Central Bank of Nigeria


MONETARY POLICY COMMUNIQUE NO.154

Date: Tuesday, 24 September 2024
Ref: CBN/MPC/COM/154/297

MONETARY POLICY RATE RAISED BY 50 BASIS POINTS
TO 27.25 PER CENT FROM 26.75 PER CENT

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN)
held its 297th meeting on the 23rd and 24th of September 2024 to review recent
economic and financial developments as well as assess risks to the outlook.
Eleven of the twelve members of the Committee were in attendance.

Decisions of the MPC
The Committee was unanimous in its decision to further tighten policy and thus
decided as follows:
1. Raise the MPR by 50 basis points to 27.25 per cent from 26.75 per
cent.
2. Retain the asymmetric corridor around the MPR at +500/-100 basis
points.
3. Raise the Cash Reserve Ratio of Deposit Money Banks by 500 basis
points to 50.00 per cent from 45.00 per cent and Merchant Banks by 200
basis points to 16 per cent from 14 per cent.
4. Retain the Liquidity Ratio at 30.00 per cent


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MONETARY POLICY COMMUNIQUE NO.154
Considerations
The Committee noted the moderation in headline inflation year-on-year in July
and August 2024. In addition, the MPC noted the relative stability and
convergence in the exchange rate across the various market segments,
resulting from the Bank’s tight monetary policy stance. This is expected to
improve confidence which will enable economic agents to plan in the medium
to long term.

The Committee was, however, unanimous in recognising that a lot more is
required to actualize the Bank’s price stability mandate. The MPC noted that
even though headline inflation trended downwards due to a moderation in food
inflation, core inflation has remained elevated, driven primarily by rising energy
prices. The uptrend poses severe concerns to Members, as it clearly indicates
the persistence of inflationary pressures. Members thus, reiterated the need to
work in close collaboration with the fiscal authority to address the current
upward pressure on energy prices. The MPC noted the continued growth in
money supply, recognising the need to curtail excess liquidity in the system as
well as address foreign exchange demand pressures. Members were also
concerned about the growing level of fiscal deficit but acknowledged the
commitment of the fiscal authority not to resort to monetary financing through
Ways & Means. Furthermore, members observed a strong correlation between
FAAC releases and liquidity levels in the banking system as well as its impact
on the exchange rate. The Committee, therefore, agreed to increase
monitoring of future releases with a view to addressing its effects on price
developments.
On food inflation, the upside risks remained flooding, hike in energy prices,
scarcity of PMS and most importantly, insecurity in farming communities.
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MONETARY POLICY COMMUNIQUE NO.154
Considering the weight of food in the CPI basket, Members recognized the
efforts of the Federal Government in addressing insecurity in farming
communities and stressed the need to remain steadfast. In addition, the MPC
applauded the ongoing effort of the Federal Government to bridge the food
supply deficit through the duty-free import window for food commodities. The
Committee also expressed optimism that the lifting of refined petroleum
products from Dangote refinery will moderate transportation costs and
significantly support the easing of food price pressures in the short to medium
term. This is also expected to moderate foreign exchange demand for
importation of refined petroleum products, with a positive spillover on external
reserve and improvement in the overall balance of payment position.
Members assessed the performance of key financial soundness indicators and
noted with satisfaction that despite familiar headwinds, the banking industry
remains safe, sound, and stable. The Committee, however, emphasized the
need to sustain supervisory oversight on the industry to strengthen its
continued support to the economy.

Following these considerations, Members deliberated on the optimal policy
option to sustain the downward trend in price development, contain emerging
risks to inflation, stabilize the exchange rate and safeguard the banking system
while also shielding the recovery of output growth. In addition, Members noted
that the real policy rate remains negative even after the recent moderation in
headline inflation. To attract investments into the economy, efforts must be
sustained to achieve a positive real interest rate. This would enhance the
economy’s competitiveness for international capital, thereby improving the
exchange rate. Following a review of the upside risks to price development and
the downside risks to the recovery of output growth, the Committee opted to
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MONETARY POLICY COMMUNIQUE NO.154
tighten policy further, to safeguard the gains already accrued in moderating
inflationary pressure.

Key Developments in the Domestic and Global Economies
According to the National Bureau of Statistics, headline inflation moderated to
32.15 per cent in August 2024 from 33.40 per cent in July, driven by a decline
in food inflation, while the core component inched up. Food inflation eased to
37.52 per cent in August 2024, compared with 39.53 per cent in July, while
core inflation rose marginally to 27.58 per cent in August 2024, compared with
27.47 per cent in July. Month-on-month, headline inflation fell to 2.22 per cent
in August 2024 from 2.28 per cent in the preceding month while food inflation
eased to 2.37 per cent in August 2024, compared with 2.47 per cent in July.
Core inflation, however, rose marginally to 2.27 per cent in August 2024,
compared with 2.16 per cent in July.

Real GDP (year-on-year) grew by 3.19 per cent in the second quarter of 2024,
compared with 2.98 per cent in the first quarter, driven by both the oil and nonoil sectors. Staff forecast indicates that the economy would grow by 3.32 per
cent in 2024.
The external reserve stood at US$39.07 billion as at 19th September 2024 an
increase of 17.4 per cent compared with US$33.28 billion in the corresponding
period of 2023. This represents 8 months of import cover for goods and
services and 13 months of imports of goods only.
Global growth projection by the IMF remains at 3.2 per cent in 2024 and 3.3
per cent in 2025. Some of the downside risks to this projection remain geoCentral Bank of Nigeria


MONETARY POLICY COMMUNIQUE NO.154
economic fragmentation, elevated global debt and ongoing geopolitical
tensions between Russia and Ukraine as well as Israel and neighboring
countries. As key central banks commence monetary easing, global financial
conditions are expected to ease gradually and hopefully offset the downside
risks to the recovery of global growth. Global inflation is expected to continue
its deceleration in 2024 but may remain above the long-run targets of most
central banks in the advanced economies.
Members thus, expressed their commitment to continuous monitoring of
developments in the global and domestic economies to ensure that the
appropriate response is always deployed to address emerging risks.
The next meeting of the Committee will be held on the 25th and 26th of
November 2024.
Thank you.
Olayemi Cardoso
Governor,
Central Bank of Nigeria
24th September 2024