CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 138 OF THE 281ST MONETARY
POLICY COMMITTEE MEETING HELD ON THURSDAY, 16th AND FRIDAY, 17th
SEPTEMBER 2021
The Monetary Policy Committee (MPC) met on the 16th and 17th September,
2021, on a relatively comforting note of a moderate global output growth
recovery and improved global trade. The performance of the global economy
in the first two quarters of the year and into the third quarter, remained
favourable with positive outlook for the rest of the year. However, cautious
optimism persists, driven primarily by mutating and more fatal strains of the
COVID-19 virus and disparities in the progress of vaccinations across several
countries. In the domestic economy, output growth performance continued to
improve, signposting the positive impact of the unwavering fiscal and monetary
support by both the fiscal and monetary authorities to revive and sustain
economic growth, post pandemic. The Committee reviewed the developments
in the global and domestic economic environments in the third quarter of 2021,
as well as the outlook for the rest of the year.
Ten (10) members of the Committee attended this meeting.
Global Economic Developments
The Committee noted the continuing rebound in the global recovery as several
advanced and emerging market economies posted promising second quarter
output growth figures, despite the uneven progress in vaccination coverage.
The MPC noted that the uncontained spread of the COVID-19 virus continues to
pose downside risks to global recovery in 2021 and into 2022. The MPC further
noted that despite the strong output growth identified in some Advanced
Economies, several developing economies were still lagging in vaccination
progress. Members, emphasized that the widespread availability of vaccines,
remained vital to surmounting the Pandemic and attaining full and all-inclusive

recovery of the global economy. Despite the challenges posed by the ongoing
mutation of the coronavirus, governments across the globe remain focused on
easing business restrictions and resuscitating economic activities. Consequently,
the International Monetary Fund (IMF), maintained its aggregate projection for
global growth in 2021 at 6.0 per cent, but increased its projection for the
Advanced Economies to 5.6 per cent from a previous 5.1 per cent, while that for
the Emerging Markets and Developing Economies (EMDEs) was downgraded to
6.3 per cent from 6.7 per cent.
Price development across several Advanced Economies has remained on a
sustained uptrend and exceeding their long run objectives. This is expected to
continue in the short to medium term as against earlier forecasts that the upward
shift was transient. Consequently, several central banks of advanced economies
are
currently
considering
early
commencement
of
monetary
policy
normalization, even though policy rate adjustments are not expected in the
medium term. Across several Emerging Market and Developing Economies,
inflationary pressures remained mixed, as some economies had much higher
rates than their peers, due to lingering exchange rate pressures, capital flow
reversals, high energy costs, supply chain disruptions and poor response to policy
stimulus resulting from structural bottlenecks.
In the global financial markets, the Committee noted that while demand for
equities remained strong, an indication of renewed market confidence, gold
price still maintained its post-Pandemic high, reflecting the hedging by investors
against a possible rebound of the Pandemic. Long-term sovereign bond yields
are expected to improve with the commencement of monetary policy
normalization by central banks of advanced economy. Committee members,
however, expressed cautious optimism for a gradual normalization of monetary
policy by these central banks, as a sharp retreat of policy stimulus may plunge
the global economy into a financial crisis again. This may also increase the
uncertainty around the full recovery of several Emerging Market and Developing
Economies. The MPC, therefore, called on the Bank to put in place measures to

moderate the likely impact of the normalization of monetary policy on the
domestic economy.
Domestic Economic Developments
In the second quarter of 2021, there was a significant improvement in the real
Gross Domestic Product (GDP), which grew by 5.01 per cent compared with 0.51
and -6.10 per cent in the previous quarter and corresponding quarter of 2020,
respectively. This recovery was attributed to the non-oil sector, driven by a
rebound in services sector and continued growth in agriculture sector. The oil
sector contracted further by -12.65 per cent (year-on year) in the second quarter
of 2021, compared with -2.21 per cent in the previous quarter. This deeper
contraction, was attributed to several factors: including declining crude oil
production at two crude streams in the country, associated with leakages in two
major pipelines; deteriorating oil production infrastructure; poor pipeline
maintenance; and the need to comply with OPEC+ production ceiling.
The Committee noted the moderate improvement in both the Manufacturing
and Non-Manufacturing Purchasing Manager’s Indices (PMIs), though still below
the 50-index point benchmark, showed a marked improvement over time. In
August 2021, the Manufacturing and non-Manufacturing PMIs improved to 46.9
index points apiece, compared with 46.6 and 44.8 index points, respectively, in
July 2021. This was attributed to an increase in new orders, driven largely by rising
demand, uptrend in business activity and further normalization of economic
activities.
Similarly,
the
employment
level
index
component
of
the
Manufacturing and non-Manufacturing PMIs in August 2021 improved to 49.4
and 48.8 index points, respectively, compared with 46.5 and 47.0 index points in
July 2021. The Committee expressed optimism that with the current level of
monetary and fiscal stimuli, as well as efforts to increase vaccination and
contain the Pandemic, the economy will continue to improve in the short-to
medium term.
The Committee reviewed the performance of the Bank’s interventions to sustain
the recovery of output growth and address the downside risks to other external

and domestic shocks to the economy. Interventions continued largely in
Manufacturing, Agriculture, Energy/infrastructure and Micro, Small, and Medium
Enterprises (MSMEs).
The Bank under its Anchor Borrowers Programme (ABP) has cumulatively
released the sum of N798.09 billion to 3.9 million smallholder farmers cultivating
4.9 million hectares of land across the country. Out of this for the 2021 wet season
farming, the Bank released the sum of ₦161.18 billion to 770,000 small-holder
farmers cultivating seven (7) commodities on 1.10 million hectares across the
country. While harvesting for the 2020 dry season under the Programme is
rounding up, harvesting activities have commenced for the 2021 wet season
cultivation. The Strategic Maize Reserve Programme of the CBN has been useful
in moderating maize prices by directly targeting large feed mill producers. Under
its Commercial Agriculture Credit Scheme (CACS), the CBN has supported 657
large-scale agricultural projects, to the tune of N708.39 billion.
To support MSMEs across the country, the Bank disbursed N134.57 billion to 38,140
beneficiaries under the Agribusiness/Small and Medium Enterprise Investment
Scheme (AGSMEIS), and for the Targeted Credit Facility (TCF), the sum of N343.21
billion has been released to 726,198 beneficiaries, comprising 602,730
households and 123,468 Small and Medium Enterprises.
Under the Real Sector Facility, the Bank released the sum of N1.00 trillion to 269
real sector projects, of which 140 are in light manufacturing, 71 in agro-based
industry, 47 in services and 11 in mining. Under the Healthcare Sector Intervention
Facility (HSIF), N103.02 billion has been disbursed for 110 healthcare projects, of
which 27 are pharmaceutical, 77 hospitals and 6 other healthcare service
projects. The Bank has also disbursed a total of N145.99 billion under its Non-Oil
Export Stimulation Facility (NESF). The CBN has revised the guidelines, working
with Nigerian Export-Import Bank to improve access to the intervention and
stimulate non-oil export growth in Nigeria.
Under the National Mass Metering Programme (NMMP), N41.06 billion has been
disbursed to ten (10) DisCos, for the procurement and installation of 759,748

electricity meters. Under the Nigerian Electricity Market Stabilization Facility - 2
(NEMSF-2), the Bank has released the sum of N145.66 billion to 11 DisCos as loans
to provide liquidity support and stimulate critical infrastructure investment to
improve service delivery and collection efficiency.
In furtherance of its intervention in the energy sector, the Bank has disbursed
N39.20 billion to six (6) beneficiaries to improve gas-based infrastructure to
support the Federal Government’s Auto-Gas Conversion Programme. The Bank
has also encouraged Deposit Money Banks (DMBs) to participate in the Solar
Connection Facility (SCF) to improve energy access in the rural areas.
To promote entrepreneurship development among Nigerian youth, the Bank
recently
approved
the
implementation
of
the
Tertiary
Institutions
Entrepreneurship Scheme (TIES). The Scheme is designed to promote
entrepreneurial activities and foster job creation among Nigerian youths.
The Committee applauded the continued moderation in headline inflation for
the fifth consecutive month to 17.01 per cent (year-on-year) in August 2021 from
17.38 per cent in July 2021. The continued decrease was attributed to a marginal
decline in the food component to 20.30 per cent in August 2021 from 21.03 per
cent in July 2021. The core component, also, declined to 13.41 per cent in August
2021 from 13.72 per cent in July 2021. The MPC noted that headline inflation
remained well above the Bank’s benchmark corridor of 6 – 9 per cent, but
expressed optimism that with sustained interventions by the Bank, food
production will continue to improve, thus moderating headline inflation further.
The Committee, thus, urged the fiscal authority to build on earlier efforts to
articulate a clear strategy to attract private sector investment while resuscitating
critical infrastructure to improve the ease of doing business in the country.
Members observed that broad money supply (M3) rose to 5.83 per cent in
August 2021, compared with 2.91 per cent in July 2021. This was largely driven by
the growth of Net Foreign Assets and Net Domestic Assets by 12.35 and 4.30 per
cent in August 2021, compared with 1.84 and 3.17 per cent in July 2021,
respectively. The growth in Net Foreign Assets was largely driven by increase in
foreign asset holdings of commercial and merchant banks. The increase in Net

Domestic Assets reflects the boost to aggregate credit net, which increased to
8.14 per cent in August 2021, from 5.71 per cent in July 2021.
In the money market, the monthly weighted average Inter-Bank Call and Open
Buyback (OBB) rates increased to 13.45 and 12.97 per cent in August 2021 from
10.72 and 11.60 per cent in July 2021, respectively. This increase reflected the
tight liquidity conditions in the banking system during the review period as the
Bank curtailed excess system liquidity.
The MPC noted the moderate improvement in the equities market in the review
period, as the All-Share Index (ASI) increased by 2.67 per cent from 37,907.28 on
June 30, 2021, to 38,920.50 on September 14, 2021. Market Capitalization (MC)
also increased by 2.63 per cent from N19.76 trillion to N20.28 trillion over the same
period,
reflecting
improvement
in
investor
confidence
following
the
strengthening of output growth.
The MPC noted that the Capital Adequacy Ratio (CAR) and the Liquidity Ratio
(LR) both remained above the prudential limits at 15.2 and 41.7 per cent,
respectively at end-July 2021. The Committee, also, welcomed the improvement
in the Non-Performing Loans (NPLs) ratio at 5.4 per cent in July 2021, compared
with 5.7 per cent in June 2021. The Committee thus, urged the Bank to sustain
current efforts to bring NPLs below the 5.0 per cent prudential benchmark.
The Committee noted the improvement in lending to the real sector following
the introduction of the Loans-to-Deposit Ratio (LDR) in 2019. Industry gross credit
increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion
at end-July, 2021. The credit growth was largely recorded in manufacturing, oil
and gas and agriculture sectors.
The Committee noted the significant increase in the external reserves which rose
to US$35.97 billion at end-August 2021 from US$33.49 billion at end-July 2021,
representing an increase of 7.41per cent. It also welcomed the further increase
to US$36.03 billion on September 13, 2021.

Outlook
The outlook for both the global and domestic economies appears mixed. This is
due to lingering uncertainties over the end of the COVID-19 pandemic as well
as continued mutation of the virus. The slow and uneven pace of vaccination in
developing economies is also compromising the achievement of global herd
immunity, thus imposing a considerable headwind to the attainment of the
global growth forecast.
Some central banks in advanced economies have given guidance of intended
commencement of monetary policy normalization as monetary and fiscal policy
across major advanced and emerging market economies have remained
robust. This would constitute a further headwind to the full and inclusive recovery
of the global economy due to the likely rise in cost of capital. The global
economy is confronted with more headwinds than tailwinds, evidenced by the
multitude of conflicting signals emerging from various major economies.
Available data and forecasts for key macroeconomic variables for the Nigerian
economy, suggest further rebound in output growth for the rest of the year. This
will however be hinged on the continued stability in oil price and robust
vaccination in Nigeria and across other countries. Foreign exchange market
stability, further reduction in inflationary pressure in the economy and continued
interventions by the monetary and fiscal authorities are very important factors to
sustain the recovery momentum. Consequently, the Nigerian economy is
forecast to grow in 2021 by 2.86 per cent (CBN), 3.0 per cent (FGN) and 2.5 per
cent (IMF).

The Committee’s Considerations
The Committee noted the recovery in output growth and improving PMIs in the
second quarter and urged the Bank to maintain the momentum of its current
policy measures to sustain positive and inclusive real GDP growth.
The increasing level of insecurity in parts of the country remained a crucial point
of concern for the MPC as its persistence could adversely impact business

confidence and derail the recovery. It continued to call on the Federal
Government to prioritize security surveillance in farming communities as the
increased supply of food would play a significant role in stabilizing
macroeconomic fundamentals.
The Committee applauded the steady but moderate decline in domestic prices
as inflation decelerated for the fifth consecutive month with forecast indicating
a continued downward trend. The Committee also welcomed ongoing efforts
towards revitalising the Nigeria Commodity Exchange (NCX) to improve the
supply value chain, curtail the speculative activities of middlemen in the
agricultural sector, and consequently drive down prices of key commodities
such as paddy rice, maize, wheat and sorghum, amongst others.
Members applauded the relentless effort by the Bank and other collaborators in
ensuring the eventual take off of the Nigerian Infrastructure Corporation
(INFRACORP), as this will improve the business environment, attract new
investment and create new jobs in the Nigerian economy. The MPC further
emphasised the importance of investment in transportation networks, power
supply and telecommunication as these have a multiplier effect on other sectors
of the economy. In addition to the INFRACORP initiative, Members urged the
fiscal authority not to relent on other complementary infrastructure initiatives
such as Public-Private-Partnerships and engagement of Nigeria’s huge diaspora
through the issuance of diaspora bonds to fund specific projects.
The MPC noted the moderate improvement in the equities market and
commended the sustained investor confidence in the Nigerian economy. The
Committee however called on the Federal Government to continue to improve
the ease of doing business in Nigeria to retain the current patronage of the
Nigerian economy by foreign investors.
Members applauded the continued resilience of the banking system, noting the
progressive decline in the non-performing loans ratio, and broad improvement
in all banking system parameters, despite the downside risks posed by the
Pandemic to the smooth running of businesses. While the Committee was

cognizant of the credit risks associated with lending in the current economic
climate, it urged Nigerian banks to extend more credit to businesses and
consumers to facilitate a seamless recovery of output growth, reduce
unemployment and stabilize prices.
On the management of the exchange rate, the Committee applauded the
Bank for improving foreign exchange supply in the economy to meet legitimate
business and consumer demand. Members thus, urged the Bank to take further
steps to restrict the activities of unauthorised and illegal dealers in the foreign
exchange market, stating that all foreign exchange transactions must be
conducted at the I&E window to ensure transparency and stability. The
Committee, thus, called on the Bank to intensify surveillance over foreign
exchange sales and utilisation by commercial banks and customers, to ensure
that operators adhere to stipulated guidelines set by the CBN. The Bank thus,
maintains its resolve to continue to restructure the foreign exchange market and
will pursue all recent policies targeted at sanitizing the market to improve
transparency and proper functioning to eliminate illegal foreign exchange
dealers in the economy.
On Government revenues, members urged the Federal Government to improve
its tax collection in order to reduce its dependence on oil revenues and reduce
its exposure to counter-cyclical shocks.
The Committee emphasised the growing need to improve the agricultural value
chain, particularly in key commodity products like cocoa, palm oil and cashew
to diversify the country’s export receipts. It, therefore, called on the Bank to
support manufacturing initiatives that could achieve this objective.
The Committee applauded the Bank for its resilience and robust efforts in
managing the downside risks to growth and the upside risks to inflation since the
outbreak of the Pandemic, while charting a stable path for the economy to
continue to expand its potential capacity through investment in infrastructure.
Overall, the MPC assessed the headwinds and tailwinds to growth, as well as,
the upside risks to inflation, noting the immense effort by both the monetary and

fiscal authorities to achieve a substantial recovery in output growth and
decrease in inflation. The Committee urged the Presidential Task Force on
COVID-19 to intensify efforts toward procurement of more vaccines and the
vaccination of more people to ensure that herd immunity is achieved.
The Committee’s Decision
The MPC expressed delight at the robust recovery of output growth during the
second quarter and the continued decline in inflation. Members, however, reiterated the need to put in place further measures to drive down inflation and
improve real returns on investment. The MPC noted the unequivocal importance
of credit growth to the sustained recovery of output and the moderation in price
development as supply improves. It thus, called on the Bank to maintain
adequate surveillance on banks to ensure compliance with its extant credit
policy, while ensuring that they are not unduly exposed to credit risks.
The Committee also noted the relevance of the Bank’s suite of interventions to
the overall system credit, urging its continued use to fund sectors with high
employment-generating capacity.
MPC weighed the pros and cons of tightening, holding or loosening the stance
of policy, noting the impact on output growth, price development,
unemployment and exchange rate.
Members felt that tightening will contract the current level of system liquidity,
and thus reduce demand pressure in the foreign exchange market, given that
the current MPR at 11.5 per cent, CRR at 27.5 per cent and liquidity ratio at 30.0
per cent is already a tightening stance. This will, however, raise the cost of credit
and reduce the volume of credit to the private sector.
On loosening, the Committee felt that this would lower retail interest rates and
improve the ability of obligors to repay their obligations, with a complementary
reduction in NPLs. The gradual downward movement of inflation may, however,
be compromised if policy accommodation is increased, leading to a further

widening of the negative real interest rate and thus exacerbating capital
outflows as investment in naira denominated assets become less attractive.
Members considered that a hold stance would allow the current recovery of
output growth and decline in inflation to continue smoothly, thus gradually
moving the economy to a sustainable path before adjustments are made to the
stance of policy.
Based on the above considerations, the MPC made the decision 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 macro-economic stability.
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:
i.
Retain the MPR at 11.5 per cent;
ii.
Retain the Asymmetric Corridor of +100/-700 basis points around the MPR;
iii.
Retain the CRR at 27.5 per cent;
iv.
Retain the Liquidity Ratio at 30 per cent.
Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
17th September, 2021