MINUTES OF THE 217TH MEETING OF THE MONETARY POLICY COMMITTEE
(MPC) HELD ON MONDAY 22ND AND TUESDAY 23RD NOVEMBER, 2010 IN THE
MPC MEETING ROOM, 11TH FLOOR, CBN, ABUJA

ATTENDANCE
1. Sanusi L. Sanusi - Governor, (Chairman)
2. Tunde Lemo - Deputy Governor, Member
3. Sarah O. Alade - Deputy Governor, Member
4. Suleiman Barau - Deputy Governor, Member
5. Kingsley Moghalu - Deputy Governor, Member
6. Sam O. Olofin - Board Director, Member
7. Adedoyin R. Salami - Member
8. Abdul-Ganiyu Garba - Member
9. John Oshilaja - Member
10. Chibuike U. Uche - Member
11. Okorie A. Uchendu - Director, MPD, Secretary
12. Uwatt B. Uwatt - Dep. Director, Deputy
Secretary

OBSERVERS
1. Sam O. Oni - Director, Banking
Supervision
2. Charles N. O. Mordi - Director, Research
3. Batari Musa - Director, Trade and
Exchange
4. O. F. Owolabi - Ag. Director, Financial
Markets
5. Lamido A. Yuguda - Ag. Director, Reserve
Management
6. Folakemi Fatogbe - Ag. Director, Risk
Management
7. Musa Amedu - Dep. Director,
Development Finance
8. Sunny Essien - Deputy Director,
Statistics
ABSENT WITH APOLOGIES
1. Shehu Yahaya - Member, MPC

2. Danladi Kifasi - Member, Perm. Sec.,
Fed. Min. of Fin.
Day 1:
Opening
1.) The meeting commenced at 10.17 a. m. with a
prayer by John Oshilaja. The MPC was informed of the
absence of two members from the meeting, with
apologies. One was the Permanent Secretary, Federal
Ministry of Finance, while the other was Dr. Shehu
Yahaya, who was bereaved.
Minutes of the Previous Meeting
2.) The minutes of the 216th meeting of the MPC held
on Monday 21st September, 2010 were read without any
error detected by members. Accordingly, based on
motions by Sam O. Olofin and Adedoyin Salami, the
minutes were adopted.
Matters Arising from the Minutes of the Last Meeting
3.) The Chairman advised that the Banking Supervision
Department (BSD) should identify the customers with
huge non-performing loans, and review the risks posed
to banks if monetary policy stance was tightened.
Members suggested that a second look be taken at the
individual banks with large non-performing loans and
proactive action taken so that another banking crisis
would not surface. At that point, the Deputy
Governor, Financial System Stability informed the
Committee that the BSD was working towards solving

the problem and would report back to the MPC on the
outcome of efforts made towards ensuring efficient
supervision of the banks.
Presentations by the Departments:
4.0 Trends In Crude Oil Production, Prices, and
Foreign Exchange Reserves
The presentation by the Research Department indicated
that oil production in the country averaged 1.99 mbd
in 2008, and fell to 1.82 mbd in 2009 with the lowest
level being 1.60 mbd recorded in July 2009. However,
oil output rose to an average of 2.13 mbd in the
first 10 months of 2010.
Movements in oil prices were mixed. In 2008, prices
rose from US$94.25/b in January 2008 to the highest
level of US$141/b in July, before falling to
US$44.95/b in December 2008. In 2009, prices ranged
between US$44.95/b and US$78.46/b. The upward trend
was sustained in 2010 with prices ranging from
US$76.42/b in July to US$87.45/b in November 2010.
The lowest price of US$76.42/b in 2010 was higher
than the budget price of US$60.00/b.
The report indicated that oil export volumes had
recovered in 2010 relative to 2009 on account of the
rebound in both output and prices, but not yet to the
level attained in 2008.
External reserves which peaked at US$62.08 billion in
September

had
since
declined
steadily
to

US$40.23 billion in April 2010 and further to
US$33.60 billion by end-October 2010. The major
reason for the decline was the near exhaustion of the
excess crude oil account from a peak of US$20.44
billion in January 2009 to US$1.99 billion at endOctober 2010. The CBN portion of the external
reserves had also been falling since August 2008 due
to the high demand for foreign exchange.
The report also showed that during the period,
payments to the joint venture partners for cash calls
and
subsidy
deductions
for
the
NNPC
rose
significantly.
Discussion
Members concluded that there was a puzzle to be
unravelled to know why foreign exchange reserves had
been falling, as oil production and prices were
rising.
5.0 Real Sector, Monetary Developments, Financial
Markets, Global Developments and Outlook
The highlights of the Economic Report presented by
the Monetary Policy Department were as follows:
i) Projections by the National Bureau of Statistics
indicated that real Gross Domestic Product (GDP)
would grow by 8.29 per cent in the fourth quarter of
2010 compared with 7.86 per cent in the third
quarter. GDP was projected to grow by 7.85 per cent
in 2010, which would be driven by agriculture,

wholesale/retail trade and services
sectors
with
relative contributions of 2.43, 2.23 and 2.07 per
cent, respectively. The oil sector was projected to
grow
with
the
positive
contribution
of
0.63
percentage point in the fourth quarter as against
0.62 percentage point in the third quarter and 0.64
percentage point in the second quarter. In 2009, the
oil sector contributed 0.14, 0.12 and 0.34 percentage
points to GDP in the fourth, third and second
quarters, respectively.
ii) The National Bureau of Statistics (NBS) data
showed that the year-on-year headline inflation
decreased marginally to 13.4 per cent in October 2010
from 13.6 per cent in September 2010 and 13.7 per
cent in August. However, core inflation rose to 13.2
per cent in October 2010 from 12.8 per cent in
September and 12.4 per cent in August, 2010. Food
inflation fell to 14.1 per cent in October 2010 from
14.6 per cent in September and 15.1 per cent in
August 2010.The report noted that between 2009 and
2010, the volatility in inflation rate had moderated
significantly in response to CBN inflation control
measures
as
well
as
improved
macroeconomic
management. The report, however, cautioned that
factors such as the anticipated injection by the
Asset Management Corporation of Nigeria (AMCON),
expected fiscal injection for 2011 election expenses

as well as rising consumer spending during the end of
the year could pose inflationary threats in the
medium term.
iii) Interest rates in the major segments of the
interbank
market
responded
to
the
increase
in
monetary policy rate (MPR) and liquidity swings
experienced during the review period. As at 15th
November, 2010, interbank and OBB rates stood at
10.56 and 8.23 per cent, respectively, trending above
the MPR. At the end of October and September 2010,
the rates in the interbank market were 8.45 and 3.19
per cent, respectively, while the OBB rates for the
same period were 7.53 and 2.92 per cent.
The average maximum lending rate fell to 21.85 per
cent in October 2010 from 22.20 per cent in September
and 22.31 per cent in August 2010. However, the
average prime lending rate remained at 16.66 per cent
in both October and September 2010, having declined
from 16.89 per cent in August 2010.
The weighted average savings rate declined marginally
to 1.48 per cent in October 2010 from 1.49 per cent
in September 2010. The consolidated deposit rate,
however, rose to 2.31 per cent in October 2010 from
2.07 per cent in September and 2.27 per cent in
August 2010. Thus, the spread between the average
maximum lending rate and the consolidated deposit
rate narrowed marginally to 19.54 per cent in October

2010 from 20.14 per cent in September, 2010.
iv) At the foreign exchange market, the average
demand and sales per auction in October 2010 stood at
$312.95 million and $262.50 million, respectively,
indicating that 83.87 per cent of the demand was met,
compared with the average demand and sales of $439.20
million and $358.60 million in September 2010, which
indicated that 81.65 per cent of the demand was
satisfied. During the period 1st-15th November 2010,
five auctions were held at the wDAS with an average
demand and sales of US$206.23 million and US$168.25
million, respectively or a sales/demand ratio of
81.58 per cent.
On November 15, 2010, the wDAS exchange rate closed
at
an
average
of
N150.29/US$
compared
with
N151.25/US$
in
October
2010,
representing
an
appreciation of N0.96 or 0.64 per cent. In the
interbank segment of the market, the average buying
and
selling
rates
on
November
15,

were
N150.65/US$ and N150.75/US$, respectively, compared
with the rates of N151.68/US$ and N151.78/US$ in
October 2010. At the BDC segment of the foreign
exchange market, the average buying and selling rates
recorded on November 15, 2010 were N151.50/US$ and
N153.50/US$, respectively, compared with the rates
of N151.98/US$ and N153.98/US$ in October 2010. The
premium between the average effective wDAS closing

rate of N151.25/US$ and the average selling rate of
N153.98/US$ also widened at the BDC segment to
N2.73/US$ (1.80 per cent) in October 2010 from
N1.96/US$ (1.30 per cent) recorded in September 2010.
The report noted that there were active movement of
funds between the money and foreign exchange markets,
and tight liquidity conditions in the interbank
market tended to appreciate the naira exchange rate.
The country’s gross external reserves stood at
US$34.27 billion on 15th November, 2010, representing
a decline of US$0.32 billion or 0.93 per cent
compared with US$34.59 billion recorded at endSeptember 2010. The reserve level fell by US$8.2
billion or 19.31 per cent when compared with US$42.47
billion at end-December 2009.
Total foreign exchange inflows in October 2010 was
US$2.38 billion, representing a decline of US$0.32
billion or 11.85 per cent from the US$2.70 billion
recorded in September 2010. Of this inflow, crude
oil/gas revenue was US$2.22 billion or 93.26 per cent
while the other inflows contributed US$0.16 billion
or 6.74 per cent. Total outflows/payments during the
same period amounted to US$3.46 billion, indicating a
decline of US$1.62 billion or 31.89 per cent below
the US$5.08 billion recorded in the preceding month.
Thus, there was a net outflow of US$1.09 billion
during the review period. Inflows from autonomous

sources
such
as
oil
companies,
international
institutions and home remittances in September and
October 2010 amounted to US$7.55 billion and US$10.43
billion,
respectively.
Autonomous
inflows
from
January to October 2010 amounting to US$67.17
billion, helped to augment foreign exchange inflows
from official sources and to stabilize the foreign
exchange market.
v) The retained revenue of the Federal Government in
September 2010 was N177.39 billion compared with an
expenditure of N162.49 billion, resulting in a budget
surplus
of
N14.90
billion
as
against
the
proportionate budget deficit of N222.15 billion for
the month. The actual revenue was lower than the
proportionate monthly revenue of N207.82 billion by
N30.43 billion or 14.64 per cent. Similarly, the
actual expenditure was lower than the proportionate
monthly expenditure of N429.97 billion by N267.50
billion or 62.21 per cent. The cumulative retained
revenue of the Federal Government from January to
September 2010 stood at N1,867.39 billion, which was
lower than the proportionate budget revenue of
N1,870.38 billion for the period by N2.99 billion or
0.16 per cent. The cumulative expenditure of the
Federal Government for the same period was estimated
at
N2,588.55
billion
and
was
lower
than
the
proportionate budget estimate of N3,869.91 billion by

N1,281.36 billion or 33.11
per cent.
The
estimated
deficit resulting from the projected expenditure for
the period (January to September, 2010) was N721.16
billion.
The budget deficit was expected to be financed from
international bonds, signature bonus from oil block
sales and FGN share of excess crude oil account,
among others.
vi) The broad measure of money supply (M2) grew by
4.25 per cent in October 2010, which when annualised,
represented a growth of 5.10 per cent compared with
the indicative benchmark of 29.26 per cent for 2010.
The growth in M2 reflected mainly the substantial
growth in credit to the Government. Aggregate credit
to the economy grew by 19.69 per cent, which
annualised to 23.63 per cent as against the target
credit growth of 55.54 per cent for 2010. Credit to
the private sector grew by 3.22 per cent in October
2010 or 3.86 per cent on annualised basis as against
the benchmark of 31.54 per cent for 2010. Credit to
the core private sector similarly grew by 2.56 per
cent in October 2010, annualizing to 3.07 per cent.
Credit to the government grew substantially by 53.35
per cent in October 2010 or 64.02 per cent on
annualised
basis
compared
with 51.36
per
cent
indicative target for 2010.
The decline in reserve money (RM) observed in most

periods of 2009 continued into the fourth quarter of
2010 and remained below the indicative benchmark.
Reserve money rose by 7.85 per cent to N1,449.95
billion on November 15, 2010 from N1,344.41 billion
as at end-September 2010, but was below the 2010
provisional indicative benchmark of N2,232.44 billion
for the fourth quarter by 39.21 per cent. The reserve
money (RM) forecast from end-November, 2010 to April
2011 indicated that the RM would continue to be below
the
quarterly
indicative
benchmarks
during
the
forecast period.
As at November 15, 2010, the DMBs’ requests for
access to the CBN’s Standing Lending Facility (SLF)
totalled N996.65 billion as against N1,094.62 billion
in October and N73.10 billion in September, 2010.
Patronage of the Standing Deposit Facility (SDF) fell
to N146.65 billion on November 15, 2010 from
N1,117.30 billion in October and N3,826.60 billion in
September
2010,
reflecting
the
tight
liquidity
conditions in the money market.
vii) There was an increase of 9.8 per cent in the All
Share Index (ASI) of the Nigerian Stock Exchange
(NSE) to 25,301 on November 15, 2010 from 23,050.59
at
end-September
2010.
Similarly,
the
market
capitalisation increased by 43.1 per cent to N8.08
trillion on November 15, 2010 from N5.65 trillion at
end-September 2010. During the same period, the

number of deals increased by 21.6 per cent as against
the decline in the volume and value of shares traded
on
the
Exchange
by
38.5
and
62.7
per
cent,
respectively. The increase in the ASI and MC followed
the listing of 15.5 billion shares of Dangote Cement
at N135.00 per share and the supplementary listing of
17.3 billion shares of Unity Bank on the floors of
the Exchange on Tuesday 26 October, 2010.
viii) Developments in the Global Economy
The performance of the global economy was mixed:
• Mild threats of inflation were observed in most
of the countries surveyed;
• Stock prices rose in most countries;
• Exchange rate developments were mixed across
countries with appreciation in internationally
traded currencies and depreciation in most
African currencies;
• All the countries surveyed maintained their
policy rates except Chile, China and Nigeria that
raised their policy rates in response to threats
of inflation;
• Selected indicators for the US economy suggested
a slow-down in economic activities; and
• The global commodities market was affected by
several natural disasters such as severe flooding
in China and Pakistan as well as wild firestorms

in
Russia.
Consequently,
commodity
prices,
especially food grains, trended upwards with the
risk of inflation pass-through from major food
exporters
to
consuming
countries
including
Nigeria.
ix) Outlook for the Future
• Money market rates and other interest rates were
not expected to moderate in the light of excessive
government borrowing and the common year-end for
banks.
• Inflation was not expected to moderate, thus making
the single digit inflation target by the end of the
year unrealisable.
• The growth in M2 would likely improve in the near
term as a result of:
o the sustained implementation of the CBN’s
quantitative easing measures comprising the
N300.0 billion power and aviation sector
intervention fund and the N200.0 billion
restructuring and refinancing fund through the
Bank of Industry (BOI);
o huge electioneering expenditures;
o payment of FGN salary arrears following the
approved new minimum wage to workers;
o increased consumer spending during the yearend festivities; and
o Commencement
of
operations
by
the
Asset
Management Corporation of Nigeria (AMCON).
• Reserve money (RM) forecast for the period between
November 2010 and April 2011 indicated that RM
would
continue
to
be
below
the
indicative

benchmark.
• With the expected resumption of economic growth in
the
world’s
largest
and
emerging
economies,
increased oil demand would keep oil prices above
the revised budget benchmark of $60 a barrel.
Meanwhile, forward oil prices in the New York
Mercantile Exchange were projected to range between
$85.37 and $87.41 a barrel between end-November and
May 2011.
• There was expected marginal increase in non-oil
revenue due to the improved efficiency of tax
collecting agencies.
• Oil
production
might
fall
following
renewed
hostilities in the Niger Delta area.
• Rising domestic debt of government would likely
continue owing to expected shortfall in government
revenue and planned issuance of bonds by the DMO.
• The naira exchange rate would remain stable in the
near term if the liberalised exchange rate policy
was sustained, while foreign exchange inflows from
autonomous sources would continue to increase
towards the end of the year.
• The capital market was expected to resume its
upward trend in the near term following ongoing
sanitisation of the market.
• Confidence in the capital market would return with

the commencement of operations of the AMCON.

Pressure Points and Policy Challenges
c) The report identified the following pressure
points:
• The
continued
underperformance
of
monetary
aggregates, relative to long – term trends;
• inflation
threat
resulting
from
anticipated
liquidity injections; and
• rising interbank interest rates as well as high
but narrowing interest rate spreads.
The challenges for monetary and credit policy in the
near term were identified as:
• providing adequate incentives for banks to lend
to the real sector;
• sustaining exchange rate stability in the face of
declining external reserves; and
• moderating inflationary threats.
6.0 Update on the Implementation of Previous MPC
Decisions
The updates were as follows:
• N200.0 Billion Refinancing/Restructuring Facility:
i.
Of this amount, the sum of N139.199 billion had
already been disbursed through the BOI;
ii. N69.47 billion had been approved for disbursement
as second tranche; and
iii. amendments to the guidelines for the scheme had
been approved.

• Application for Guarantee Certificate to the tune
of N107.5 million, made up of N100.0 million to
First Bank of Nigeria and N7.5 million to the
National Economic Reconstruction Fund (NERFUND) had
been approved under the SME Credit Guarantee
Scheme.
• Resumption of liquidity mop-up through OMO in
September 2010.
Discussion of the Report
The Committee noted that the budget deficit reported
arose
from
huge
government
expenditure
for
subsidizing the consumption of petroleum products,
and the increased wages to federal civil servants,
the loss of revenue through duty waiver on rice
imports, and the joint venture cash calls, among
others. The Members agreed that fiscal discipline and
structural reforms were needed to reduce the huge
budget deficit. On money market rates, it was also
noted that the spread between the open buy back (OBB)
and interbank rates reflected the credit risks in the
industry. Members were, however, informed that the
spike in interest rates in October 2010 arose from
information
and
communications
technology
(ICT)
challenges in the Bank when the Enterprise Resource
Planning (ERP) platform was undergoing upgrades.
Members were informed that preserving the foreign
reserves

of the country had implications for
the economy,
particularly,
as manufacturing inputs, power, food and petroleum
products were largely sourced from imports. In that
regard, the Committee noted the limits of monetary
policy and emphasised the need for reforms in order
to reduce pressure on policy. On the underperformance
of monetary aggregates, it was agreed that the
monetary programme be reviewed, though the reason for
the underperformance was attributed to the nonperformance of fiscal operations. A member observed
that much of the domestic revenue was devoted to
recurrent expenditure which left very little room for
capital projects. Members also recognised that while
Government borrowing would heighten money market
rates, AMCON bonds expected to be issued to the banks
would moderate the rates.
Members noted that the Committee should be observant
of
the development of asset bubbles in the stock market.
The
Chairman
reminded
members
of
the
Bank’s
commitment to price stability, especially as the
numbers that resulted from the revision of the CPI by
the NBS, tended to suggest a heightened inflation
threat. Members noted that the economy was facing an
elevated Government recurrent expenditure as well as
an unreasonably high demand for foreign exchange.

They equally observed that the high demand for
foreign
exchange
was
being
fuelled
by
fiscal
expansion. It was also noted that exchange rate
stability encouraged the inflow of domestic and
foreign investment.

Proposals for Monetary Policy Actions
Scenario 1: Retention of the MPR at 6.25 per cent and
the current interest rate corridor:
The argument in favour of the proposal was that
maintaining the existing monetary policy stance would
sustain market expectations with respect to interest
and exchange rates, thus allowing uninterrupted
implementation
of
approved
policies
and
the
achievement of their objectives.
On the other hand, allowing the existing policy rate
to remain would signal insensitivity to the inflation
threat arising from the various liquidity injections
anticipated towards the end of the year.
Scenario 2: Raise the MPR by 25 basis points with the
current interest rate corridor retained:
The proposal would signal monetary policy tightening
in
response
to
the
prospects
of
heightened
inflationary
pressures
arising
from
anticipated
liquidity injections in the near term. The argument
against the policy action was its potential for
raising lending rates and frustrating the efforts so

far made towards channelling credit to the real
economy. Scenario 3: The MPR should be raised by 25
basis points and interest rate corridor adjusted to
+300/-200 basis points implying SLF rate of 9.5 per
cent and SDF rate of 4.5 per cent.
The adoption of the proposal would signal monetary
tightening and encourage interbank lending. The
downside risk would be that the DMBs might be
encouraged to use the SDF instead of making use of
excess funds available at the interbank market.
The Committee was invited to consider the proposals
as presented.
Discussion of the Proposals for Monetary Policy
Actions
In considering the proposals, the Chairman reminded
members that the Committee could choose to leave the
MPR unchanged, provide easy money to the Government
and meet the foreign exchange demand. The Committee
also could further tighten policy, thereby increasing
the cost of Government borrowing, exert pressure on
interest rates and reduce borrowing. The Chairman
noted that the public debt would have been lower if
the
public
revenue
was
earned
from
taxes
on
components of the GDP such as agriculture, services,
manufacturing and value added tax like what obtains
in other countries. A question was raised as to
whether the shutting down of the Class A BDCs was not

a signal of policy inconsistency. The Chairman stated
that the Class A BDCs were responsible for creating
distortions and speculation in the market giving the
impression of money laundering. A member asked
whether the Class A BDCs could migrate to Class B
BDCs to which the Chairman stated that the more the
Class B BDCs the better, so that members of the
public could easily access them for their foreign
exchange needs.
The meeting ended on Day 1 with a prayer by L.A.
Yuguda, Acting Director of Reserve Management.
DAY 2, 23RD November, 2010
The meeting commenced with a prayer by Suleiman
Barau, Deputy Governor, Corporate Services.
The Chairman reminded the members that they had
agreed that there was need to tighten the monetary
policy stance and that the pursuit of exchange rate
stability would advance the cause of price stability.
He noted that tightening the policy stance without
fiscal discipline would not allow monetary policy to
be effective. Accordingly, tightening monetary policy
could take the form of increasing the MPR or
narrowing the interest rate corridor. He called on
members to present their views before the voting.
Members generally agreed on the need for tightening
monetary policy but were divided on the modalities
for achieving the objective. Some argued that an increase

in the MPR from the current level would not really tame
inflation as no one knew when the 2011 budget would be
passed and the size of the expected fiscal injections.
Considering the impact lag on inflation of an increase in
the MPR, and its likely effect on non-performing loans,
it was agreed that the interest rate corridor should be
returned to symmetry for the meantime while developments
in the economy were watched until the next meeting of the
Committee in January 2011. Moreover, leaving the MPR
unchanged could make credit accessible to the real sector
and allow room for flexibility of action at the January
2011 MPC meeting.
Voting and Decisions of the Meeting
7) After deliberations, the Committee through a majority
decision voted to:
i) retain the Monetary Policy Rate (MPR) at 6.25 per
cent;
ii) adjust the corridor +/- 200 basis points, implying
the Standing Lending Facility (SLF) rate of 8.25 per cent
and Standing Deposit Facility (SDF) rate of 4.25 per
cent;
iii) maintain the policy stance of a stable exchange
rate; and
iv) continue to monitor inflationary trends with a view
to taking appropriate steps as and when necessary.
v) On the stance of monetary policy in the year ahead,
the Committee reaffirmed that monetary policy would seek
to exert pressure on aggregate demand, thereby helping to
lower inflation expectations. In addition, monetary

policy would stand ready to provide adequate and timely
liquidity to support credit dynamics that would sustain
fiscal mechanisms to bolster growth.
Any Other Business
8) The Deputy Governor (Economic Policy) presented a
proposal for the 2011 calendar of MPC meetings. The
proposal sought to shift the dates of the meetings from
the first week to the second or third week of the odd or
even months so that there would be enough time to receive
inflation and GDP data from the NBS. The Chairman noted
that it would be too far to hold the first meeting of the
year in February 2011 and decided that the first meeting
should be held in January 2011.
Date of Next Meeting
9.) The next meeting was scheduled to hold on January 24
and 25, 2011.
Closing
10.) The meeting ended at 12.22 p.m. with a prayer by
S.O. Oni, Director, Banking Supervision Department.
CHAIRMAN
SECRETARY
DATE