandemic, the MPC reviewed its continued impact on the domestic
economy as Members collectively agreed that the downside risks were still
hindering the recovery. In this light, it commended the efforts of the Presidential
Task Force on COVID-19 for procuring vaccines and continuing the drive to
ensure that most Nigerians are fully vaccinated.
On price development, Members continued to express concerns about the
impact of insecurity in farming communities on food inflation. Whereas headline
inflation had been moderating for several months, the committee believed that
its recent uptick was associated with increased demand during the festive
season and was thus of the view that prices will return to the downward
trajectory given the Bank’s ongoing interventions in the agriculture sector. On
this note, Members applauded the efforts of the Bank with the recent launch of
the rice pyramids, noting that these efforts to increase food supply and stem
food inflation were in the right direction. Members, however, reiterated the key

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role of the Federal Government in providing the necessary security around the
country, and particularly in the farming communities, to ensure that farmers and
their produce remain safe, and food supply is both boosted and uninterrupted.
The Committee noted that the ongoing dry season farming would further
improve food supply and dampen prices.
Members noted the ongoing debate around the removal of fuel subsidy and
suggested a robust engagement with relevant groups in the country, and
afterward follow a stepwise and gradual approach, to ensure its moderate
impact on cost of transportation and energy for individual, households and
firms. The Committee also noted the need to encourage the take-off of private
refineries across the country to provide alternative competitive local supply
source and reduce the need for government intervention to manage fuel
prices for domestic consumption. In addition to this, the Committee called for
the speedy conclusion of the government gas-powered vehicle conversion
scheme and other alternative sources of fuel.
On the exchange rate, the Committee applauded the Management’s efforts
at maintaining stability over the short term with increasing demand as the
economy continues to reopen. Members noted the dwindling proceeds from
oil sale, despite rising crude oil prices. They further noted the need to address
the persistent reduction in remittance of oil revenue to the Consolidated
Revenue Fund and urged the NNPC to urgently address this anomaly. The
improved foreign exchange supply will thus support the Bank’s demand
management strategy in the foreign exchange market and consolidate
macroeconomic performance, especially those that promote export, reduce
dependence on import and reduce foreign exchange demand pressure. The
MPC welcomed the improvement in foreign capital inflow through diaspora
remittances and urged the Bank to further extend the incentive scope to
attract more remittances to official channels.
The Committee noted the rising government debt profile and the concentration
of the funding sources and its implications for fiscal sustainability and

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macroeconomic stability, including its impact on financial system performance
and growth. The MPC continued to urge the Government on the need to
harness other sources of revenue to reduce its dependence on oil as a single
revenue source. In addition, it reiterated the need for government to seek
alternative, more viable, and efficient infrastructure financing sources, in order
to ease its expenditure burden. To this end, Members called on the fiscal
authorities to take advantage of InfraCorp, the private sector driven
infrastructural
vehicle
and
transfer
viable
infrastructure
projects
for
consideration by the Corporation as this would ease pressure on Government.
that would otherwise have to raise revenue through taxes from an already
burdened private and household sector.
The improved performance of the equities market in the review period,
signposted continued investor confidence in the Nigerian economy. This in the
view of Members was a positive sign that the economy remained on a path to
a more robust medium-term recovery.
The banking sector indices, in the consideration of Members, showed no less
resilience as other macroeconomic indicators reviewed; even as obvious
downside risks associated with the Pandemic continued to impact the business
environment. Members thus applauded the Management’s efforts in ensuring
the continued downward trend of Non-Performing Loans (NPLs) ratio, signifying
improving conditions in the banking system. Nevertheless, Members
emphasized the need for the Bank to closely monitor developments in the
sector and swiftly respond to any emerging challenges.
The Committee’s Decision
The MPC observed with concern the moderate rise in inflation in December
2021, noting that this was typical of increased aggregate demand associated
with the end of year festive activities. Members, however, expressed their
continued commitment to drive down domestic prices by putting in place

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relevant policy measures to curb the rise in inflationary pressures, while also
supporting the fragile growth recovery.
In its determination as to whether to hold or loosen or tighten its policy stance,
the MPC was mindful that, whereas the US and some Advanced Economies
have signaled their intention to commence policy normalisation which may
result in capital flow reversal for EMDEs, the major focus at these climes were
targeted mainly at reining in the high level of inflation which had been
unprecedent in the last four decades in those climes.
For Nigeria, members were of the view that Nigeria is confronted with, not only
inflation but also fragile output growth. As a result, MPC believes that its current
stance of price and monetary stability conducive for growth remain desirable.
The MPC is convinced that various measures being implemented were helping,
not only in boosting output growth, but also in moderating inflation. The MPC
therefore, enjoyed Management to continue to use its development finance
tools to accelerate output growth, which will also help in boosting
manufacturing output that would ultimately aid moderation in prices. It also
requested Management to continue its use of administrative measures,
including discretionary tools at its disposal through CRR to control money supply
in the economy.
In its final consideration, the Committee was clear that a loosening option was
not desirable because it would trigger liquidity surfeit and fuel inflationary
pressure as available funds may outstrip the economy absorptive capacity or
domestic capacity utilization. It also feels loosening could trigger foreign
exchange demand pressure, as the excess liquidity would be channeled to
either frivolous importations or speculative holding of foreign exchange as
alternative investment channels narrow; leading to foreign exchange
depreciation and or inflation.
The MPC also dropped a tightening option at this meeting in view of the fragile
state of the current GDP growth rate and potential external and domestic

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headwinds confronting the economy. The Committee opined that tightening
could truncate the steady improvement in credit performance, including other
financial soundness indicators, and reverse the declining trend in NPLs.
Moreover, tightening could counteract the CBN’s credit expansion motive as a
necessary condition for improved economic growth and employment
generation.
The MPC, therefore, concluded that a HOLD stance remains desirable at this
time, as this would indicate a conservative but cautious and consistent policy
choice given the prevailing economic conditions and outlook, thus
strengthening policy credibility and focus. It also feels that a hold would signal
MPCs realisation of the fragility of the growth recovery and its sensitivity to
emerging global and domestic uncertainties. Hence the need to sustain the
current policy trajectory.
After a careful balancing of the benefits and downsides of each policy option,
the MPC decided to hold all policy parameters constant; believing that a hold
stance will enable the continued permeation of current policy measures in
supporting the recorded growth recovery and further boost production and
productivity, which would ultimately rein-in inflation in the short to medium term.
The Committee thus decided by a unanimous vote to retain the Monetary
Policy Rate (MPR) at 11.5 per cent.
In summary, the MPC voted to retain:
I.
The MPR at 11.5 per cent;
II.
The Asymmetric Corridor of +100/-700 basis points around the MPR;
III.
The CRR at 27.5 per cent; and
IV. The Liquidity Ratio at 30 per cent.
Thank you.

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Godwin I. Emefiele
Governor, Central Bank of Nigeria
25th January 2022

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
The last two years have seen massive monetary and fiscal stimulus policies in
response to the recessive impacts of the COVID-19 pandemic. Consequent upon
the global rally in public spending and low interest rates, output is beginning to
converge on the level prior to the pandemic in some countries, especially the
advanced economies. At the same time, the costs of this policy path have started
to manifest. Increased inflationary pressures have resulted from the combination of
huge fiscal and monetary injections, high energy prices and disruptions in the
supply chains of intermediate goods. And so, monetary policy must now aim to
strike a balance between stimulating output and reining-in inflation. Against this
background, we can extrapolate that monetary policy making is likely going to be
quite challenging in 2022, especially for developing countries that are mostly
posting fragile and sluggish output recoveries due to factors including poor access
to vaccines and a variety of structural constraints on economic activity including
weak policy support.
To the extent that inflation can be contained without harming growth, there would
be little policy dilemma. However, the reality of most emerging markets and
developing economies (EMDEs) is that output recovery remains quite fragile and
therefore vulnerable in the face of aggressive anti-inflation policy stance. Output
in this cluster, according to the World Bank, could remain substantially below the
pre-pandemic trend for some time. That said, the pressure that these countries face
go beyond slow output recovery and elevated inflation pressure. The drift towards
policy normalization by central banks in the advanced economies threatens
capital flows to these countries, thereby increasing the risk of exchange rate
instability.
The complexity of the policy problem in the EMDEs vary in some respects by
country. For commodity exporters like Nigeria, the expected moderation in global
growth to about 4.0 per cent in 2022 from 5.9 per cent in 2021 could come with

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softening demand for commodities (crude oil in the case of Nigeria) and price
fluctuations. Up to Q3 2021, for which hard data is available, Oil and gas sector
remained in contraction. This could worsen in the event of a significant decline in
the price of crude oil. I see other important downside risks to domestic output
recovery which together with my assessment of the inflation outlook, informed my
decision to vote for a ‘hold’ at the January 2022 meeting of the Monetary Policy
Committee (MPC).
In 2021, real GDP growth rate slowed from about 5.0 per cent in Q2 to about 4.0
per cent in Q3. Staff estimates for Q4 show a further decline to about 2.86 per cent.
Although it is projected to inch up to 2.94 per cent in Q1 2022, it could slow again
to 2.72 per cent in Q2 2022. Obviously, real output growth could remain sluggish in
the year. This is further buttressed by the evolution of some of the indicators of
economic activity. The non-manufacturing PMI, for instance, remained below 50
points in December 2021. In effect, policy support to key sectors of the economy
continues to be relevant.
Headline inflation continues to be a challenge. It rose to 15.63 per cent in
December 2021 from 15.40 per cent recorded in November 2021. The increase
reflected increases in both core and food inflation in the month. Core inflation rose
marginally by 0.02 percentage points to 13.87 per cent, while food inflation grew
by 0.16 percentage points to 17.37 per cent in December 2021. Until December,
headline inflation had steadily declined owing mainly to the sterilization operations
of the Bank (which kept banking system liquidity close to its optimal level) and
improved output of food brought about by the Bank’s interventions in agriculture.
As such, the sudden increase in inflation may be attributed to increased demand
on account of year-end festivities. This effect is expected, going by staff
projections, to taper-off as from February 2022. Considering this outlook, I saw no
urgent need to tighten the stance of monetary policy at the January meeting.
Most fundamentally, the inflationary pressures the economy has experienced in the
last two to three years have been driven mainly by non-monetary factors.
Distribution bottlenecks and supply shortages have been its major undercurrent

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since 2020, following the coronavirus-induced lockdowns and movement
restrictions. The Bank’s response so far has partly focused on alleviating major
supply constraints using development finance interventions in the real sector of the
economy. This approach has had the desired effect of lifting output and
dampening consumer price pressures, especially in the foods sub-sector. I am
persuaded that this strategy continues to be important in addressing much of the
current price pressures.
While not discounting the risks presented by the drift towards policy normalization
in the advanced economies, volatile energy prices and rising global inflation, I am
minded that the timing of any adjustment in policy could be heavily consequential.
Although most central banks are wary of these risks to inflation, only a few have
responded with a hike in policy rate. I believe that a cautious approach to
monetary policy is ideal at this time in view of the cloudy growth outlook. I should
emphasize that the routine sterilisation actions of the Bank continue to be sufficient
to rein-in banking system excess liquidity.
Against the backdrop of pressure on both output and prices, I must admit,
monetary policy maneuvers would be difficult, to say the least. In the
circumstance, complementary fiscal actions are needed to ease the burden
of adjustment on monetary policy. Obviously, policy support has been very
instrumental to macroeconomic recovery in 2021. More will be needed from
the fiscal side in 2022 especially in sectors like agriculture, SMEs and solid
minerals. In addition, physical infrastructure and security ought to maintain their
priority position on the fiscal plate in year. On the monetary side, measures
aimed at redirecting credit to these and other sectors of the economy would
continue to be relevant towards addressing growth fragility. Luckily, the
opportunity for that exists with the substantial improvement in banking system
resilience. At end-2021, average industry capital adequacy ratio (CAR) stood
at 14.53 per cent; non-performing loans (NPLs) was 4.85 per cent, indicating a
remarkable improvement in the quality of risk assets and Liquidity ratio was 41.33
per cent.

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I believe, the option of tightening policy using the policy rate remains on the
table as long as inflationary pressures persist. I am however hopeful that the
policy headroom for supporting growth will not narrow any further by the next
meeting of the MPC in March 2022. Until then, my policy preference remains
continuation of the extant strategy of targeted intervention in critical sectors
alongside sterilization actions to rein-in excess banking system liquidity. I,
therefore, voted to:

1. Retain the MPR at 11.5 per cent.
2. Retain the Asymmetric Corridor at +100/-700 basis points.
3. Retain the CRR at 27.5 per cent.
4. Retain the Liquidity Ratio at 30 per cent.


2. ADENIKINJU, ADEOLA FESTUS
International Economic Development
The international economic environment presents mixed picture and prospects
in January 2022. On the upside are the continuous economic recovery from the
impact of COVID-19, increasing rate of vaccination especially in the advanced
economies, and expansion in global trade. Global economy in 2022 is
projected to grow by 4.1%. Growth in Advanced Economies is expected to
moderate to 3.8% in 2022, while Emerging and Developing Economies are
expected to grow by 4.6% in 2022. However, on the flip side are, rising inflation,
low vaccination rate in developing economies, high global debt, rising energy
prices, and persistent supply problems and logistics constraints. Other downside
risks include declining fiscal support and uncertainties around COVID-19 and its

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variants. Global inflation is expected to remain above its pre-pandemic level in
2022, due to the base effects of stimulus packages, supply shocks and logistics
problems. While, global trade has picked up, especially for goods trade,
services trade remain subdued as some restrictions to movement remains in
place in certain jurisdictions. Global debt declined slightly to US$296 trillion in
Q3 2021, after reaching an all-time high in Q2 2021.
The global community has resolved to limit global warming and shift energy
demand trajectory in favour of green energy. This will impact on energy prices,
energy investment and green technology. Again, for many developing
economies, the pace of growth in China will impact on commodity prices and
outbound Chinese foreign direct and portfolio investment. The pace of
normalization in the Advanced economies will also impact on capital flows to
developing economies as well as increase the cost of already high public debt.
Domestic Economic Development
Staff of the Bank presented the Economic Developments and Outlook Report,
and the Banking System Stability Review Report. The Economic Developments
and Outlook Report showed that the 4.03% growth in real GDP in Q3 2021 was
driven by a combination of factors: rise in crude oil prices, credit expansion by
13.87% due to CBN Interventions and improved credit delivery from banks,
expansionary fiscal policy, as well as base effects. Nevertheless, the Economic
Report also showed that significant headwinds confront the economy. Inflation
grew by 15.63% in December 2021, a slight increase from 15.40% in November
2021. This increase was driven by both food and core inflation. Food inflation
was driven largely by demand for food during the festive season. The naira also
depreciated by 0.04% to N414.34/US$ in the I&E window. There was mixed
performance of Purchasing Managers Indices (PMIs): manufacturing PMI rose
to 52.0 index points, while non-manufacturing PMI remained below 50.0 index
point, at 48.7 index points.

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Federal Government fiscal operations in 2021 resulted in huge budget deficits.
As at Q3 2021, FGN fiscal operations already resulted in overall deficit of over
N7.5 trillion. Broad Money, M3, grew by 13.77%, which is 4.33 percentage points
above the provisional level. The growth in broad money was driven by its
components: Net Foreign Assets (NFA) grew by 6.06%, a -6.73 deviation from
the benchmark, while Net Domestic Assets (NDA) rose by 15.58%, 17.44
percentage points above provisional level. Growth in NDA was mainly driven
by Net Claims on Government, which exceeded provisional level by 5.5
percentage points.
Interest rate spread month-on-month widened to 25.3% in December 2021.
While prime lending rates declined to 11.68%. maximum lending rates rose to
27.58%. Average savings rates declined to 1.25%. The administrative measures
put in place by the CBN, restrained liquidity surfeit in the system. Tight liquidity
conditions prevailed in the banking system as average net liquidity balance
stood at N182.71 billion as at end-December 2021, below the benchmark of
N313.8 billion – N450.00 billion.
The external sector also showed mixed performance. External reserves, FPI and
FDI inflows declined. On the other hand, trade balance, current account
balance and remittances rose between Q2 and Q3 2021. Remittances rose
marginally from US$4.92 billion in Q2 2021 to US$4.97 billion in Q3 2021. Petroleum
producers accounted for 18.31% of total imports in Q3 2021.
The Banking System Stability Review Report showed that the banking system
remain safe, sound, and resilient. Capital Adequacy ratio though declined
slightly from 15.1% in December 2020 to 14.53% in December 2021, this is still
above the prudential requirement of 10.0%. Non-Performing Loans Ratio fell
below the 5% prudential requirement, for the first time, after a lengthy period.
Liquidity ratio at 41.33% was also higher than 30% prudential requirement. Both
Returns on Assets and Returns on Equity fell in December 2021 relative to
December 2020. Operating costs to income rose from 68.2% in December 2020
to 73.1% in December 2021. The report also showed growth in total assets, total

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deposits as well as total credit to the economy. Gross credit rose from N20.48
trillion in December 2020 to N24.57 trillion in December 2021. The growth in bank
credit is largely due to the LDR policy of the CBN. The report also confirmed that
credit is increasingly becoming more expensive in the economy.
My Concern
The pace of economic recovery in Nigeria is still very weak, and unable to
effectively impact on unemployment and poverty. The elevated level of
inflation, amid rising budget deficit, insecurity, pressure on exchange rate and
poor state of infrastructure are important challenges. This is compounded by
the fact that 2022 is a pre-election year in Nigeria. The normalization in the
Advanced Economies and the reaction by several central banks in emerging
economies implies that we cannot be impervious to this development. The US
FED has already provided a forward guidance on at least three rate hikes in
2022. This will affect foreign currency exposures of the Federal Government and
private sector institutions, especially commercial banks. It may also lead to
more exits of FPIs from local equity market.
An important feature of the 2020 Budget is the centralisation of government
agencies accounts (GOE), and the provisions that government agencies
cannot spend more than 50% of their earnings. While on paper, this may be a
good thing to drive up revenue, one only hopes it will not introduce
bureaucracy into the functioning of some agencies and affect their flexibility
to respond to urgent issues and ability to compete in the marketplace.
While world oil prices are trending upwards, Nigeria is unable to benefit
maximally from the rising prices in terms of increased contributions of oil to
government fiscal revenue and foreign exchange reserves, because of the
drop in oil production and exports, as well as the negative effects of oil price
subsidy. As of January 21, 2022, crude prices for Bonny Light stood at US$89.03
per barrel. Crude oil spot prices are expected to exceed US$90 per barrel in Q1

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2022. By December 2021, oil production stood at 1.52 mbpd, which is
significantly lower than the budget benchmark of 1.86 mbpd.
As I had indicated in my earlier Personal Statements, Nigeria needs to diversify
foreign exchange earnings from crude oil and portfolio capital, because of
their inherent volatility. We must explore diaspora remittances and non-oil
exports. We must remove the bottlenecks to non-oil exports. Customs and
related agencies should focus on trade facilitation, and not just, maximization
of revenues. The Bank Staff reports also contained some excellent suggestions
that the Bank should explore, including mainstreaming unregistered online
transfer channels to Nigeria, removal of bottlenecks inhibiting the seamless
remittances of funds by Nigerians in diaspora, among others.
I am also concern by the elevated level of budget deficit in the 2022 budget.
The government estimated a budget deficit of N6.39 trillion. However, recent
experiences have shown that revenue projections are usually over optimistic,
while actual expenditures exceeded projected expenditures. Hence, there is
every probability that we may overshoot the budget deficit just like in the
previous years. The normalization policy in advanced economies will likely raise
costs of foreign debts. The domestic option also has the potential of crowding
out private investment, as well as inducing inflation. Government should
explore non-debt options to finance capital projects. It should also produce a
credible programme to wind down petroleum subsidy.
CBN intervention programmes remain a vital component of lowering inflation
and facilitating economic growth, However, it is important to rationalize the
programmes, with a view to strengthening the components of the intervention
that promote economic expansion, poverty reduction and employment
generation.
My Vote
There are still many uncertainties within and outside the domestic economy.
Economic growth remains very fragile. While inflation ticked up marginally in

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December 2021, it is too soon to tell whether it is a trend or a blip. Hence, the
next few months remain very important. We must protect current growth
trajectory to reduce socio-economic problems in the country.
Hence, I cast my vote to maintain all monetary parameters at their extant
values:
1) MPR at 11.5%
2) CRR at 27.5%
3) LR at 30%
4) Asymmetry Corridor around the MPR at +100/-700 basis points.


3. AHMAD, AISHAH N.
The headwinds that characterized the global economy following the outbreak
of COVID-19 have persisted with rising uncertainty. Although output in many
countries rebounded in 2021 following a sharp decline in 2020, increased
volatility in commodity prices, monetary policy normalization in some
advanced economies and impending monetary policy rate hikes by the US
Federal Reserve (Fed), in particular, remain key considerations for the global
economy.
As advanced economies raise policy rates, risks of capital flow reversals and
secondary effects on currency depreciation and domestic inflation in Emerging
Market and Developing Economies (EMDEs)- especially with rising debt levels -
are impossible to ignore. These combines with the pandemic maintaining grip
in different parts of the world, prompting uncertain COVID-19 sovereign policy
environment and weakened global growth prospects for 2022.
The World Bank in its January 2022 Global Economic Prospects Report, forecasts
global output growth to decelerate to 4.1 and 3.2 per cent in 2022 and 2023,
respectively, from 5.5 per cent in 2021 following persisting supply chain

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bottlenecks and the gradual withdrawal of both monetary and fiscal stimuli.
Overall, global economic prospects are tilted to the downside.
In response to these developments, a couple of EMDE central banks have
raised policy rates. Notably, the People’s Bank of China (PBoC), reduced its
policy rate by 10 basis points to 3.70 per cent this month, to spur domestic
growth which has remained muted by prolonged downturn in the real estate
sector. The PBoC’s decision presents an alternative policy response which
prioritizes strengthening domestic recovery over a reactive response to global
monetary developments.
Notwithstanding amplified global risks, the domestic economy is expected to
maintain its growth trajectory. Notably, the Manufacturing Purchasing
Managers’ Index, a leading indicator of output performance, rose to 52.0 index
points in December 2021, compared with 50.8 index points in the preceding
month, driven largely by increased economic activities, reflected in growth in
new orders, employment and production levels. This development, coupled
with the relatively strong output growth of 4.03 per cent in the third quarter of
2021, provides cautious optimism for continued expansion in economic
activities in the short-to medium-term. This positive outlook is, however,
predicated on sustained and coordinated monetary and fiscal policy support
in view of lingering headwinds.
An uptick was reported in headline inflation (year-on-year) to 15.63 per cent in
December 2021 from 15.40 per cent in the preceding month. This follows 8
consecutive months of decline and partly reflects seasonal festive season spike
in demand. Food and core components rose to 17.37 and 13.87 per cent in
December 2021 from 17.21 and 13.85 per cent in November 2021, respectively.
This recent price development appears transient and is expected to abate in
the near term as supply-demand imbalances wane amidst efforts to strengthen
food supply. Notwithstanding, the Bank’s liquidity management tools will be
important to curb monetary induced inflation, in view of the surge in broad

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money (M3) to 13.77 per cent in December 2021 from 10.10 per cent in the
previous month.
The continued improvement in external reserves is noted, which stood at
US$40.20 billion as at December 2021 despite challenges with foreign
exchange supply. The inherent risk of capital flow volatility and exchange rate
pressures, on the back of monetary policy normalisation in some advanced
economies were key considerations for monetary policy. The effect on external
reserves should be moderate in view of the tepid portfolio inflows recorded in
the last few years, despite the relatively high yields. Nonetheless, ongoing
initiatives aimed at boosting domestic exports and opening sustainable
channels of foreign exchange supply remain imperative and must continue to
be pursued.
The financial system maintained its resilience into 2022 as data provided by
Bank staff indicated stability in broad soundness indicators and an
unprecedented improvement in asset quality, even as credit to the private
sector continued to grow. Capital adequacy as at December 2021 was robust
at 14.53 per cent, 453 basis points above the regulatory minimum of 10 per cent.
Industry liquidity was also strong at 41.33 per cent over the same period and
supported by significant cash reserve requirement buffers available to provide
liquidity backstops should banks require it.
Key industry aggregates also continued their year-on-year upward trajectory
with total assets rising to N59.24trillion in December 2021 from N50.99 trillion in
December 2020, while total deposits rose to N38.42 trillion from N32.21 trillion
over the same period. Total credit also increased by N4.09 trillion between endDecember 2020 and end-December 2021 with significant growth in credit to
manufacturing, General commerce and Oil & Gas sectors. This impressive
increase was achieved amidst continued decline in non-performing loans ratio
from 5.10 per cent in November 2021 to 4.94 per cent in December 2021 (6 basis
points below the regulatory benchmark) for the first time in over a decade.

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Furthermore, results of stress tests showed resilience of banks’ solvency and
liquidity ratios in response to potential severe macroeconomic shocks.
However, the Bank must remain vigilant to proactively manage probable
macro risks to the financial system such as lingering spillover effects of the
pandemic, winding down of forbearance measures, and myriad risks to
financial stability including exchange rate, operational and cyber security risks.
Policy Decision
The outlook for global recovery hinges on some key factors – the path of the
pandemic, spillover effects of tightened monetary policy by the Fed, lingering
supply chain disruptions, inflation persistence especially in advanced
economies and output developments in China to mention a few. These issues
have implications for Nigeria’s economic resilience as the economy remains
confronted with idiosyncratic challenges such as limited fiscal space in view of
high budget deficits, despite substantial efforts to improve government
revenues. This underscores the importance of ongoing CBN interventions in
critical output enhancing sectors of the economy and the need for
coordinated monetary and fiscal policy efforts at holistically tackling our
underlying structural challenges.
With inflation far above the guideline benchmark of 6-9 per cent combined with
fragile output growth, a difficult trade-off becomes apparent, requiring a
nuanced policy decision-making approach. First, the weak output growth
requires much more policy support to strengthen the recovery, especially with
lingering unemployment. Second, the current pressures on domestic prices are
adjudged largely supply related, as such, increased production of goods and
services and minimizing distribution bottlenecks should help mitigate price
developments in the short-term.
Overall, whilst a policy rate hike appears justified in view of the current price
level, it would be prudent to further monitor the recent path of domestic prices
as well as the effects of policy normalization in practice before a more hawkish

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policy decision is taken. Naturally, this view must be balanced with
consciousness of not leaving it “too late” to take action. This consideration
ensures that short-term policies do not undermine the long-term prospects of
the economy, while the corrective effects of previous policies are allowed to
filter-through with minimal distortive policy shocks.
In view of the above, I vote to maintain the current monetary policy stance by
retaining the Monetary Policy Rate (MPR) at 11.5 per cent, Cash Reserve Ratio
(CRR) at 27.5 per cent, Liquidity Ratio (LR) at 30.0 per cent and the asymmetric
corridor at +100/-700 basis points around the MPR.

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4. ALIYU, AHMED
INTERNATIONAL AND DOMESTIC ECONOMIC DEVELOPMENTS
The Monetary Policy Committee (MPC) held its first meeting in 2022 within an
environment of persisting global macroeconomic challenges, exacerbated by
headwinds associated with increasing cases of the Omicron variant of the
COVID-19 virus. Inflation, in the Advanced Economies, initially thought to be
transitory, has maintained an upward trajectory, developing above forecasts.
While supply chain disruptions and rising energy and commodity prices have
been the major drivers of inflation in the Advanced Economies, rising food and
commodity prices have been identified as the main drivers of inflation in the
Emerging Markets and Developing Economies (EMDEs), particularly in SubSahara Africa, including Nigeria. Against this background, the IMF in its January
2022 edition of the World Economic Outlook (WEO) downgraded its 2022 global
growth forecast to 4.4 percent from 5.9 percent.
While many Advanced Economies believe that raising benchmark interest rates
is justified in the current circumstances, the weaker than anticipated global and
domestic economic conditions, signaled the need to be cautious in order not
to disrupt the smooth functioning of financial markets. In light of the rising trend
of inflation, the US and EU have hinted on plans to commence tightening of
monetary policy in 2022, while the UK has already raised its bank rate by 0.15
percentage points in December 2021. Conversely, China cut its benchmark
policy rate to bolster output growth, considering the 0.9 percentage points
decline in growth year-on-year between Q3 - Q4 2021.

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Global trade at 9.5 percent in 2021 is projected to slow to 5.8 percent in 2022
and to a further 4.7 percent in 2023, due to lower-than-expected level of
activities arising from constrained production, supply chain bottlenecks and
waning demand. While the strong performance in 2021 was driven by a positive
shift in merchandise trade, services trade is anticipated to slowly recover in
2022, particularly in sectors hard hit by the Pandemic.
Crude oil prices, buoyed by positive market sentiments, sustained an upward
path in the review period. The OPEC Basket, Bonny Light, UK Brent and West
Texas Intermediate sold at US$88.55/b, US$89.03/b, US$87.89/b and US$85.14/b,
respectively, as at January 21, 2022. For oil exporting EMDEs, the current oil price
development is expected to improve growth projections, particularly as
geopolitical concerns over tight energy supplies point to further increases in oil
prices.
Staff report suggests that global financial conditions are likely to tighten in 2022
following the imminent commencement of monetary policy normalization by
some Advanced Economies, which could affect portfolio flows to emerging
markets and raise borrowing costs and debt levels.
THE DOMESTIC ECONOMY
The domestic economy grew strongly in the second and third quarters of 2021
pointing to a relatively strong recovery from the COVID-19 pandemic. Real GDP
grew by 4.03 percent year-on-year (y-o-y) in Q3 2021, from 5.01 percent y-o-y
in Q2 2021. On quarter-on-quarter (q-o-q), Real GDP grew by 11.07 percent in
Q3 2021 from -0.79 percent in Q2 2021. Staff forecast suggests that the
economy will grow by 2.86 percent in Q4 2021 based on sustained increase in
crude oil prices and continued improvement in credit expansion, business
sentiments, and productive activities.
Manufacturing PMI increased above the 50-benchmark point in November and
December 2021 at 50.8 and 52.0 index points, respectively, on account of the
improvement in business sentiments, even though the Non-Manufacturing PMI

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remained below the 50-benchmark point in the same periods at 48.6 and 48.7
percent, respectively, due to worsening employment outlook. Similarly, the
output gap narrowed and is estimated to lessen further by 1.5 percentage
points from -3.3 percent in 2021Q3 to -1.8 percent in 2021Q4.
Recent price developments show an uptick in headline inflation in December
2021. Headline inflation y-o-y grew by 15.63 percent in December 2021 from
15.40 percent in November 2021. The National Bureau of Statistics (NBS)
attributed the uptick in inflation to the increase in demand for food items,
higher logistics and transportation costs associated with year-end festivities. The
core and food components of headline inflation increased by 0.02 and 0.16
percentage points, respectively.
Monetary developments show a month-on-month (m-o-m) increase in Broad
Money (M3) by 13.77 percent or 4.13 percentage points above the 2021Q4
benchmark of 9.64 percent. The growth in broad money was largely due to the
6.18 percentage points increase in Net Domestic Assets. Similarly, Monetary
Base grew by 2.32 percent m-o-m, led by expansion in currency-in-circulation
(CIC), Other Reserves and Cash Reserve Requirements (CRR).
Money market developments witnessed steady low yields in Government
securities due to huge demand at auctions. Average Open Buy Back (OBB)
rate, m-o-m, rose to 12.95 percent (+285bps) in December 2021, due to tight
liquidity conditions in the banking system. Developments in the equities market
show that market indicators improved in the review period, due to price
appreciations in blue-chip stocks and profit-taking activities of investors.
The banking sector remained sound, safe and resilient as Financial Soundness
Indicators (FSIs) were within their regulatory thresholds. Industry Capital
Adequacy Ratio (CAR) at 14.53 percent at end-December 2021, remained
above the 10 percent regulatory minimum. Asset quality measured by NonPerforming Loans (NPLs) improved to 4.94 percent at end-December 2021,
below the regulatory threshold of 5 percent. The improvement in NPLs is

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attributed mainly to sound regulatory oversights of the CBN during the year.
Gross credit rose from N20.48 trillion in December 2020 to N24.57 trillion in
December 2021 on account of increased industry funding base and CBN’s
directive on Loan to Deposit Ratio.
On the external front, the gross external reserves at US$39.96 billion on January
20, 2022 could support 7.51 months of import of goods and services and 10.13
months of import of goods only. The Total Debt to GDP ratio was within
sustainable levels in accordance with comparable benchmarks.
CONSIDERATION FOR VOTING
Highlights of developments in the domestic economy indicate sustained
progress in economic recovery. Monetary policy actions since the onset of the
COVID-19 pandemic have proved effective in addressing the adverse impacts
of the Pandemic, with the economy coming out of recession sooner than
expected and growth sustained for four consecutive quarters. But despite the
recovery, growth remains fragile. While real GDP is projected to grow at 2.86
percent in Q4 2022 (below the 33.3 percent rate of unemployment), it indicates
a declining trend from the previous quarters, notwithstanding the associated
base effects. Available data shows that inflation moderated for eight
consecutive months, before the marginal increase recorded in December
2021.
While it is evident that efforts made in the last few months yielded positive
results, current strategy should focus on what more could be done to take
growth beyond its historic average, engender an all-time low and stable
inflation and significantly improve the welfare of the people. I cannot underemphasize that price stability remains the principal objective of the Committee.
The uptick in inflation in December 2021, is a source of concern, as it suggests
inflation persistence, even though the inflation report submits that seasonal
effects played a significant role. In this regard, policy actions should continue

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to focus on price stability conducive to medium to long term growth, rather
than dwell on factors that are likely to be temporary.
Monetary policy tightening is worth contemplating at this meeting, considering
the likely liquidity impact of election related spending and the implementation
of the 2022 budget by the three tiers of government. I however, share in the
view that the current stance of policy which has aided growth and price
moderation for most part of 2021 be sustained through the first quarter of 2022,
while emerging evidence of their implication on Consumer Price Index (CPI) is
assessed, for subsequent policy intervention.
Reflecting on the rising inflation in Advanced Economies and the imminent
normalization, it is unclear to what magnitude these would impact on the
domestic economy particularly on capital inflows to warrant monetary policy
action at this time. What is critical, however, is to strengthen existing institutional
framework and ongoing efforts at infrastructural development, to encourage
inflow of capital that would stimulate growth and create employment.
In addition, developmental interventions should be reinforced in exportoriented activities, especially non-oil exports, given that the current crude oil
export dependence of the economy, may no longer be feasible in the longer
term as emphasis shifts from fossil fuel to clean energy.
On fiscal operations, the Government will continue to implement and deploy
critical reforms and infrastructure to strengthen its finances, create fiscal space
and adequately manage the public debt. In this regard, Government remains
committed to the implementation of the Strategic Revenue Growth Initiative
(SRGI) to improve its revenue and entrench fiscal discipline.
On this note, I feel that maintaining the status quo would be apt in the
circumstances. I therefore, vote to retain all policy parameters at their extant
levels as follows:
•
MPR at 11.5 per cent

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•
The asymmetric corridor at +100/-700 basis points around the MPR
•
Liquidity ratio at 30.0 per cent
•
CRR at 27.5 per cent

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5. ASOGWA, ROBERT CHIKWENDU
Policy Decision:
On the basis of an assessment of the current and evolving macroeconomic
situation at both the global and domestic levels, I believe that a continuation
with the ongoing accommodative stance is necessary so as to sustain the
growth recovery process. Also, given the risks and uncertainties that remain in
the domestic economy, a premature withdrawal of the stimulus programme will
be counterproductive. As such, a patient policy approach which will support
growth whilst achieving the medium –term target for inflation is the preferred
decision.
I will therefore vote to:
• Retain the MPR at 11.5 %
• Retain the CRR at 27.5%
• Retain the Asymmetric Corridor at +100/-700 basis points
• Retain the Liquidity Ratio at 30.0%
The key considerations that underlie this decision and which relate to
assessments of the current global and domestic economic developments are
explained below.
Assessment of the Global Economy:
Available information suggests that the global economy has continued to
recover despite the spread of the new coronavirus variant. In many countries,
economic activity lost some dynamism but has not contracted significantly.
Latest forecasts indicate that global GDP growth in 2022 will remain robust but
will moderate from 6. 5 percent in 2021 to 3.5 percent in 2022 and 2023, partly
because of the expected lower growth in the USA and China and also as policy
stimulus is withdrawn in a number of countries. CBN staff report indicates a 2021
third quarter GDP contraction in such large economies as USA, UK, the Euro

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Area, Japan, China, Brazil and Russia. However, there were signs of growth
rebound in many of these countries by the fourth quarter 2021 although official
GDP results are not yet out. Preliminary evidence show that global aggregate
demand entered the expansion zone in the fourth quarter with exports and
imports markedly exceeding the third quarter 2021 levels. Also, the composite
global purchasing manager’s index (PMI) improved to a four-month high in
November 2021 with services further dominating manufacturing.
The global financial market remains highly volatile partly as a result of
uncertainties regarding several policy actions in a number of advanced
economies. Global equity prices have recently declined since December 2021
especially in developed economies owing to a combination of higher
expected interest rates and increased geopolitical tensions. Government bond
yields have started a somewhat upward swing in recent times in many
developed countries partly responding to inflation and also reflecting the
general expectation that policy interest rates will soon be raised while
currencies in a significant number of countries have also appreciated against
the dollar.
Global inflation has continued an upward trajectory with many countries now
posting highest levels in decades due partly to the recovery in global demand
in the midst of supply chain disruptions. Current energy prices and prices of
some agricultural commodities remain at higher levels compared to the same
period last year with slight improvements on a month-on-month basis. As at
now, there is considerable uncertainty about the persistence of global
inflationary pressures with upward revision in current inflation forecasts. For
instance, in Canada, the outlook for inflation in 2022 has been revised upwards
by about three-quarters of a percent. In the UK, the inflation rate in April 2022 is
also projected to peak around 2 percentage points higher than had been
expected in December 2021.
Amidst significant increases in current and expected inflation, many central
banks are now withdrawing monetary accommodation. However, the

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decisions of the respective monetary authorities are not homogenous but
rather take into account the progress in post-pandemic recovery in the
different economies. For instance, the US Federal reserve increased the pace
of reduction in monthly asset purchases, while keeping interest rates close to
zero. The European Central Bank also announced a slower pace of asset
purchases under the ‘Pandemic Emergency Purchase Programme (PEPP)’ in
the first quarter of 2022 and discontinuation of PEEP by end-March 2022. The
Bank of Japan also signalled the completion of additional purchases of
commercial paper and corporate bonds by end-March 2022 and as from April
2022, it will revert to the quantum of purchases prior to the pandemic. Poland
became the first country to raise rates in 2022 with a hike of 50 basis points on
January 4, which was the fourth consecutive increase since the hikes
commenced in October 2021. Peru, Argentina and Uruguay earlier raised rates
in October 2021. Russia also effected it 7th rate hike in December 2021, while
the Bank of England recently joined the rate-hiking club with a 15 basis point
increase in policy rate. The Central Bank of Chile raised interest rates by 150
basis points in early January 2022, but there are several other monetary
authorities that have adopted a patient approach to monetary policy as their
economies continue to recover, despite inflationary surges. The Reserve Bank
of India at its December 2021 meeting kept all policy parameters unchanged
including the marginal standing facility. The Bank of Israel kept interest rate
unchanged at 0.1 percent at its January 3, 2022 monetary committee meeting
while the Bank of Australia also in early January maintained the policy rate
constant but decided to cease further purchases under the ‘bond purchase
programme’.
Overall, the global future outlook is somewhat positive, but the path of recovery
is still being shaped by the pandemic and its second order effects. Eventhough
recent global purchasing managers index increased slightly and continues to
indicate a relatively high level of economic expansion particularly in the
services sector, there are still fears that global supply chain disruptions will persist
far into 2022 and may continue to push up prices. While COVID-19 resurgences

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are less likely in 2022, the fears about a new variant always triggers negative
responses, like the black Friday plunge in global equity markets on November
26, 2021.
Current Domestic Economic Assessment.
The Nigerian economy had a strong momentum heading into 2022. A wide
range of measures and indicators confirmed that the domestic economy
rebounded strongly in 2021 with the impact of government interventions.
According to CBN staff early forecasts, real GDP is estimated to grow by 2.86
percent (year-on-year) in quarter 4 of 2022. This actually looks moderate when
compared with the 4.03 percent (year-on-year) growth recorded in the third
quarter of 2021. However, on a quarter-on-quarter basis, real GDP expanded
by 11.07 percent in the third quarter of 2021 as compared with -0.79 percent in
the second quarter of 2021. This was driven by the strong recovery of the
services sector particularly information and communications technology, and
improved performance of the manufacturing sector. Such other indicators as
the manufacturing and non-manufacturing PMIs as well the Manufacturers
Association of Nigeria (MAN) CEO’s confidence Index for December 2021 point
to a good overall aggregate growth for 2021. The manufacturing PMI stood at
52.0 index points in December, which is an improvement on the 50.8 index
points recorded in November 2021 and 47.5 points in October 2021.
With domestic economic recovery gaining momentum, all constituents of
aggregate demand also entered the expansion zone, with exports and imports
significantly exceeding their pre-COVID 19 levels. In the third quarter of 2021,
the domestic current account balance recorded the second consecutive
surplus after a prolonged period of over ten quarters consecutive deficits. CBN
staff report shows that in the third quarter of 2021, the overall balance of
payments (BOP) as a percentage of GDP increased significantly to 3.35
percent from 0.36 percent of GDP in the second quarter of 2021. GDP growth
is expected to remain strong in 2022, supported by continued strong
performance of the services sector, recovery in agriculture and an

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improvement in global demand especially if oil prices sustain the ongoing
favourable tempo in the months ahead.
The Nigerian financial market has been marked by appreciable growth since
the previous MPC meeting especially the banking and equities markets. The
banking sector remains stable and resilient with strong liquidity and adequacy
ratios. The ratio of non-performing loans (NPLs) to gross loans stood at 4.94
percent in December 2021 from 5.3 percent in October 2021. The banking
industry asset base increased by 16.17 percent from 50.9 trillion naira at end
2020 to 59.2 trillion naira at end 2021. Gross credit of the banking industry
increased from 20.48 trillion naira at end 2020 to 24.57 trillion naira at end 2021,
with manufacturing, general (retail and consumer), government, oil and gas
recording the highest increases in gross credit between 2019 and 2021. The
equity market also improved since the last MPC meeting as the All-Share Index
increased by 1.61 percent between October and December 2021, while
market capitalization increased by 1.63 percent during this same period.
Meanwhile interest rates have remained fairly constant for some long period
eventhough between November and December 2021, maximum lending rates
rose to 27.58 percent from 27.26 percent, while average savings rate declined
from 1.83 percent to 1.25 percent.
There are however three worrisome indicators at the time of this MPC meeting
including, the inflationary rise in December 2021, the surge in M3 and the persistent
debt buildup which are key issues of policy concern. First, inflation rate picked up
in December 2021 after eight consecutive months of moderation. Headline
inflation (year-on-year) rose to 15.63 percent in December from 15.40 percent in
November 2021, while core inflation also rose marginally from 13.85 percent in
November to 13.87 percent in December 2021. On a month-on-month basis,
headline inflation stood at 1.82 percent in December 2021 compared with 1.08
percent in November 2021. While much of this temporary increase has been
attributed to the usual ‘December Demand Pressure’, the lingering security issues
may have also played a key role in the rise of the food sub-index. The second
worrisome issue is the surge in broad money (M3) which moved very significantly
from 4.72 per cent on a month-on-month basis at the end of September to 7.37
percent at end-October 2021 and further to 10.22 percent by November 2021. This

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was above the regulatory maximum benchmark of 9.64 percent for that quarter.
CBN staff report show that this growth was largely driven by increases in Central
Banks claims on the Federal government and other sectors (public nonfinancial
corporations, private sector, state and local governments). The key concern is
that such significant monthly increases in broad money may sooner than later be
adding to domestic inflationary pressures and this has to be closely watched. The
third worrisome issue is the persistent debt build-up caused by the weak revenue
performance resulting in an increasing fiscal deficit trend. CBN staff report show
that the revenue-expenditure gap even further widened in October 2021 with
public debt stock increasing from 32.2 trillion naira in September 2020 to 38 trillion
naira in September 2021. Nigeria is however not alone in the debt dilemma as the
global debt levels soared above 400 percent of global GDP early in 2021, but later
declined to about 350 percent of global GDP by the third quarter of 2021. The
main challenge is the lack of debt wisdom in Nigeria and with the debt service
expenditure estimated at about 35.6 percent of the projected revenue in 2022,
the road to long term recovery now seems more uncertain than previously
anticipated.


6. OBADAN, MIKE IDIAHI
INTRODUCTION

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Uncertainties and vulnerabilities have continued to define the global economy,
especially relating to covid-19 infections and the attendant effects. There is
uncertainty about the threats of the Omicron and future variants of COVID-19.
Other notable uncertainties that confront the global economy include: the
uneven distribution of vaccines; rising infection rate of COVID-19 by mutant
strains of the virus; rising inflation; and persisting supply side constraints. These
have tended to weigh down global recovery.
The recent months have witnessed renewed waves of COVID-19 infections
across the world with massive outbreaks of the fast-spreading Omicron variant.
The good news is that countries experienced lower death and hospitalization
rates thereby allowing most governments to refrain from re-imposing
lockdowns. Rather, they are relying on accelerated vaccination programmes
supported by minor restrictions such as wearing of face masks, expanded
testing, and limits on large gatherings. A few countries that imposed lock-downs
are considering lifting them. For example, on the 26th of January, 2022, reports
indicated that the Dutch authorities had decided to lift the lock-down on public
places and gatherings including restaurants because the impact of the raging
variant was lower than earlier feared. Thus, most countries, Nigeria included,
have apparently decided to live with the virus. Consequently, economic
activities have progressed in defiance to the resurgence of the pandemic
compared with the first and second waves. Vaccinations are ongoing but with
the Emerging markets and Developing Economies (EMDEs) being less favoured.
The EMDEs remain confronted with poor availability and distribution of
vaccines. Nevertheless, there is less likelihood of a full-scale lockdown as was
experienced in 2020. This has favourable implications for global growth
prospects and resolution of supply chain disruptions in 2022, other things being
equal.
IMPLICATIONS OF GLOBAL DEVELOPMENTS
The global economy has sustained its recovery trajectory and the recovery in
economic activities is expected to continue through to 2022 although at a

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reduced pace. This is because of persisting supply bottlenecks, rising input costs
and the continued impact of new and mutating strains of the covid-19 virus.
Because of the persistence of the downside risks to output, coupled with the
dissipation of pent-up demand and the gradual withdrawal of both monetary
and fiscal stimulus, global growth is forecast by the World Bank to decelerate
from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023. The
expectation is that the global economy would return to its pre-crisis growth path
by 2023. But then, slower global economic growth in 2022 has implications for
the recovery of poor countries, Nigeria included.
Global trade experienced a strong recovery in 2021. But the recovery in goods
and services trade is expected to moderate in 2022 and 2023 as base effects
vanish. After reaching 9.5 per cent in 2021, growth in global trade volume is
expected to slow to 5.8 per cent in 2022 and to 4.7 per cent in 2023. Downside
risks to the global trade outlook, in the short term, include the rising COVID-19
infections connected to the Omicron variant and the associated supply chain
disruptions. Another threat to global trade is persisting inflationary pressure
driven by supply bottlenecks and exacerbated by the rapid recovery of global
aggregate demand. The expected moderation of global trade will impact the
Nigerian economy negatively considering its high degree of openness.
Global inflation has remained high, defying the earlier view of transience by
central banks of Advanced Economies (AEs). It has reached historical peaks in
countries such as the United States of America and United Kingdom. The
implication of this for the Nigerian economy has been felt for some time now in
the form of elevated role of imported inflation in the country’s worrisome
headline inflation.
Developments in the crude oil market have remained upbeat reflecting high
prices which are well above the lows of the COVID-19 pandemic levels. As at
21st January, 2022, oil prices per barrel were as follows: OPEC basket, US$88.55;
Bonny Light, US$89.03; UK Brent, US$87.89. The main drivers of the high prices
have been the continued strong demand and persisting OPEC+ supply ceiling.

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However, the oil futures market suggests moderation in the price of crude oil to
lie between US$72.06 and US$73.84 per barrel for December 2022 deliveries.
Ordinarily, high oil price should be good news to Nigeria. But the country’s
subsisting production challenges and the heavy importation of refined
petroleum products have so far prevented it from realising visible benefits from
the high oil price regime in the form of accretion to external reserves, stability
of the exchange rate and boosting of government revenue. It is imperative
therefore for the Government to find lasting solutions to the oil production
challenges and continued importation of petroleum products.
Many countries, especially the AEs, are gradually winding up the stimulus
programmes that supported growth in their economies throughout 2020 and
2021, especially the monetary stimulus. While fiscal policy has maintained a
strong momentum, monetary policy has elicited concerns arising from surging
inflation and its downside risks to the recovery. Consequently, several
advanced economy central banks have given indications to withdraw
monetary stimulus and commence a regime of policy rate adjustments,
invariably upwards. For example, the US Fed is expected to completely taper
its US$120.0 billion monthly asset purchase during the first quarter of 2022 and
announce its first policy rate hike thereafter.
The implication of monetary policy normalisation is that global financial
conditions will likely tighten and result in a portfolio shift from the EMDEs to the
Advanced Economies as investors seek higher and less risky returns. It also
implies higher borrowing costs which could hurt economic activity, especially
for EMDEs, and possibly trigger a financial crisis through debt defaults. Thus, for
EMDEs including Nigeria, there is the fear of capital flows reversal which could
hurt their recoveries. However, the circumstances of each country should
determine its response to the monetary policy normalisation by the Advanced
Economies. Sizeable rate hikes may hinder their recovery.
CONSIDERATIONS FOR OPINION

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In the past one year, the Nigerian economy has shown notable signs of
recovery and resilience. The financial system demonstrated soundness, stability
and resilience with the non-performing loans ratio falling below the prudential
benchmark for the first time in recent history. The market for crude oil, upon
which the economy depends heavily, rebounded strongly with high prices in
the US$70s or above. But the net positive impact on domestic revenue and
foreign exchange has been very minimal because of subsisting production
challenges and comatose local refineries. Fiscal performance is worrisome in
the area of revenue generation and the attendant narrow fiscal space and
public debt accumulation. Besides these are other issues which shape the
direction of monetary policy.
Economic growth. No doubt, the economy has shown significant signs of growth
since the exit from recession in the last quarter of 2020. With dwindling base
effects, the growth rate in the fourth quarter of 2021 is projected to be about
2.86 percent. The GDP is forecast by four organisations to lie in the range of 2.4
to 3.1 percent on average in 2021. The forecast for 2022 is as follows: World Bank
Group, 2.5%; IMF, 2.7%; CBN, 2.72% and FMFBNP, 4.2% which is understandable.
Although they portray positive developments, they do not provide room for
complacency. Besides, negative output gap persists being about -3.3 percent
in Q3 2021, implying unemployment and underemployment of resources and
under-utilisation of capacity in the key real sectors of the economy.
Thus, the growth achieved has not reached a level that provides room for
celebration. It is not yet solid nor stable and there are numerous headwinds to
it including uncertainties in the global economy, the looming normalisation of
AEs’ monetary policies; foreign exchange market pressures; unpredictable
global oil market and risk of continuing low oil production hindering the country
from leveraging the high crude oil prices; legacy infrastructure deficits and the
persisting insecurity. The latter is a crucial factor in the persisting output gap as
it has increasingly impacted food supply, prices and other physical economic

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activities negatively. Further tightening of monetary policy will be injurious to the
fragile growth achieved.
Issue of inflation. For eight consecutive months in 2021, there was good news
about inflation decelerating up to November 2021. But the trend was disturbed
in December with a marginal increase in the headline inflation rate to 15.63
percent from the 15.40 percent achieved in November. Food inflation, which is
driven by structural and insecurity factors, accounted for a sizable proportion
of the increase in headline inflation. Indeed, in December, food and nonalcoholic beverages contributed over 65.0 percent of the 15.63 percent
increase in headline inflation and its weight in the basket of goods for
computing inflation is over 50.0 percent. Also, December was a month of
elevated economic activities arising from increased spending of savings aimed
at meeting festivity needs and activities by many economic agents, thus
elevating demand significantly in relation to supply of goods and services. The
average price increase during that period was compounded by market actors
who took advantage of glaring market imperfections to hike prices arbitrarily.
In his press briefing on the inflation figures for December 2021, the Statistician
General of the Federation attributed the upward movement of the year-onyear inflation rate last December to increased demand for goods and services
during the Christmas festive season. Now that that season is over, the transient
nature of the hike is manifesting in an observed downward trend of the prices
of some goods. This suggests the likelihood of a decline in the inflation rate in
the month of January 2022.
Issue of monetary injections and money supply growth. Yes, there have been
notable monetary and fiscal injections into the economy to address the
exigencies of covid-19 and recession. But the injections have not been
targeted at just consumption which could easily spike inflation through the
demand channel. Rather, a significant proportion of the injections have been
aimed at boosting output and productivity of the real sectors and infrastructure
development aimed at enhancing productivity which in the medium/long-

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term should reduce the prices of goods and services, ceteris paribus.
Consequently, a large part of the injections may be considered as noninflationary. A consideration of the annualised monthly average growth rates
of broad money supply (M3) in 2021 shows that it was only in November and
December that the growth rates exceeded the provisional annual benchmark
of 9.64 percent. There was a spike in money supply growth in those two months
while it was far less in many other months, for example, 1.56% in February and
o.24 in March.
Extant monetary policy stance. This reflects tight stance with MPR at 11.5
percent; CRR at 27.5 percent excluding the administrative tightening measures,
and Liquidity Ratio of 30 percent. If because of the rather transient marginal
increase in inflation last December, some stakeholders are clamouring for a
hike in MPR, will it address the significant non-monetary factors of inflation? No.
Will it attract significant portfolio capital inflows? Most likely not. Foreign portfolio
inflows in the last two years have been marginal.
Thus, further monetary policy tightening at this time may not address the nonmonetary factors of the observed uptick in inflation nor attract capital inflows,
the latter because of the challenges in the macroeconomic environment and
wider economy. Rather, the Deposit Corporations will capitalise on an
increased MPR to hike lending rates which would hurt much desired investment
to catalyse growth.
Therefore, at this point in time, it is not desirable to pander to the calls for further
tightening by some market participants that exhibit emotional reactions to
macroeconomic indicators rather than engaging with them on the basis of
knowledge and capacity. It will not be in the interest of the desired strong and
stable economic recovery, price stability as well as poverty reduction to
abandon policy support at this time.
Let us watch the growth and inflation trends and allow continuation of extant
monetary and development finance measures, which have proved to be

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effective in supporting growth and inflation control, till the next MPC meeting
when the situation would be reviewed and appropriate decisions/actions
taken.
In light of the foregoing, I vote to hold all the policy parameters constant, that
is:
Monetary Policy Rate:

11.5 percent
Cash Reserve Requirement:
27.5 percent
Liquidity Ratio:

30.0 percent
Asymmetric Corridor:
+100/-700 percent
Two issues of concern
i. Surging public debt. Public debt has surged to over N38.0 trillion. What
appears also worrisome now is the composition which shows external debt as
growing more than the target of 40.0 percent of total debt stock in relation to
domestic debt of 60.0 percent The latest data show the ratio as 46: 54 percent
for external debt and domestic debt, respectively. This trend needs to be
checked in view of the foreign exchange implications of external debt
servicing.
ii. Call to resume sale of foreign exchange to the Bureaux de Change (BDCs). It
may be recalled that since July 2021, the CBN has stopped sale of foreign
exchange to the BDCs as a result of their sharp practices and inability to assist
the Bank in its quest to achieve objectives relating to exchange rate stability.
Their role was transferred to the deposit money banks along with the associated
foreign exchange allocations. Now, some people are urging the CBN to resume
sale of foreign exchange to the BDCs. In the Daily Trust Newspaper of January
25, 2022, Bode Augusto of Augusto & Co urged the CBN to resume sale of
foreign exchange to the BDCs, failing which the parallel market rate will be
between N610 and N620 naira in 2022. There is no logic in this. The BDCs are

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now fully operating in the parallel market. One of the reasons for the suspension
of forex sales to them was that they were operating like parallel market
operators. Official foreign exchange sold to them were off-loaded in the
parallel market. And so, resuming the sale of forex to them will not bring the
parallel market rate down. Therefore, the calls to resume forex sales to the BDCs
by the CBN should be ignored.


7. OBIORA, KINGSLEY ISITUA
In the face of fragile economic recovery, I voted to:
retain the Monetary Policy Rate (MPR) at 11.5 per cent,
the Cash Reserve Ratio (CRR) at 27.5 per cent, the
Liquidity Ratio (LR) at 30.0 per cent and the asymmetric
corridor of +100/-700 basis points around the MPR. This
stance should complement the measures already
taken by the Bank aimed at sustaining recovery,
ensuring price stability and guaranteeing a stable
banking system.
After two years into the Coronavirus Disease (COVID-19) pandemic, the virus
continued to mutate with deleterious effects across the world. The discovery of
the Omicron variant in late November 2021 has further dampened the prospect
of global economic recovery. The number of confirmed cases has increased by
over 100 million from 257 million to 358 million between November 2021 and
January 2022 MPC meetings, representing an increase of 39.3 per cent,
compared with 13.0 per cent between September and November 2021 MPC
meetings. The global deaths toll also increased to 5.6 million from 5.1 million in the
period under review. The recent surge has led to the imposition of some
restrictions across the regions, especially in Europe, South East Asia, and Latin
America. Also, the associated economic losses from the pandemic are expected
to reach about US$13.8 trillion by the end of 2024 – based on the IMF estimates.
However, despite progress in global vaccination programmes, African countries
continued to lag other regions in vaccination coverage. Only seven (7) out of
fifty-four (54) countries in Africa met the 40.0 per cent target rate for full
vaccination set by the World Health Organisation (WHO) by the end of 2021. With

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this abysmal performance, achieving the target for 70.0 per cent coverage for all
African countries by June 2022 will be highly unlikely. Therefore, there is an urgent
need to overcome the challenge of ensuring equitable distribution of vaccines
across the world.
Given the dynamics of COVID-19 infections and other related factors, the global
economy is projected to moderate in 2022. Although the JPMorgan Global
Composite Purchasing Managers’ Index expanded for the eighteenth (18th)
month, it has slightly declined to 54.3 points in December from 54.8 points in
November 2021. The decline was in part attributed to weak consumer and
intermediate goods. Accordingly, in the January World Economic Outlook
(WEO), the International Monetary Fund (IMF) projected the global economy
to moderate to 4.4 per cent in 2022 from 5.9 per cent in 2021. The expected
moderation is due to the rapid spread of the Omicron variant, rising energy and
food prices, supply chain disruptions with associated inflationary pressures, as
well as the downturn in China’s property sector. The growth in Advanced
economies, Emerging Market and Developing Economies, and Sub-Saharan
Africa is expected to moderate to 3.9, 4.8, and 3.7 per cent in 2022 from 5.0. 6.5
and 4.0 in 2021, respectively. Growth in the United States, Euro Area and the
United Kingdom will moderate to 4.0, 3.9, 4.7 from 5.6, 5.2 and 7.2 per cent,
respectively. In China, it will also moderate to 4.8 percent from 8.1 per cent in
2021. Nevertheless, these projections will depend on the dynamics of the
pandemic, the speed of monetary policy tightening by advanced economies,
supply chain disruptions and inflationary pressures.
Following the global trends, most analysts expect the domestic economy to
slightly moderate in 2022. The latest official figures from the National Bureau of
Statistics (NBS) showed a moderation of real GDP growth to 4.03 per cent in Q3
2021 from 5.01 and -3.62 per cent in Q2 2021 and Q3 2020, respectively. The
moderate growth was driven by the non-oil sector, which grew by 5.44 per cent,
compared with the oil sector that contracted by 10.73 per cent. In terms of
relative contribution, Agriculture, Industry and Services contributed 30.0, 20.0,
and 50.0 per cent, respectively. The overall growth was driven by oil price

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recovery, proactive interventions by the monetary and fiscal authorities, as well
as base effects. Accordingly, the IMF projected the domestic economy to
moderate to 2.7 per cent in 2022 from 3.0 per cent in 2021. Encouragingly, the
Manufacturing PMI moved into expansionary territory in November 2021. It
expanded to 52.0 index points in December 2021 from 50.8 index points in
November 2021, driven by production level, new orders, suppliers’ delivery time,
and raw materials inventories. Also, the rise in oil price that reached US$89 per
barrel during the January 2022 MPC meeting from US$77 per barrel in
November 2021 will significantly bolster domestic economic recovery.
Inflationary pressures which had decelerated for eight (8) months, inched up to
15.63 per cent in December from 15.40 per cent in November 2021, driven by
the increases in food and core inflation. The two components increased to
17.37 and 13.85 per cent in December from 17.21 and 13.87 per cent in
November 2021, respectively. The factors responsible for the uptick included
higher
demand
for
food
items
during
the
festive
season
and
logistics/transportation costs. Furthermore, the current account balance
significantly improved from a surplus of US$348.88 million (0.36 per cent of GDP)
in Q2 2020 to a higher surplus of US$3,680.28 billion (3.35 per cent of GDP) in Q3
2021, reflecting a decrease in the import of goods and services and net out
payment of investment income. Gross external reserves, however, decreased
by 0.69 per cent to US$40.20 billion in December 2021 from US$40.48 billion in
November 2021, occasioned by foreign exchange sales at the Secondary
Market Intervention Sales (SMIS) and Investors’ and Exporters’ (I&E) windows
and direct payments, respectively.
Efficient supply and demand management policies by the Bank have led to the
current relative stability of the Foreign Exchange (FX) rate. Apart from measures
aimed at improving the supply-side of forex through the support of non-oil
exports, the Bank is also working aggressively on the demand-side to eliminate
the incidence of over-invoicing and mispricing of export/import of goods and
services. That is why I support the current effort of the Bank in introducing the eValuator and e-Invoicing by February 1, 2022. It will replace the hard copy

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invoice and will be part of the documentation required for all import and export
transactions. The new regulation, which will be operated on a Global Price
Verification Mechanism will be guided by a benchmark price. The aim is to
eliminate over-invoicing, mispricing of exports and imports, as well as activities
of money laundering. Reducing these loopholes through this measure will
enable the Bank to save more foreign exchange earnings that will be
channelled to the most productive sectors of the economy. This will boost local
production capacity, promote inclusive growth and sustain a strong naira
exchange rate.
The banking system continued to sustain its soundness, safety and resilience
amid economic recovery. The total asset of the banking industry increased
from N50.99 trillion from end-December 2020 to N59.24 trillion, representing an
increase of 16.18 per cent, driven by balances with CBN/banks, OMO bills and
credits. Accordingly, the banking system continued to increase the flow of
credit to the real economy. The gross banking sector credit increased by N4.88
trillion or 22.0 per cent from N22.68 trillion at the end of December 2020 to
N27.56 trillion at the end of December 2021. The increased credit was recorded
in oil and gas, manufacturing, general, government, and general commerce.
Furthermore, the Non-Performing Loans (NPLs) was below the regulatory
benchmark of 5.0 per cent for the first time in several years. It stood at 4.94 per
cent at end-December 2021, compared with 6.13 per cent at end-December
2020, attributed to recoveries, restructuring of facilities and write-offs during the
year. The average monthly weighted average Open Buy Back (OBB) rates rose
to 12.75 in December 2021 from 10.61 per cent in November 2021, showing tight
banking system liquidity conditions – a reflection of the Bank’s effort at reining
the monetary side of inflation and ensuring a stable banking system.
The outlook continued to be hobbled by short to medium term imbalances. The
transmission of the COVID-19 infections remained a key concern to the
economic recovery globally due to its ravaging impacts on socio-economic
activities. The domestic economic recovery is still fragile. Despite rising oil prices,

Classified as
Oil Refining, Crude Petroleum and Natural Gas continued to contract in Q3
2021 with attendant consequences on fiscal revenues and external reserves
position. Headline inflation continues to trend above the implicit target range
of 6-9 per cent, driven largely by food inflation, thereby highlighting the need
for the Government to address security concerns in the food-producing areas
of the country. Though inflation inched up in December 2021, after eight
months of deceleration, I believe the uptick is transient and will return in a few
months to a decelerating trend. For example, in an effort to moderate food
inflation, the Bank between November and December 2021 disbursed N75.99
billion to support the cultivation of over 383,000 hectares of maize, rice and
wheat during the 2022 dry season, bringing the cumulative disbursements to
₦927.94 billion to over 4.5 million smallholder farmers under the Anchor
Borrowers’ Programme (ABP). Furthermore, the economy is still confronted with
structural and security challenges and lingering infrastructural deficits. The Bank
has continued to support the economy through various interventions in critical
sectors of the economy including infrastructure. For example, as part of the
Bank’s effort to support infrastructural development, the Bank disbursed
₦274.33 billion to the sector under the Nigeria Bulk Electricity Trading Payment
Assurance Facility (NBET-PAF). An additional ₦20.58 billion was also released to
Distribution Companies (DisCos) under the Nigeria Electricity Market
Stabilisation Facility – Phase 2 (NEMSF-2). However, given the African
infrastructure financing needs of US$170 billion a year and a gap of about
US$100 billion a year according to the African Development Bank, Nigeria must
attract private capital to complement the limited fiscal space. This is where
initiative like the establishment of InfraCorp becomes necessary because it will
attract funds across the globe, which will provide the basis for infrastructural
development, increased productivity, double-digit growth and sustainable
economic development.

Although inflation inched up in December 2021, the forecast suggests it will be
temporary and will return to its decelerating trend in the coming months. On that

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basis, and given the fragile growth recovery, I believe the best course of action is
to hold all parameters. Therefore, I voted to:
• Retain the Monetary Policy Rate (MPR) at 11.5 per cent;
• Retain the Cash Reserve Ratio (CRR) at 27.5 per cent;
• Retain the Liquidity Ratio (LR) at 30.0 per cent; and
• Retain the asymmetric corridor of +100/–700 basis points around the MPR.


8. SANUSI, ALIYU RAFINDADI

Classified as
1.0 Decision
I decided to vote for a hold on all the policy parameters in today’s meeting,
being the first for the year and under the condition of heightened uncertainties
in both the domestic and global economic environments. On the global scene,
the increasing possibility of policy normalization in the major advanced
economies raises concerns for possible capital flows reversals with potentially
adverse consequences on the exchange rate, inflation as well as public debt.
On the domestic scene, being a pre-election year, uncertainties regarding the
evolution of inflation, foreign exchange pressure as well as money market
developments have also increased. Although the uptick in inflation in
December 2021 appears to put a halt to the eight months of disinflation, it may
be a temporary blip in response to the festive period’s increased demand.
Given these rising uncertainties, a hold on all the policy parameters appears to
be the optimal choice for now.
2.0 Background and Justification
2.1 Global Economic Developments
The raging global inflation has hastened the planned pace of the wellanticipated monetary policy normalisation, including the tapering and rates
hikes, across Advanced Economies (AEs). Although Nigeria’s exposure to
foreign portfolio may not be large enough to significantly affect the reserves
position, the associated capital flow reversal and rising yields may have
adverse effect on the domestic capital market, external debt service as well as
the FG’s fiscal plans.
The two major developments that shaped the medium-term global policy
environment are the rising rate of inflation in the major advanced economies
and the accompanying policy responses in the form of speeding-up of their
monetary policy normalisation plans. While the rising inflation may have no
immediate contagion effect on the domestic economy, it nevertheless signals
the possibility of future higher import prices, hence, imported inflation. The

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speedy policy normalisation implies that capital flows to emerging markets may
dry up and reverse, putting pressure on their foreign reserves, exchange rates
and, consequently, inflation. Indeed, many Emerging Market and Developing
Economies (EMDEs) have started hiking their policy rates, partly, to moderate
the adverse effects of this development.
During the last quarter of 2021, the global economy continued to recover in
response to the unprecedented coordinated fiscal and monetary stimulus
across Advanced Economies (AEs) and EMDEs. For the year 2021, global GDP
growth is estimated at 5.5%, but is forecasted, by the World Bank, to
progressively grow at the relatively lower rates of 4.1% and 3.2% in 2022 and
2023, respectively, as monetary policy is normalised and the pent-up demand
wanes out. Output growth in the Advanced Economies is estimated at 5.0% in
2021, but will decline in 2022 and 2023 to 3.8% and 2.3%, respectively. In the
EMDEs, however, output growth for 2021 was estimated at 6.3%, but is similarly
forecasted to grow at the lower rates of 4.6% and 4.4% in 2022 and 2023,
respectively. The progressively lower growth rates expected across the globe
are due to the expected commencement of normalisation of policy, slower
progress of vaccination in the EMDEs, persisting supply bottlenecks and the
uncertainties driven by emergence of new COVID-19 variants. Output in the US
is forecasted to grow (q-o-q) by 5.5% in Q4 2021 compared with 2.3% in Q3 2021.
Output growth in the UK is forecasted to slow down to 0.9% in Q4 2021,
compared with 5.5% achieved in Q3 2021. The Euro zone is expected to grow
by 1.5% (q-o-q) in Q4 2021 compared with 2.2% achieved in Q3 2021. In Japan,
output recovery is forecasted to continue in the 4th quarter as output grows by
1.0% compared with 0.4% achieved in Q3 2021. Although output growth
amongst the EMDEs were forecasted to be mostly positive in Q4 2021, the rates
have greatly varied. India and Nigeria are expected to record a somewhat
higher q-o-q output growth rates of 12.7% and 5.1%, respectively, in Q4 2021.
South Africa and Brazil are, however, forecasted to grow at 2.0% and 0.2% in
Q4 2021 compared with the contraction of -1.5% and -0.1% recorded in Q3
2021, respectively.

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The recovery of global trade in 2021 was fast, having grown at the rate of 9.5%
during the year. It is, however, expected moderate to 5.8% and 4.7% in 2022
and 2023, respectively. Oil prices continued to be driven by rising demand,
weather-related disruptions and OPEC supply ceilings. As at January 21, 2022,
the price of OPEC basket stood at US$ 88.55/b compared with US$71.98 per
barrel on September 14, 2021 and US$54.38 per barrel in January 2021. The
upward trend is expected to continue as the spot price is forecasted to reach
US$ 90/b in Q1 2022 and US$100/b on Q3 2022.
Global price developments continue be driven by a combination of demand
and supply side factors. These include the price of agricultural commodities,
production input, high oil prices and supply bottlenecks. In AEs, inflation is
forecasted to rise to 2.8% in 2021, but decline to 2.3% in 2022. Inflation in the US,
Eurozone and the UK has been rising fast and well away from their long-term
target of 2%. In the US, inflation rose to 7.0% (y-o-y) in December 2021 from 6.8%
in November 2021. This is the highest rate recorded since 1982.
In the Euro area, inflation rose from 4.9% in November, 2021 to 5.0% in
December, 2021 due to rising prices of food, energy, alcohol and non-energy
industrial goods. In the UK, inflation increased from 5.1% in November, 2021 to
5.4% in December 2021. In the EMDEs, inflation is forecasted to increase to 5.5%
in 2021 but moderate to 4.7% in 2022. In December, inflation rates in China and
Kenya have declined, but have increased in South Africa, Egypt and Nigeria.
Between November and December 2021, inflation increased in Egypt (from
5.6% to 5.9%), South Africa (from 5.5% to 5.9%) and Nigeria (from 15.4% to
15.63%).
Global capital flows to the emerging market has continued to decline. In the
first half of 2021, FDI flows to low income economies declined by -9%. Portfolio
flows also declined by 37.35% in between October and November 2021 in
response to the expected policy normalisation in the AEs.
2.2 Domestic Economic Developments and their Implications

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Although new national accounts data are not yet available, output growth,
which had sustained a positive recovery since the 4th Quarter of 2020 when the
economy exited the COVID-induced recession, is expected to remain positive.
During the 3rd Quarter of 2021, output grew by 4.03% (y-o-y), outperforming the
earlier projected rate of 3.33%. The output growth was driven by the non-oil
sector, which grew by 5.44% (y-o-y). The non-oil GDP growth was driven by
growth in services and agriculture. The oil output actually contracted by -
10.73% (y-o-y) in Q3 2021 due to the fall in crude production. Given that the
CBN’s Purchasing Managers Index (PMI) for both Manufacturing and Nonmanufacturing increased in October, November and December 2021, the 4th
Quarter
output
growth
is
impliedly
positive.
Indeed,
because
the
Manufacturing PMI for the months of November and December crossed the 50
index points threshold, it suggests strong manufacturing activities during the
period, the growth of output in the Q4 2021 can also be expected to be strong.
Staff forecasts show that output would grow by 2.86% for the Q4 2021 and 3.10%
for the year 2021.
In December 2021, disinflation that started since April 2021 paused with an
uptick in the headline inflation, slightly rising (y-o-y) from 15.4% in November
2021 to 15.63% in December 2021. The increase of 0.23 percentage points was
attributable to higher demand during the festive season. Although both
components of inflation increased during the period, the increase in food
inflation was significantly higher and was the major driver of the increase in
inflation. For instance, the food price component rose from 17.21% in
November 2021 to 17.37% in December 2021; an increase of 0.16 percentage
points compared with the relatively smaller increase of 0.02 percentage points
increase in the core component during the period. The rise in core inflation was
associated with the higher logistics/transportation costs and other seasonal
effects. The rise in food inflation was due to the rise in demand for food during
the festive season.

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Available data shows that the resilience of the banking industry was sustained
during the period under review. The Capital Adequacy Ratio (CAR) of the
industry was 14.53% as at December 2021, which is above the regulatory
minimum of 10%. There was also further improvement in the quality of the
industry’s assets as the Non-Performing Loans (NPLs) ratio fell below the
regulatory maximum of 5% to 4.94% in December 2021. The industry’s total
credit to the economy also increased from N20.48 trillion in December 2020 to
N24.57 trillion in December 2021, representing a 20% increase. In December
2021, a total of N855.48 billion new credits were granted to six sectors including
Oil & Gas, Manufacturing, General, General Commerce, Agriculture and
Construction accounted for 84.96% or N726.79 billion of the new credit. Analysis
of the interest rate band reveals that 71.83% of customers paid interest rates of
less than 15% in December 2021. In terms of the total amount lent, 41.43% of the
3.916 trillion naira was lent at less than 15% interest rates. This shows that interest
rates are declining as more credit are being granted by the banking system.
3.0 The Basis for My Policy Choice
In choosing between the options to tighten or loosen the current policy stance,
I voted for hold on all the policy parameters on the conviction that the uptick
in inflation in December was a temporary blip in response to the rising demand
during the festive period. Given that the output recovery is still fragile, and given
the strength of the supply-side factors in the inflationary process, tightening may
hurt output recovery and strengthen the supply constraints and exacerbate the
inflationary pressures. Although this year is a pre-election year and significant
liquidity injections as well as exchange rate pressure are expected, it is not yet
time to tighten the policy stance through rates hike. The bank should continue
to use administrative measure to manage liquidity, for now, as we monitor the
evolution of inflation. A hold, in my opinion, is the optimal choice for now.

Consequently, I voted to:

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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.


9. SHONUBI, FOLASHODUN A.
Our first meeting in 2022 held on the back of a global economy that is
challenged by heightened inflation and a recovery momentum that is been
slowed by protracted supply-chain disruptions. Intermittent rebound, due to
irregular reopening of economies and uneven vaccination rate, mainly
between advanced and emerging market and developing economies

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(EMDEs) in most of 2021 dampened the full impact of record level stimuli by
monetary and fiscal authorities around the world.
Nigeria grappled with the negative spillover from disruptions to global growth
in 2021 in the form of low demand for major commodity exports, shortfall in
availability of essentials and imported inflation. However, despite lingering
security challenges, the economy has witnessed continuous, though fragile
growth. The Bank has remained at the forefront of facilitating growth via its
intervention programmes and deliberate measures in the banking sector to
enhance credit flow to the real sector. The monetary policy environment
therefore continues to face the herculean task of managing the trade-off
between staying accommodative to further improve growth and aggressively
taking steps to curb high inflation, even with the strong pointer from the
imminent gradual unwinding of accommodative policy in advance
economies.
Brief Review of Global and Domestic Economic Developments
For the second year running, a major headwind to the global economic growth
remains protracted disruptions to economic activities, caused by the
pandemic. Despite the measured improvement in vaccination during 2021,
further disruptive effects of new variants have heightened uncertainties.
Though the advanced economies recorded some modest rebound, poor
progress in vaccination rate and sub-optimal stimuli support limited the strength
of rebound in the EMDEs. Elevated prices in advanced economies due to
supply bottlenecks have also limited growth momentum, just as prices in EMDEs
rose on account of imported inflation and pressured exchange rate.
Four consecutive quarters of growth post-recession, notwithstanding the
multiple challenges in the socio-political and macroeconomic environment
underscores the strength of rebound in the domestic economy. Driven mainly
by sustained expansion in the non-oil sector, the path to sustained growth is
underscored by improvement in other real sector indicators at the end of 2021.
The Manufacturing Purchasing Managers’ Index (PMI) rose further above the

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50.0 index point to 52.0 points, just as the indices of industrial and manufacturing
production, as well as, electricity consumption rose, relative to the levels in the
preceding period.
Headline inflation, on a year-on-year basis, rose to 15.63 per cent in December
2021, driven by increase in both food and core components, indicating a
reversal of 8 consecutive months of decline. Food and core inflation rose to
17.37 and 13.87 per cent, respectively, in December 2021, from 17.21 and 13.85
per cent, in November 2021. On a month-on-month basis, headline and food
inflation also rose, while core inflation fell relative to the levels in preceding
month.

State of the Nigerian banking system at the end of 2021 showed general
improvement in the sector’s resilience and robustness, though it was
challenged by lower profitability. The industry non-performing loans, at 4.95 per
cent, was below the regulatory maximum of 5.0 per cent, while liquidity ratio,
at 41.33 per cent remain well above the regulatory minimum of 30.0 per cent.
Industry capital adequacy ratio at 14.53 per cent, was below the 15.10 per cent
at the beginning of 2021, but above the standard regulatory threshold of 10.0
per cent.

Growth across major monetary aggregates in 2021 were generally above the
benchmarks, indicating significant expansion in money supply. Broad money
supply (M3) grew by 13.77 per cent, compared with 9.64 per cent benchmark
for fiscal 2021, reflecting 10.70 and 18.50 per cent in net claims on government
and claims on other sectors, respectively, which were above the target growth
for fiscal 2021. Overall improvement in All-share index and aggregate market
capitalization at the end of 2021 reflected the impact of capital market reform
to enhance efficiency. Money market rates were generally lower, indicating
banking system liquidity condition and impact of policies to stabilize markets.

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State of the external sector at the end of 2021 reflected measured
improvement, though the sector remains challenged by sub-optimal liquidity
and exchange rate pressure. Improvement in the components and overall
balance of payments, reflected positive trade balance, reduced imports, as
well as higher government transfers and workers remittances. In 2021, the fiscal
space struggled with low revenue, even as the Government face pressure for
increased expenditure to further ameliorate the effects of pandemic-induced
disruptions, finance infrastructure development, address insecurity challenges
and inspire further expansion of economic activities.
Overall Considerations and Decision
Dragging pandemic, protracted disruption to supply-chain and impact of
supply shortage induced inflation on income is a major headwind to global
growth recovery. Persisting high prices and its likely effect on inflation
expectations has heightened likelihood that advanced economies will soon
commence a gradual wind down of the loose policy regime. Overall,
vulnerability of recovery and sustained reopening may compel economies to
settle for a trade-off between rate adjustment and direct interventions to
forestall the big impact of a total discontinuation of the support system.
Sudden inflation uptick in December 2021, against the trend, raises concern.
Although festivity related higher demand may have temporarily caused the
increase in core inflation, higher food inflation in a post-harvest period raise
more worries about the impact of protracted insecurity on farming activities
and food supply. Expansion in monetary aggregate above the benchmark
may be an indication of monetary angle to inflation, especially at a time of
negative output gap. This is however expected to be addressed by liquidly
management measures of the Bank.

Monetary policy leverages some assumptions, particularly about robustness
and tidiness of fiscal policy, which enables policy effectiveness. However, tight
fiscal space, huge deficit size, and its financing options, may be aggravating

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inflationary pressure. While commending the initiative to redefine operations of
Government Owned Enterprises so as to enhance revenue generation, it is
hoped that pressure on prices from this area will abate as this progresses and
Government explore other funding alternatives, including the Public Private
Partnership.

The Bank has done so much to salvage the domestic economy, deploying
interventions at lower interest rates to facilitate growth, and administratively
managing liquidity to curb inflation under a stagflation environment. A thought
about the outcomes and what would have been the counterfactual show that
there is more to be done to fix the fundamental issues. Against the backdrop of
a regime that prioritized growth, while keeping an eye on monetary and price
stability, the policy space still faces the task of continuing to manage the tradeoff between rationalizing interventions to preserve growth, while taming
inflation.

The LDR policy has facilitated sustained flow of credit to the real economy, with
lending rate trending below the level at the beginning of 2021, reflecting effect
of the credit stimulating measures of the Bank. But current growth is far from
being prosperous. High expectation of businesses from the sentiment survey
and uptick in PMI reflects the Banks pro-growth policies. The rise in inflation in
December 2021 warrants a watchful eye on monetary variables. In all, the MPC
would continue to be mindful of not only what has happened or is happening
now but also keep in focus, upcoming happenings that will directly or indirectly
impact workings of the economy.


I therefore vote to retain:
• MPR at 11.5 per cent;
• Asymmetric Corridor of +100/-700 basis points around the MPR;
• CRR at 27.5 per cent; and
• Liquidity Ratio at 30 per cent.

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10. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
As the world adapts to life with Covid-19, recurring mutation of the virus is
deterring the pace of global recovery; thus, levitating uncertainty, risks and
imbalances. Regardless, output recovered above pre-pandemic levels (in
major economies), with global growth projected at 5.9 and 4.9 percent in 2021
and 2022, respectively from –3.1 percent in 2020. The surge in global demand
and consumer spending is, however, outpacing supply and overheating
markets. Labour shortages (due to self-isolations), rising food and energy
prices, and commodity scarcity (attributable to pandemic-related restrictions)
are amplifying costs and elevating inflation above target in many economies.
Short-term outlook indicates that continued output recovery is pulling inflation

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expectations; warranting monetary tightening in advanced economies. This
could spark capital repatriation from Emerging Markets and Developing
Economies (EMDEs), heighten financial market vulnerability and complicate
their fragile recovery.
For the Nigerian economy, following a strong pick-up of economic activities in
2021, short-term outlook remains positive, recovery is on course, and output
could surpass pre-pandemic levels in 2022. Manufacturing Purchasing
Managers’ Index (PMI) for December 2021 expanded further to 52.0 points
from 50.8 points in November, although the Non-Manufacturing index
declined by 0.6 point. This reflected sturdy rebound of business activities,
increased labour mobilisation, and expanding productive capacity. In-house
analysis projects growth at 2.8 percent for 2022 from 3.1 percent estimated for
2021 and –1.9 percent in 2020.
Consolidation of the domestic economy is expected to be driven by stronger
non-oil activities buoyed by the CBN’s interventions in manufacturing,
agriculture, infrastructure, healthcare and MSMEs. Cumulatively, these
interventions stand at nearly N1trillion to smallholder farmers through the
Anchor Borrowers Programme (ABP), about N1.4 trillion under the Real Sector
Facility, over N108 billion for the Healthcare Sector Intervention Facility, and
almost N370 billion through the Targeted Credit Facility (TCF) to households
and businesses. The facilities are helping to resolve the long-standing structural
constrains and bolster domestic productivity with favourable effects on market
prices.
Though short-term inflation trend remains downward, recent data on domestic
prices shows an uptick in headline rate from 15.4 percent in November 2021 to
15.6 percent. This reflects the slim rise in both food and core inflations to 17.4
and 13.9 percent, respectively. Analysis implies that the uptick is transient,
yuletide-pushed, and exacerbated by security challenges along some foodproducing belts. Price dynamics are worsened by logistic, distribution, storage

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and middle-men problems, which widened the difference between farm-gate
and market prices. These are being tackled through our infrastructure initiatives
and the imminent commodity exchange platform. Near-term outlook suggests
an episodic and momentary ascent of inflation early in 2022 which is projected
to start to wane by the first quarter. The slight upside blip in inflationary trend is
noted with concern and will be monitored closely. This emerging pressure is,
however, expected to be dampened by the ongoing aggregate supply
boosting policies of the CBN.
Trends in the money and financial markets show mixed trajectories of systemic
liquidity conditions in December 2021. At 12.8 percent, the 2.1 percentage
points (m-o-m) rise in OBB rate reflected interbank liquidity constraints, as
customers’ festivity-induced cash-holding preferences enlarged currencyoutside-banks. Accordingly, money stock expanded further, with annualised
M3 growth at 13.8 percent vis-a-vis 11.2 percent in November 2021. Net
domestic asset quickened 15.6 percent (annualised) from 10.0 percent,
reflecting the 30.7 percent rise in core private sector credits.
I note the robust and progressing path of domestic credits, spurred by the LDR
policy and our stance on enhanced flows to strategic real sector ventures. I
reiterate that the CBN will sustain credits to the private sector, even as I remain
mindful of the risk aversion of banks to supposedly high-risk real sector ventures.
I note the improvements in banks’ Non-Performing Loans (NPLs) position and
our continuing efforts at de-risking the target sectors. Robust credits will bolster
domestic investment, household demand, and factor productivity, while fasttracking economic diversification, and ensuring strong and inclusive growth.
In my consideration, I affirm that the objective of price and monetary stability
remains sacrosanct to us. I note the continued improvement in short-term
economic outlook as the output recovers to pre-pandemic levels following the
various stimulus support by the Federal government and the CBN. I also
acknowledge the shocks to inflation in the near-term both from domestic and

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foreign sources. While the recent rise in domestic inflation is deemed transient,
I note the significant elevation of global inflationary pressures, particularly
among Advanced Economies, where the rate is manifold of target. The
elevated inflationary trend that accompanied the worldwide pandemicinduced stimulus support, signals the immediacy of global monetary tightening
with dire ramifications for EMDEs. This in addition, to the recent episodic rise in
domestic inflation, justifies arguments to tighten, today, in order to tame
expectations and, tangentially, mitigate possible capital outflows.
However, I note that though effective anchoring of inflation expectations is
fundamental, economic recovery remains fragile, while per capita income
and unemployment rate are outside tolerable levels. Widespread security
challenges, infrastructural rigidities, and weak factor productivity diminish
medium-term prospects and therefore need to be resolved urgently. I am of
the view that a favourable dismantling of these challenges, reinforced by
sustained application of our various intervention programmes will strengthen
our domestic fundamentals and further boost short-term outlook. It also
remains imperative to ensure a full diversification of the economy and create
institutional structures that will insulate the economy from exogenous shocks.
My inclination today, given the near-term inflation expectations, is to tighten
monetary policy stance. But cautious and well-balanced policy is irrefutable.
The dilemma of the trade-off between inflation and output remains extant,
and a rate hike could derail our modest recovery. I remain mindful of the need
to pursue a policy of price stability without losing sight of the importance of
economic growth. I am of the view that the current levels of policy parameters
are appropriate and do not require adjusts. I prefer to allow the prevailing
stance to continue to work through the system, as clearer direction is gleaned
of potential shocks. To foster price stability and output stabilisation without
introducing disruptive policy shocks, I, therefore, vote to:
1. Retain the MPR at 11.5 percent;

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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

January 2022