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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 146 OF THE MONETARY POLICY
COMMITTEE MEETING HELD ON MONDAY 23rd AND TUESDAY 24th JANUARY 2023
The Monetary Policy Committee (MPC) held its first meeting for 2023 on the 23rd
and 24th January, 2023, as optimism of a rebound in global output recovery
waned considerably, giving room for increased concerns of a likely global
recession in 2023. This is driven by several global shocks impacting negatively
on growth and price development. Major headwinds to global growth include:
ongoing geopolitical tensions in some regions; intensified disruptions to the
energy market; persisting supply bottlenecks; resurgence of the COVID-19
pandemic in major industrial cities in China; and tightening external financial
conditions. In addition to these, the slow growth in global trade, continued
volatility in the oil market and growing private and public debt portfolios, are
clear signals of increasing uncertainty, imposing a drag on growth.
In the domestic economy, output growth recovery was subdued in the third
quarter of 2022, but expected to recover moderately in the fourth quarter on
the back of continued support of both monetary and fiscal policy through
various interventions in growth-enhancing sectors. At this meeting, the
Committee reviewed these and other developments in the global and
domestic economic and financial environments in 2022, as well as the outlook
and risks for 2023.
Twelve (12) members of the Committee attended this meeting.
Global Economic Developments
The Committee noted with concern, the growing evidence of increased
militarization of the war in Ukraine and the consequence of a prolonged war

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on the recovery of the global economy. It also noted the renewed concern of
the possibility of yet another Pandemic reverberating the global economy in
2023, as infection rates rise in China, following its lifting of COVID-19 restrictions.
These two factors alongside the tightening of global financial conditions remain
major headwinds to global economic growth. The combined impact of these
shocks on the global economy could result in further disruptions to commodity
and energy markets as well as the efficient functioning of global supply chains.
In the Advanced Economies, fiscal policy retreated to give way to monetary
adjustment, while in the Emerging Markets and Developing Economies, fiscal
capacity is being greatly undermined by the array of shock spillovers from the
global economy. The International Monetary Fund (IMF), in its October 2022
World Economic Outlook, retained its global output growth projection for 2022
at 3.2 per cent, but further downgraded in the 2023 forecast to 2.7 per cent
compared with 2.9 per cent in its July 2022 forecast. The World Bank in its latest
forecast, indicated a much lower global growth expectation of 1.7 per cent for
2023.
On price development, the MPC observed that inflation, in most Advanced
Economies, although trending downwards, remained significantly above their
long-run objectives and is expected to remain elevated throughout 2023. This is
driven by the continued high price of food and energy, a fallout of the war in
Ukraine, lagged impact of the massive liquidity support rolled out to douse the
impact of the COVID-19 pandemic, and persisting disruptions to the global
supply chain as China faces a renewed surge of the Pandemic. Fears that
Russia may renege on its commitment to the Black Sea grains deal is also
building expectations of possible rise in short-term price levels. In the Emerging
Markets and Developing Economies, inflation is expected to moderate
marginally in 2023, but remain broadly elevated due to a combination of
factors such as the persisting high price of grains and other commodities;
continued exchange rate pressures; and other legacy structural factors.
In the global financial markets, the continued normalisation of monetary policy
has led to the tightening of external financial conditions and increased volatility

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in the equities market. With the increased fears of a likely global recession in
2023, investors have commenced a move towards safe-haven assets such as
gold and silver to safeguard their investments.
In the Advanced Economies, corporate debt levels remain considerably high
as pressure builds to avoid default scenarios with the continued hike of
monetary policy rates. In the Emerging Market and Developing Economies, the
persistence of rising public debt profiles and capital flow reversals are putting
severe pressure on exchange rates, posing a challenge to external
sustainability.
Domestic Economic Developments
Available data from the National Bureau of Statistics (NBS) revealed that Real
Gross Domestic Product (GDP) grew by 2.25 per cent (year-on-year) in the third
quarter of 2022, compared with 3.54 per cent in the second quarter of 2022 and
4.03 per cent in the corresponding period of 2021. The economy has continued
on a path of positive growth for eight consecutive quarters. This is driven largely
by support by the Bank and the fiscal authority to growth enhancing sectors.
Staff projections showed that output growth recovery is expected to continue
reasonably in 2023, given the expected sustained positive performance during
the fourth quarter of 2022 and steady rebound in economic activities.
The MPC welcomed the moderation in inflation following ten consecutive
months of uptick, as headline inflation (year-on-year) declined marginally to
21.34 per cent in December 2022 from 21.47 per cent in November 2022. Monthon-month headline inflation however, increased to 1.71 per cent in December
2022 from 1.39 per cent in the preceding month, due to a rise in consumer
spending during the festive period.
The Committee observed the continued growth in money supply with broad
money (M3) growth exceeding the 2022 provisional benchmark of 15.21 per
cent at 16.52 per cent (year-to-date) in December 2022, compared with 13.92
per cent in November 2022. This was largely driven by increased claims on other

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sectors (other financial corporations, state and local governments, public
nonfinancial corporations, and the private sector).
Money market rates oscillated below and within the asymmetric corridor of the
standing facilities window, reflecting changing liquidity conditions in the
banking system. Accordingly, the monthly weighted average Open Buyback
(OBB) rate decreased to 11.61 per cent in December 2022 from 12.56 per cent
in November 2022, while the monthly average inter-bank rate, increased to
12.08 per cent in December 2022 from 11.89 per cent in November 2022.
The MPC noted the continued resilience of the banking system, evidenced by
the progressive improvement in the Non-Performing Loans (NPLs) ratio from 4.9
per cent in November 2022 to 4.2 per cent in December 2022. The Committee
also noted that the liquidity ratio was well above its prudential limit at 44.1 per
cent, while the Capital Adequacy Ratio (CAR) remained at 13.8 per cent in
December 2022 compared with the preceding month, staying within its
prudential range of 10.0 -15.0 per cent.
The equities market was bullish in the review period, as the All-Share Index (ASI)
and Market Capitalization (MC) increased to 51,251.06 and N27.92 trillion on
December 30, 2022, from 43,839.08 and N23.88 trillion respectively, on October
31, 2022. This reflected better-than-expected corporate earnings and improved
investor confidence in the country.
The Committee noted the marginal decline in the external reserves, as gross
external reserves decreased by 0.95 per cent at end-December 2022 to
US$36.55 billion, from US$36.9 billion at end-November 2022. This reflects the
exchange rate pressure accentuated by a combination of heightened
demand and slow accretion to reserves.
The Committee reviewed the performance of the Bank’s various interventions
aimed at stimulating production and productivity across the real sector.
Between September and October 2022, under the Anchor Borrowers’
Programme (ABP), the Bank disbursed N41.02 billion to several agricultural

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projects, bringing the cumulative disbursements under the Programme to
₦1,067.29 billion to over 4.6 million smallholder farmers cultivating or rearing 21
commodities across the country. The Bank also released N300 million to finance
large-scale agricultural projects under the Commercial Agriculture Credit
Scheme (CACS), bringing the total disbursements under the Scheme to ₦745.31
billion for 680 projects in agro-production and agro-processing.
In addition, the Bank released the sum of ₦48.30 billion under the ₦1.0 trillion
Real Sector Facility to seven (7) new real sector projects in agriculture,
manufacturing, and services. Cumulative disbursements under the Real Sector
Facility currently stood at ₦2.15 trillion disbursed to 437 projects across the
country, comprising 240 in manufacturing, 91 in agriculture, 93 in services and
13 mining sector projects. Furthermore, under the 100 for 100 Policy on
Production and Productivity (PPP), the Bank has disbursed the sum of ₦20.78
billion to nine (9) projects in healthcare, manufacturing, and services. This brings
the cumulative disbursements under the facility to ₦114.17 billion to 71 projects
across healthcare, manufacturing, services and agriculture. The Bank released
₦4.00 billion under the Intervention Facility for the National Gas Expansion
Programme (IFNGEP) to promote the adoption of compressed natural gas
(CNG) as the preferred fuel for transportation and liquefied petroleum gas
(LPG) as the preferred cooking fuel.
In the MSME sector, the Bank supported entrepreneurship development with
the disbursement of the sums of N1.33 billion and N10.00 million under the
Agribusiness/Small and Medium Enterprise Investment Scheme (AgSMEIS) and
Micro, Small, and Medium Enterprise Development Fund (MSMEDF),
respectively, to support entrepreneurship development in the country, bringing
the total disbursement under the interventions to N150.22 billion and N96.08
billion, respectively. Under the Export Facilitation Initiative (EFI), the Bank funded
export-oriented projects with the sum of N5.34 billion, bringing the cumulative
disbursement under the intervention to N44.58 billion.

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Outlook
The broad outlook for the recovery of both the global and domestic economies
remain uncertain with the path to full recovery clouded by significant downside
risks. The key risks remain the lingering headwinds from the Russian-Ukraine war,
heightened inflationary pressure across several economies and sharp slowdown
of economic activities in China with the resurgence of COVID-19 pandemic
across its major cities. Others include: the tightening of external financial
conditions, as monetary policy normalization continues; increasing risk of a
global debt crisis, as both corporate and public debt levels burgeon; and the
increasing likelihood of a global recession in 2023.
Available data and forecasts for key macroeconomic indicators for Nigeria
suggest that the economy will continue to grow through 2023, but at a subdued
pace. The continued high level of insecurity; perennial scarcity of Premium
Motor Spirit (PMS) and high cost of other energy sources; increased spending
towards the 2023 general elections; rising cost of debt servicing; and
deteriorating fiscal balances, remain the key sources of shocks to the Nigerian
economy. Accordingly, the economy is forecast to grow in 2023 by 2.88 per cent
by the CBN estimate.

The Committee’s Considerations
At this meeting, although the MPC was delighted that inflation (year-on-year)
had started to moderate, it was not convinced that a marginal 13 basis points
dip in inflation was enough to begin to celebrate. The Committee was
therefore not of the opinion that a hold or loosen option was desirable. This is
because loosening under a double-digit inflationary condition will be
tantamount to an immediate reversal of the expected further downward trend
in inflation. Committee also felt that loosening will negate the objective of
dampening the pent-up aggregate demand that fueled the rise in inflation
post-COVID-19 pandemic.

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As for hold, the Committee was reluctant in considering this option because a
hold option would signal MPC’s quick adjustment of its policy stance due to a
one-time, marginal decline in inflation, suggesting a weak confidence in its
previous policy stance at taming inflation.
The MPC was therefore unanimous in its position to continue to tighten.
However, the dilemma at this meeting was whether to continue tightening
aggressively or moderately. To the Committee, a moderate tightening may
slow the rate of deceleration in inflation without necessarily hurting output. For
those members who felt that an aggressive stance was needed, they were of
the view that Nigeria’s inflation at a rate above 20 per cent, was already a
threat to growth and among the highest in the world. To this group of members,
aggressively raising the policy rate was paramount to reining in inflation
because an aggressive tightening stance would further narrow the negative
real interest rate margin. MPC also feels that a tightening stance would signal
confidence in the effectiveness of its Monetary Policy direction to rein in
inflation, improve financial system stability, and moderate exchange rate.
The Committee’s Decision
Members welcomed the recent deceleration in year-on-year headline inflation,
noting that the persistence in policy rate hikes over the last few meetings of the
Committee had started to yield the expected decline in inflation.
The Committee thus deliberated on either to hike rates further or hold for the
impact of the last four rate hikes to continue to feed through. At this MPC,
therefore, the options considered were primarily to hold the policy rate or
tighten further to consolidate the gains of previous rate hikes. Loosening, in the
view of members, would gravely undermine the gains of the last four rate hikes.
The MPC noted the continued upward risk to price development characterized
by the forthcoming 2023 general elections; perennial scarcity of PMS; continued
rise in other energy prices; exchange rate pressure; as well as rising insecurity.
Members, however, noted that the current naira redesign and cash withdrawal

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limit policies are huge moderating factors to price development as CurrencyOutside-Banks
is
expected
to
continue
to
moderate
beyond
the
implementation stage of these policies.
The MPC was of the view that although the inflation rate moderated marginally
in December, the economy remained confronted with the risk of high inflation
with adverse consequences on the general standard of living. The Committee,
therefore, decided to sustain the current stance of policy at this point in time to
further rein in inflation.
One (1) member voted to increase the MPR by 150 basis points, Four (4)
members by 50 basis points, and Seven (7) members by 100 basis points,
In summary, the MPC voted to:
I.
Raise the MPR by 100 basis points to 17.5 per cent;
II.
Retain the asymmetric corridor of +100/-700 basis points around the MPR;
III.
Retain the CRR at 32.5 per cent; and
IV.
Retain the Liquidity Ratio at 30 per cent.
Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
24th January 2023

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