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CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 137 OF THE MONETARY POLICY
COMMITTEE MEETING HELD ON MONDAY 26th AND TUESDAY 27th JULY, 2021
The Monetary Policy Committee (MPC) met on the 26th and 27th July, 2021 faced
with cautious optimism for the recovery of both the global and domestic
economies. The performance of the global economy in the first two quarters of
the year had been favourable and is expected to continue for the rest of the
year. There is, however, renewed downside risk to this optimism associated with
the fast spread of new and deadlier strains of the COVID-19 virus. The high rate
of vaccination across the globe seems promising to drive herd immunity to
reduce mortality rates. In the domestic economy, the continued support by
both the monetary and fiscal authorities, is expected to yield favourable
outcomes and hopefully return the economy to a strong recovery path in the
next few quarters. The Committee reviewed the developments in the global
and domestic economic and financial environments over the second quarter
of 2021 and the outlook for the rest of the year.
Nine (9) members of the Committee were in attendance at this meeting.
Global Economic Developments
The Committee noted that while there has been reasonable gains in subduing
the Pandemic, lowering of restrictions and reopening of several economies, the
fast pace of mutation of new and deadlier strains of the virus is posing a
downside risk to the full recovery of the global economy. In addition, the
uneven access of vaccines across several countries is a significant risk to the
attainment of global herd immunity. Despite the above challenges,
governments all over the world have continued to ease restrictions to enable
the recovery of supply chain networks and enhance aggregate demand. The

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expected rebound in global output growth is dependent, therefore, on the
efficient deployment of COVID-19 vaccines with the expectations that the
evolving deadlier strains would be subdued. Even with the current outlook, the
International Monetary Fund (IMF) projects global growth at 6.0 per cent in 2021,
compared with the last projection of 5.5 per cent. In line with this, the
Advanced Economies are projected to grow at 5.1 per cent while the Emerging
Markets and Developing Economies are projected to grow at 6.7 per cent.
Price development across several economies is expected to remain moderate
in the short to medium term with some prospects of a mild uptick. The
Committee further noted the rise in inflation above the long run objectives of
some key Advanced Economies, although reported as transient and therefore
not expected to lead to an adjustment of the stance of monetary policy. There
however, remains the lingering risk of an early return to monetary policy
normalization, should price development continue to trend upwards. Across
several Emerging Market and Developing Economies, inflationary trend was on
average mixed, with some of the economies recording higher rates, compared
with their peers. This was largely due to exchange rate pressures, capital flow
reversals, high energy costs, weak supply chains and poor response to policy
stimulus to combat the macroeconomic slowdown associated with the
Pandemic.
In the global financial markets, the Committee noted the increased demand
for equity securities, an indication of improved investor confidence in the global
recovery. In addition, it observed the progressive weakening of long-term
sovereign bond yields, as the demand for equities pick up. The MPC further
noted the moderation in the price of gold, signaling reduced demand, as
investors return to the financial markets. The unprecedented stimulus provided
by monetary and fiscal authorities to ease the impact of the Pandemic has,
however, heightened the risks of global financial crisis post-Pandemic and calls
for central banks across the globe to remain vigilant, should the need for
sudden policy adjustments arise.

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Domestic Economic Developments
Real Gross Domestic Product (GDP) grew by 0.51 per cent in the first quarter of
2021, compared with 0.11 per cent in the preceding quarter. In the non-oil
sector, Agriculture and Industry sub-sectors, were the major drivers of growth,
with growth rates of 2.28 and 0.94 per cent, respectively. The oil sector, year-on
year, contracted by -2.21 per cent in first quarter of 2021, compared with -19.76
per cent in the previous quarter. The weak performance in the oil sector was
attributed to several factors, including the declining quality of oil infrastructure,
lack of new investment in the sector and the need to comply with the OPEC+
production quota.
The Committee noted that the Manufacturing Purchasing Managers’ Index
(PMI), improved to 46.6 index points in July 2021, compared with 45.5 index
points in June 2021. Though it remained below the 50-index point mark, the
improvement is an indication of gradual recovery of output growth in the
economy. The Non-Manufacturing Purchasing Managers’ Index (PMI) also
increased to 44.8 index points in July 2021, compared with 43.0 index points in
June 2021.
The employment level index for July 2021 stood at 46.5 index points, relative to
the preceding month’s figure of 45.0, but, remained below the 50.0-index point
threshold. The Committee welcomed the sustained monetary and fiscal stimulus
to revamp the domestic economy and hoped that the distribution of vaccines
to subdue the Pandemic will continue unabated.
The Committee noted the continued moderation in headline inflation (year-onyear) to 17.75 per cent in June 2021 from 17.93 per cent in May 2021, the third
consecutive month of decline. The decrease was attributed to a marginal
decline in both the food and core components to 21.72 and 13.09 per cent in
June 2021 from 22.28 and 13.15 per cent in May 2021, respectively. The MPC
noted that, though, headline inflation remained well above the ceiling of the
Central Bank’s 6-9 per cent corridor, it expressed optimism that the current

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interventions by the Bank in various sectors of the economy will further depress
inflationary pressure as output growth improves and the negative output gap
closes.
On the performance of monetary aggregates, the Committee noted that
broad money supply (M3) declined to 2.02 per cent in June 2021, compared
with 2.99 per cent in May 2021. This development was largely driven by a
slowdown in the growth rate of Net Domestic Assets (NDA) and Net Foreign
Assets (NFA). Net Foreign Assets contracted by 3.65 per cent due to the
contraction of foreign asset holdings of the central bank, as well as non-interest,
primary mortgage, and microfinance banks. The marginal decline in Net
Domestic Assets reflected the slowdown in aggregate credit net, which
decreased to 4.30 per cent in June 2021, from 4.79 per cent in May 2021.
Accordingly, aggregate credit at end-May 2021 stood at N24.23 trillion,
compared with N22.68 trillion at end-December 2020. This represents a year-todate increase of N1.55 trillion.
Under the Bank’s development finance initiatives, the Bank granted N756.51
billion to 3,734,938 small holder farmers cultivating 4.6 million hectares of land,
of which N120.24 billion was extended for the 2021 Wet Season to 627,051
farmers for 847,484 hectares of land, under the Anchor Borrowers’ Programme
(ABP); for the Agribusiness/Small and Medium Enterprise Investment Scheme
(AGSMEIS), the sum of N121.57 billion was disbursed to 32,617 beneficiaries; and
for the Targeted Credit Facility (TCF), N318.17 billion was released to 679,422
beneficiaries, comprising 572,189 households and 107,233 Small and Medium
Scale Enterprises (SMEs).
Under the National Youth Investment Fund (NYIF), the Bank released N3.0 billion
to 7,057 beneficiaries, of which 4,411 were individuals and 2,646 SMEs. Under the
Creative Industry Financing Initiative (CIFI), N3.22 billion was disbursed to 356
beneficiaries
across
movie
production,
movie
distribution,
software
development, fashion, and IT verticals.

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Under the N1.0 trillion Real Sector Facility, the Bank released N923.41 billion to
251 real sector projects, of which 87 were in light manufacturing, 40 in
agrobased industry, 32 in services and 11 in mining. On the N100 billion
Healthcare Sector Intervention Facility (HSIF), N98.41 billion was disbursed for 103
health care projects, of which, 26 are pharmaceuticals and 77 are in the hospital
services. Similarly, the sum of N232.54 million was disbursed to 5 beneficiaries
under the CBN Healthcare Sector Research and Development Intervention
(Grant) Scheme (HSRDIS) for the development of testing kits and devices for
Covid-19 and Lassa Fever.
On the National Mass Metering Programme (NMMP), N36.04 billion was disbursed
to 17 Meter Asset Providers, to nine (9) DisCos, for the procurement and
installation of 657,562 electricity meters. On the Nigerian Electricity Market
Stabilization Facility - 2 (NEMSF-2), the CBN released N120.29 billion to 11 DisCos,
to provide liquidity support and stimulate critical infrastructure investment
needed to improve service delivery and collection efficiency.
On money market development, the net liquidity position and interest rates in
the economy reflected the impact of the Bank’s liquidity management
operations. Accordingly, the monthly weighted average Inter-bank Call and
Open Buy Back (OBB) rates rose to 16.87 and 16.39 per cent in June 2021 from
15.95 and 16.18 per cent in May 2021, respectively.
The Committee noted the weak performance of the equities market despite the
recent increasing patronage by domestic investors. The All-Share Index (ASI)
decreased by 1.28 per cent to 37,947.18 on July 16, 2021, from 38,437.88 on May
31, 2021. Similarly, Market Capitalization (MC) decreased by 1.30 per cent to
N19.77 trillion on July 16, 2021, from N20.03 trillion on May 31, 2021.
The MPC noted that the Capital Adequacy Ratio (CAR) and the Liquidity Ratio
(LR) both remained above their prudential limits at 15.5 and 41.3 per cent,
respectively. The Non-Performing Loans ratio (NPLs) at 5.70 per cent in June 2021
showed progressive improvement, compared with 6.4 per cent in June 2020. The

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Committee, however, urged the Bank to sustain its tight prudential regime to
bring Non-Performing Loans (NPLs) below the 5.0 per cent prudential
benchmark.
The Committee noted the marginal increase in the external reserves which rose
to $33.83 billion on 22nd July 2021 from US$32.78 billion as at 30th June 2021.
Outlook
The overall outlook for both the global and domestic economies, remain
clouded with downside risks despite the upbeat forecast for a speedy recovery.
These risks include lingering uncertainties surrounding the path to the
termination of the Pandemic, as new and deadlier strains of the virus continue
to pose a significant threat to the efficacy of the COVID-19 vaccines. In
addition, the uneven access to the vaccines across the globe is undermining
the realization of the current forecast.
Capital flows to emerging market economies, remain uncertain as the pace of
price development in the advanced economies pick up. While the US Federal
Reserve Bank and other major central banks have given indications that the
current rise in inflation is transitory, and may not require policy adjustment,
inflation is confronted with a significant upside risk. This may result in an early
return to monetary policy normalization, with adverse consequences for
financial system stability.
Available data and forecasts for key macroeconomic variables for the Nigerian
economy suggest a broad improvement for the rest of the year. This is hinged
on continued progress with the containment of the Pandemic, as well as
ongoing monetary and fiscal support. As a result, the Nigerian economy is
forecast to grow in 2021 by 3.15 per cent (CBN), 3.0 per cent (FGN) and 2.5 per
cent (IMF).

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The Committee’s Considerations
The Committee noted the gradual recovery in output growth following positive
growth in the first quarter and improving PMI in subsequent months, expressing
confidence that the second quarter output result will show further
improvement.
The MPC carefully accessed the options confronting it in the short to medium
term, analysing the downside risks to growth and upside risks to inflation. It
commended the continued effort by both the monetary and fiscal authorities
as well as public health agencies in stemming the Pandemic and its impact,
thus, returning the economy to a path of recovery. While the economy has
been gradually reopening, Members noted that the Pandemic was far from
over and therefore continued to hinder the recovery. It thus, urged the
Presidential Task Force on COVID-19 to intensify efforts towards procurement of
more vaccines to ensure that herd immunity is achieved in Nigeria.
The MPC was concerned about the broad level of insecurity across the country,
noting its impact on business confidence and overall economic activities. It
noted the persisting insecurity in key commodity producing areas and urged
the Federal Government to intensify security surveillance in farming
communities to ensure uninterrupted farming activities. Committee members
expressed optimism about the likely moderating impact of the forthcoming
harvests on food prices, as this would contribute to the ongoing broad
reduction in headline inflation. The CBN will continue to release maize from its
strategic maize reserve directly to feed-millers as part of its strategic response
to address rising food prices and moderate the price of maize across the
country.
Members further noted the contribution of poor infrastructure to rising domestic
price levels, re-iterating their call to the Federal Government to prioritize
investment in public infrastructure such as improved transportation networks,
power supply and telecommunication facilities. Funding for such projects, the
Committee noted, could be sourced through Public-Private-Partnerships, as

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well as the issuance of diaspora bonds. It emphasized the complementary role
these bonds would play to boost foreign exchange supply, improving accretion
to reserves and easing the exchange rate pressure.
Notwithstanding, the moderate decline in market indices, the Committee
noted that the equities market remained in a good place, indicating sustained
investor confidence in the Nigerian economy.
The MPC applauded the continued resilience of the banking system in the face
of severe shocks to both the domestic and global economies. Members noted
Management’s effort in maintaining a reasonably low level of non-performing
loans ratio, even though aggregate credit moderated slightly. The Committee
encourages Nigerian banks to extend more credit to consumers and firms to
enhance consumption and production activities necessary to strengthen the
recovery.
Committee members noted the persistent reduction in remittance of oil
revenue to the Consolidated Revenue Fund, stemming largely from rising levels
of cost under-recovery and other obligations, particularly to Joint Venture
Contracts. The Committee thus, urged the Government to continue to explore
additional sources of non-oil revenue, as this would reduce the over
dependence on a single revenue source.
Members applauded the efforts by the Federal Government to encourage the
use of gas in motor vehicles and the payment for conversion of 1 million
Premium Motor Spirit (PMS)-driven vehicles to gas-driven, to reduce overall cost
of PMS consumption. The Committee encouraged the participation of private
sector initiatives to develop and expand modular refineries while it frowns at
cross-border smuggling of PMS.
The Committee also noted the increased contribution of the non-oil sector to
Government revenue in recent times which reflected the gradual diversification
of the economy and reduce reliance on crude oil export proceeds and called
for increased support for the non-oil sector in the country.

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Overall, Members were confident that the Bank was taking the right steps
toward the restoration of macroeconomic stability, while noting the downside
risks to growth and the upside risks to price developments.
The Committee’s Decision
At this meeting, the MPC was delighted that inflation had begun to trend
downwards, while output growth had remained positive. Committee, however,
was of the opinion that there was a need to continue to put in place policy
measures that will further and faster drive down inflation, while at the same time
accelerate output growth to levels above population growth rate. Whereas,
the arsenal at its disposal had almost become fully exhausted, MPC believe that
there is the need to continue to use those tools that had been adopted so far,
even in a more aggressive manner. MPC, therefore, encourage the Bank to
continue using its existing administrative methods to rein-in inflation by the use
of its discretionary CRR policy to mop-up liquidity from the banking system as
the need arises.
The Committee also encouraged the Bank to continue the use of its intervention
mechanism to deploy funds to output-stimulating and employment-generating
sectors of the economy, such as, the Targeted Credit Facility, AGSMEIS,
Agriculture and Manufacturing.
In the Committee’s view, the current situation, neither gives room for tightening,
as this will hurt output growth, nor, loosening, as this will exacerbate inflationary
pressures.
On tightening, MPC feels that whereas this will limit excess liquidity available to
attack the foreign exchange market, it nevertheless feels that tightening will
reduce money supply and thus, inhibits the ability of Deposit Money Banks
(DMBs) to create credit that is needed to stimulate manufacturing output which
could also help to moderate prices.
On loosening, whereas MPC feels this should transmit into lower market interest
rates which could improve the ability of obligors to repay their loans and reduce

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NPLs, it nevertheless feels loosening would not only exacerbate inflationary
pressure, but this would increase negative real rate of return and discourage
investments in the domestic economy.
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; and IV. Retain the Liquidity Ratio at 30 per
cent.
Thank you.
Godwin I. Emefiele
Governor, Central Bank of Nigeria
27th July 2021

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PERSONAL STATEMENTS BY THE MONETARY POLICY COMMITTEE MEMBERS
1. ADAMU, EDWARD LAMETEK
Global economic recovery prospects remain strong despite the third wave of
the COVID-19 pandemic as most countries have learned better ways of coping
with the Pandemic. In contrast to the initial approach anchored on lockdowns
and movement restrictions, current responses are generally more activity
friendly. Mass vaccination has increased resilience to the pandemic in the
advanced economies, where economic recovery prospects are currently much
brighter.

Current projections point to a phenomenal global output recovery in 2021 even
as concerns are getting louder about the unevenness of the recovery outlook.
In June 2021, the World Bank echoed this concern despite raising its global
growth projection to 5.6 per cent for 2021. Earlier in April 2021, the International
Monetary Fund (IMF) had expressed the same concern alongside a projection
of 6.0 per cent global growth in 2021. The Fund left this global projection
unchanged in the July 2021 update of the World Economic Outlook (WEO). The
Organization for Economic Co-operation and Development (OECD) stands by
its May 2021 projection of 5.8 per cent global growth, amidst concerns about
uneven recovery. These projections are generally stronger than envisaged
earlier in the year and reflect sustained (large) fiscal and monetary support in
many countries, substantial progress with vaccination in the advanced
economies, continuing adaptation of economic activity to the COVID-19
environment globally and a booming merchandise trade.

In the views of the World Bank (June 2021), many developing countries would
continue to struggle with the pandemic’s lasting effects, while the U.S. and
China are expected to lead recovery in advanced economies and emerging
economies, respectively. As a group, the Emerging Markets and Developing
Economies (EMDEs) is projected to expand by about 6 per cent in 2021 with
China leading the cluster with about 8.0 per cent growth in the year. The World
Bank and the IMF project Nigeria’s growth for 2021 at 1.8 and 2.5 per cent,
respectively. Both projections place Nigeria on the side of countries likely to drag
world output in 2021.

I see five (5) key factors underpinning the projected huge divergencies in
economic recovery across countries. They are vaccination, pick-up in
merchandise trade (pharmaceuticals, medical supplies and IT materials
especially), fiscal support and monetary accommodation as well as initial

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conditions. These factors largely explain why the U.S could attain about 7.0 per
cent growth and China’s 8.0 per cent in 2021. On the flip side, these same factors
explain why economic growth in many developing countries may not be so
robust in 2021. These countries are unable to make rapid progress with COVID19 vaccination. They mainly export primary commodities with demand and
prices unstable generally, and are heavy importers of pharmaceuticals, medical
supplies and IT materials. Most of them have little fiscal space and limited room
for further monetary maneuvers.

Although global inflation is trending upwards, reflecting rising commodity prices,
pent-up demand and the general COVID-19-related supply shocks, central
banks and fiscal authorities around the world have continued with injections to
further spur economic activity. This is understandable since much of the current
consumer price pressures appear to be transitory. I believe this to be largely the
case with the current inflation pressures in Nigeria. As such, at the July meeting
of the Monetary Policy Committee (MPC), I voted to retain all policy parameters
despite the inflationary pressure. Other considerations that informed my decision
at that meeting of the Committee are discussed in the rest of this statement.

First, at 17.75 per cent, headline inflation continued to slow in June 2021,
reflecting moderation in both food and core consumer price inflation, year-onyear. Food inflation trended downwards from 22.28 per cent in May to 21.83 per
cent in June 2021. Similarly, core inflation moderated to 13.09 per cent from 13.15
per cent in May. Even though these numbers are considerably high given the
Bank’s single digit policy-reference rate, the short-to medium-term outlook
indicates continuing moderation owing to factors including base effect,
seasonality and more crucially the routine sterilization actions of the CBN. On
account of sustained sterilization, the averages for both inter-bank call and
open-buy-back rates rose to 16.6 and 16.7 per cent, respectively, in June 2021,
from 10.1 and 12.6 per cent in March. In effect, the economy’s underlying
monetary conditions are already tightening and should therefore forestall any
likely inflation inducement from system liquidity.

Second, in the absence of Q2 GDP, the clearest indications of economic activity
are from leading indices like the purchasing managers index (PMI), industrial
production, energy consumption, etc. In June, the manufacturing and nonmanufacturing PMIs were below 50 points at 45.5 and 43.0 points, respectively,
reflecting high production costs and other structural constraints. Meanwhile the
indexes of industrial production and manufacturing production rose only mildly
in Q2,2021. And so, against the background of a weak real GDP growth of 0.51
per cent in Q1 2021, and some of the current forecasts for 2021, economic

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activity remains a major policy priority. The risks to growth, in my view are more
to the downside. The third wave of COVID-19 poses a serious threat to countries
with low vaccination coverage including Nigeria.

Third, the aftereffects of previous episodes of the pandemic have continued to
linger. In July, the manufacturing and non-manufacturing PMIs were also below
50 points at 46.6 and 44.8 points, respectively. Downside risks to economic
growth in the short-term include insecurity and high production costs (energy,
transportation and security costs). With these in mind, I would argue that more
fiscal and monetary support would be required to increase the pace of
domestic economic recovery in the rest of the year. This does not require any
changes to the monetary policy parameters. Instead, current actions which are
largely administrative should be sustained and possibly deepened. To be clear,
these actions have included the innovations around the cash reserves
requirement (CRR), the minimum loan-to-deposit ratio (LDR) as well as the
development finance interventions.

On account of the extant administrative actions, credit to the private sector has
grown phenomenally in both volume and size. Total credit increased to N22.04
trillion at end-June 2021, from N20.48 trillion at end-December 2020. Meanwhile,
the outlook for credit to the real sector continues to be good in view of the
soundness and stability of the banking system. It is comforting to note that the
major financial soundness indicators (FSIs) have continued to be strong. In June,
industry capital adequacy ratio (CAR) stood at 15.50 per cent and the nonperforming loans (NPLs) ratio decreased to 5.7 per cent from 5.9 per cent in April
2021, indicating some improvement in the quality of risk assets. Likewise, industry
liquidity ratio (LR) increased to 41.3 per cent in June 2021 from 38.9 per cent in
April 2021. This is above the minimum liquidity ratio of 30 per cent for commercial
banks and 20 per cent for merchant banks.

Lastly, the global economic environment continues to harbour some uncertainty
with important implications for Nigeria’s domestic economic policy. Although
the global growth prospects are strong, there are downside risks which cannot
be wished away. The third wave of COVID-19 pandemic continues to pose a
major threat so long as vaccine access remains poor in developing and some
emerging economies. Commodity price instability is also a concern for both
producers and consumers. For producers, particularly developing countries,
government budgets are at risk; while for big consumers, commodity price
instability could stoke inflation expectation and make monetary policy less
effective. There is also some instability in financial markets across the globe
owing mainly to the new variants of the COVID-19 virus and tightening financial

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conditions. These vulnerabilities cast shadow on the global growth outlook and
on the promise of recovery in emerging and developing countries especially. In
the circumstance, domestic economic policy must assume a cautious tone.

Monetary policy at this time must in the minimum preserve the recovery gains so
far. The current strategy of leveraging monetary sterilization does exactly that by
ensuring optimal liquidity. In response to that, real interest rates have started to
rise. This has worked well with rising crude oil prices and the “Naira for dollar
Scheme” to improve foreign exchange flow to the economy. In my view, extant
policies are working and should be allowed to fully evolve in terms of impact.
On this note, at the July 2021 MPC meeting, I voted to retain all the policy
parameters at their previous levels.
In effect, I voted to:
I.
Retain the MPR at 11.5 per cent;
II.
Retain the Asymmetric corridor at +100/-700 basis points around the
MPR;
III.
Retain the CRR at 27.5 per cent; and
IV.
Retain the Liquidity Ratio at 30.0 per cent.

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2. ADENIKINJU, ADEOLA FESTUS
International Economic Developments
The global economy is recovering fast. Global growth momentum has
strengthened on the back of continuous policy support by monetary and fiscal
authorities, growing vaccine coverage and relaxations of restrictions on
movement of persons and goods within and across international borders. Both
the USA and China, two countries critical to global economic growth, are
currently experiencing impressive growth performance. Global commodity
demand is rising, leading to a rise in commodity prices, including oil prices.
Global Purchasing Manager index, PMI stood at 56.6 in June 2021. There is very
strong likelihood that current accommodating policies in advanced economies,
may not be quickly wind down in the near term, despite the rising inflation in
these economies.
However, headwinds to global economy recovery remains, including rising
inflation, high debt/GDP ratio, vaccination hesitancy and vaccination inequality
between the poor and rich countries. The rapid pace of new COVID-19 variants,
including the delta, now present in over 104 countries, is causing some countries
to reverse or pause the pace of opening of all sectors of their economies.
Domestic Economic Developments
Presentations by Bank Staff on Real Sector Development shows a mixed state of
the domestic economy. While the Nigerian economy expanded by 0.51% in
2021Q1, driven largely by growth in the agriculture and industry sectors, the
largest sector of the economy, the services sector, declined. While inflation is
decelerating, its level is still unacceptably high, the naira is under significant
pressures in the foreign exchange market, and net accretion to foreign reserves
is negligible. There are twin deficits in the trade and current accounts, although,
both narrowed in June 2021.
Manufacturing PMI improved to 46.6 points but was below the 50 index points,
while non-Manufacturing PMI stood at 44.8 points. Overall business outlook of
the macroeconomy in the next 3 to 6 months is rising. There is mixed outcome
from the oil sector: crude oil prices are above benchmark price; however, crude
oil production and exports are below their respective benchmark values.
The naira exchange rage depreciated in both the I&E and the BDC windows.
The BDC accounted for 15.6% of foreign exchange outflows, second only to SMIS
interventions. External reserves rose from US$32.78 billion to US$33.70 billion in
June 2021. Bank Staff forecasts show that inflation is expected to moderate in

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the 3rd and 4th quarters of 2021, and real GDP to grow at about 2.82% by end of
2021. Headline inflation, food inflation and core inflation decelerated in the
month of June 2021. Headline inflation moderated to 17.75% in June 2021, from
17.93% in May 2021.
Presentation by Bank Staff on the Banking System Stability shows that the
financial soundness indicators are all trending in the right direction. The banking
system remains strong, resilient, and sound. Capital Adequacy Ratio at 15.5%, is
slightly above the prudential requirement of 15%; Non-Performing Loans Ratio is
5.7%, in June 2021, down from 5.8% in May 2021. This is driven largely by the
implementation of the GSI policy and strengthening of risk management
practices. Liquidity Ratio as of June 2021 stood at 41.3%, clearly above the
prudential requirement above 30%. Total assets of the banking industry rose to
N53.64 trillion in June 2021, up from N47.82 trillion in June 2020. Similarly, total
deposits rose from N28.42 trillion to N33.85 trillion year on year. Total credit also
rose from N18.90 trillion in June 2020 to N22.04 trillion in June 2021, signaling that
the LDR policy of the CBN is working.
The credit expansion to all the sectors of the economy, in particular
manufacturing, oil and gas and general commerce is good for the economy.
The CBN intervention funds are delivering on their mandate and boosting credits
to the MSMEs and households’ credits. Personal and households’ loans are rising
after declining in 2020. Development finance interventions rose by 39.33% to
N326,22 billion in May/June from N234.14 billion in Mar/Apr 2021. However, the
credit market in the formal banking is tightening as interest rate bands is
narrowing. Lending rates increased relative to the saving rate, thus widening the
interest rate spread. This is reflective of increased risks and inflationary
considerations of the Deposit Money Banks. (DMBs). The liquidity conditions in
the economy remain tight due to open market operations, CRR debits and
revenue remittances by government agencies.
Fiscal operations remain precarious. In April 2021, deficit fiscal operations stood
at N3.2 trillion, and 70.8% of expenditure is in deficit. M3 grew by 2.02% month on
month in June 2021 driven largely by growth in Net Domestic Assets (NDA) and
contraction in Net Foreign Assets (NFA). The latter is caused by decrease in
foreign asset holdings of domestic banking system. The persistence of insecurity
in major food producing areas is increasingly impacting food supply and prices.
My Consideration
Despite the positive real GDP growth and deceleration of inflation, key
challenges remain. First, economic recovery remains very weak and fragile. In
the services sector, trade recorded negative growth. This sector is critical to

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poverty reduction and gender equality. Second, inflation is still unacceptably
high, affecting consumers welfare. Third, the state of the fiscal account is very
worrisome. There is continuous underperformance of government revenue
relative to the budgeted values, affecting capacity of governments at all levels
to deliver on government promises and revving up deficits and public debts to
worrisome levels.
In my view, one way to address the challenging government revenue, high fiscal
deficit and inflation induced through the mechanisms for financing the deficit is
for government to develop a framework for winding down the unsustainable
petroleum subsidy regime which has negatively affected government fiscal
space, accretion to foreign reserves, put pressure on the naira exchange rate
and hinder the development of the downstream sector. The subsidy on petrol is
no longer sustainable and its retention is difficult to justify under the current
economic climate.
The passage of the PIB is likely to be beneficial to the economy, attracts
investment to the oil and gas sector and facilitate employment and growth.
Hence, the National Assembly must quickly resolve the current impasse and
ensure that it is sent to the President for his assent. No matter its shortcomings,
the PIB will enhance the efficiency of the sector, streamline regulatory
framework, removes the cloud of uncertainty around the fiscal regime, facilitate
development of the gas sector, improve on the present state of the oil
producing host communities and improve the performance of the national oil
company.
The present state of the economy justifies the continuation of the CBN
intervention programme. The rise in unemployment rate to 33.3% in 2020Q4 from
27.1% in 2020Q2, especially among the youths and the negative per capita
income growth justifies continuous unconventional support for the Government.
While it is true that aggregate credit in the economy is expanding, it is important
to link the credit expansion to sectors that are most likely to drive employment
growth and poverty reduction.
In addition, both the monetary and fiscal authorities must explore ways to
diversify and expand sources of foreign exchange to the economy, including
through the diaspora bonds, support for non-oil exports sectors, reduce the
constraints to exports, reorientate agencies link to the export sector to promote
export competitiveness of the Nigerian products.
We must also explore ways to derisk the economy, encourage credit expansion
by addressing issues like land titling, and challenges to foreclosures, insecurity
are inhibitors to ease of doing business in the economy.

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My Vote
The recovery is still very tenuous, and it is not yet time to effect any change in
the current monetary policy stance. I cast my vote to maintain all monetary
parameters at their extant values:
i)
Keep MPR at 11. 5%
ii)
Retain CRR at 27.5%
iii)
Maintain Liquidity ratio at 30%
iv)
Retain asymmetric corridor around the MPR of -700/+100 bases points.

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3. AHMAD, AISHAH N.
The July MPC meeting held against the backdrop of continued optimism of a
strengthened global recovery. Global trade maintained a faster than expected
rebound, gradually attaining pre-pandemic levels. Growth continues to be
propelled by sustained implementation of significant monetary and fiscal stimuli,
success with vaccine administration in advanced economies, adaptation of
economic activity to the ‘new normal’ and the significant improvement in trade.
This positive expectation is reflected in the IMF global growth forecast of 6.0 per
cent in 2021 compared with its earlier forecast of 5.5 per cent in its April WEO
report (from a contraction of 3.3 per cent in 2020).
Uptick in inflation was observed in some key advanced economies as they
approach their long run benchmarks due to base effects and burgeoning
demand from resumption of economic activities. Although central banks in
some advanced countries have provided forward guidance on possible
monetary policy normalization in the medium term, the global policy stance
remains generally accommodative with a key focus on supporting strong output
growth. On balance, the global economy is set for a strong rebound in 2021.
Notwithstanding, emergence of new vaccine resistant strains of the corona virus
(such as the delta variant), spikes in new cases, deaths and the introduction of
new restrictions in several countries portend downside risks to global output
growth projections.
Domestic economic developments also signal steady recovery. Real GDP
growth of 0.51 per cent was recorded in Q1, 2021 compared with 0.11 per cent
in the preceding quarter as a result of improvement in economic activities,
driven largely by the Agriculture and Industry sub-sectors which grew by 2.28
and 0.94 per cent, respectively, in Q1, 2021. Output gap though still negative
also narrowed in Q1, 2021 relative to Q4, 2020 from -2.3 per cent to -2.0 per
cent. Manufacturing PMI and Employment PMIs both rose by 1.6 points and 2.4
points to 45.5 and 45.0, respectively, in June 2021 relative to May 2021 due to
increased efficiency in suppliers’ delivery time and uptick in economic activities.
Whilst the growth outlook for the domestic economy is optimistic, output growth
remains fragile, given that Manufacturing PMI and Employment PMIs were both
below the 50.0 points benchmark and GDP growth below Nigeria’s long-term
population growth rate. Continued rigorous implementation of the Economic
Sustainability Plan (ESP) and interventions in critical economic sectors is required
to drive a more lasting and inclusive growth.
Domestic price developments continued to be positive as headline inflation
(year-on-year) moderated for the third consecutive month to 17.75 per cent in

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June 2021 from 17.93 per cent in May 2021, driven majorly by deceleration of
food and core components of inflation by 0.21 and 0.05 per cent to 21.72 and
13.09 per cent in June 2021, respectively. The Bank’s development finance
interventions in critical sectors which increased by 39.33 per cent from N234.14
billion in May 2021 to N326.22 billion in July 2021 boosted supply and contributed
somewhat to the moderation being witnessed in domestic prices. Although
inflation remains on a downward trend, it remains far above the 6-9 per cent
inflation threshold of the Bank, thus requiring concerted efforts to address
structural factors (security, infrastructure, and logistics arrangements) driving
domestic price developments.
External sector developments also mirrored the gradual recovery in economic
activities over the first two quarters of 2021. Foreign Portfolio Investments (FPIs)
rose by US$0.21 billion, from US$0.16 billion in May 2021 to US$0.37 billion in June
2021 signifying increasing confidence in the Nigerian economy. Diaspora
remittances also increased to US$4.29 billion in Q1, 2021 from US$ 4.09 billion in
Q4, 2020 because of CBN’s exchange rate management policy measures.
External Reserves increased marginally to US$33.70 billion as of July 14, 2021, from
$32.78 billion at end-June 2021 partly reflecting positive developments in
international crude oil market whilst relative stability was also maintained in the I
& E segment of the foreign exchange market between June and July 2021. With
the Committee’s decision to discontinue weekly FX sales to Bureau de Change
operators, more stability and transparency is expected in the FX market. The
Bank is thus advised to sustain the implementation of policy measures aimed at
sanitizing the FX market and also vigorously enforce FX regulations to ensure that
all legitimate demands for FX are met.
The banking sector remains resilient with strong fundamentals. The banking
industry continued to post strong growth with total assets increasing by N5.82
trillion or 12.17 per cent between June 2020 and June 2021. Financial Soundness
Indicators were also robust and significantly met minimum regulatory
requirements - Non-Performing Loans (NPLs) ratio declined further to 5.7 per cent
in June 2021, 10 bps lower than the rate recorded in the previous month, while
capital adequacy and liquidity ratios remained robust at 15.5 and 41.3 per cent,
respectively, in June 2021.
Increased credit to growth enhancing sectors of the economy such as
agriculture, manufacturing and general commerce helped support output
recovery recorded in the domestic economy. Total credit increased by N3.14
trillion from N18.90 trillion to N22.04 trillion between end-June 2020 and end-July
2021 due largely to increase in level of funding and the CBN’s Loans to Deposit
Ratio (LDR) policy. Whilst noting the satisfactory performance of the financial

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system, the Bank must remain vigilant and proactively manage operational,
asset quality and other risks to financial system stability, especially with the
lingering impact of the COVID-19 pandemic. The Bank is also advised to
increasingly consider Environmental, Social and Governance risk factors and
ensure their integration into its policy tool kit given recent unprecedented
extreme weather conditions and frequent natural disasters being witnessed
across the globe.
Policy consideration
Broadly, the global economy has made a sharp rebound while the domestic
economy is slowly recovering from the effects of the pandemic amidst some
downside risks. Sustained efforts at procuring and administering the COVID-19
vaccines to build herd immunity to the virus, alongside accelerated
implementation of CBN’s targeted credit interventions to businesses and
households are critical to strengthening the macroeconomic gains being
recorded.
In consideration of the current and expected macroeconomic developments
highlighted above, it is safe to say that ongoing policy actions are yielding
expected results – the economy is gradually exiting stagflation with inflation
trending downwards whilst output growth trajectory is positive.
I am convinced that maintaining the current monetary policy stance to allow
measures being implemented to further permeate the economy is appropriate
in the present circumstance.
Thus, I vote to retain;
• MPR at 11.50 per cent;
• Asymmetric corridor of +100/-700 basis points around the MPR
• Cash Reserve Ratio (CRR) at 27.5 per cent; and
• Liquidity Ratio (LR) at 30.0 per cent.

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4. ALIYU, AHMED
INTERNATIONAL AND DOMESTIC ECONOMIC DEVELOPMENTS
The global economy continues to witness a two-track recovery following
observed disparity in COVID-19 vaccine distribution. While the Advanced
Economies are beginning to plan towards ending monetary stimulus by year
end, indicating a return to normalcy, as vaccine administration become
widespread, the Emerging Markets and Developing Economies (EMDEs) require
more monetary and fiscal support to strengthen economic recovery. Even for
the Advanced Economies, economic growth outlook remains uncertain as new
infections arising from deadlier strains of the virus present downside risk to
recovery.
The IMF in light of the diverging outcomes has revised upwards the growth
forecast for Advanced Economies and lowered growth prospects for EMDEs,
even though it retained its overall global growth forecast at 6.0 per cent in 2021
and 4.4 per cent in 2022. Similarly, the World Bank predicts the global economy
to grow by 5.6 per cent in 2021.
On global price developments, inflation in many Advanced Economies have
continued to rise, amidst narrowing output gap, with the US and the UK already
in breach of the 2.0 per cent long-run target. However, the development
appears to be transitory as it is expected that inflation would return to its prepandemic levels by year end. Inflation was largely driven by base effects due to
low price levels in 2020, increases in energy prices and temporary supplydemand disparities. For the EMDEs, inflation, which was the result of the build-up
of exchange rate pressure and, in part, high food prices, remain high for most
countries, thus constraining central banks from lowering policy rates.
World trade continues to rebound, increasing by 10.0 per cent (y-o-y) and 4.0
per cent (q-o-q). Trade has benefitted from strong monetary and fiscal policy
support, including the extensive vaccination in the Advanced Economies. The
World Bank projected global trade to grow at 8.3 per cent in 2021 and 6.3 per
cent in 2022, reflecting the responsiveness of trade to the re-opening of the
global economy, even though its realization will depend largely on the
suppression of the spread of the virus by different countries.
Crude oil prices remain positive, reaching a 2-year high of US$70 per barrel in
June 2021. The rise in oil prices, signals improved demand as industrial production
picks-up, amidst the stalemate in negotiations amongst OPEC+ countries.
Indeed, global industrial production is shown to have surpassed the prepandemic level and is moving rapidly upwards.

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Global debt levels are still rising, despite growing concerns around debt
sustainability including debt service to revenue ratio. With EMDEs government
debt levels up by 15 per cent since end-2019 and revenues affected by the
Pandemic, debt service remains a burden for many countries in the region. It is
noted that constrained economies require unhindered access to international
finance, to boost reserves, ease liquidity constraints and develop critical
infrastructure necessary to induce growth and create jobs.
On the domestic side, the economy grew by 0.51 per cent in Q1 2021 from 0.11
per cent in Q4 2020. The main drivers of growth included Agriculture and Industry
sectors by 2.28 and 0.94 per cent, respectively, while Services contracted by -
0.39 per cent. As fragile as it may appear, there are indications that growth
would maintain the current upward path through the remaining quarters of 2020,
as economic activities expand, given the sustained fiscal and monetary stimulus,
and the direct credit intervention schemes in the economy, especially in the real
sector. My position is supported by the improvements in the Manufacturing
Purchasing Managers Index (PMI) which rose to 46.6 index points in July from 45.5
index points in June 2021, and the Non-Manufacturing PMI which increased to
44.8 index points in July 2021 from 43.0 index points in June 2021, even though
they are below the 50.0 index points benchmark.
It is heartening to observe the moderation in inflation since April 2021. Headline
inflation slowed to 17.75 per cent in June 2021 from 17.93 per cent in May 2021,
driven mainly by the decline in the food component of the inflation basket and
improvements in the supply chain as economic activities gradually return to
normalcy. Further breakdown shows that food inflation (y-o-y) moderated to
21.83 per cent in June 2021 from 22.28 per cent in May 2021. Core inflation (y-oy) stood at 13.09 per cent in June 2021 from 13.15 per cent in May 2021. Despite
the moderation in year-on-year inflation, headline, food and core inflation grew
marginally, month-on-month (m-o-m) to 1.06, 1.11 and 0.81 per cent,
respectively, in June 2021 from 1.01, 1.05 and 1.24 per cent, respectively, in May
2021.
The external reserves position stood at US$33.83 billion on July 22, 2021, a 3.2 per
cent increase from the US$32.78 billion recorded on June 30, 2021, but a year to
date decrease of 7.2 per cent from US$36.46 billion on December 31, 2020. The
movement in reserves was driven largely by Secondary Market Intervention
Scheme (SMIS) and Bureau-de-Change foreign exchange sales.
There is no gainsaying the fact that the foreign exchange market has been
weighed down by severe shocks to crude oil prices, remittances, and capital
flows, associated with the ravaging impact of the COVID-19 pandemic. CBN’s

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policy adjustments to preserve the value of the naira, ensure stability in the
foreign exchange market and boost the external reserves, is noteworthy. Whilst
the market continues to witness pressure at its various windows, there is no doubt
that the various foreign exchange demand and supply management measures,
including policies to stimulate higher export proceeds, diversify the export base
and increase remittances inflow would in the near to medium term have the
desired impact on the economy.
On developments in monetary aggregates, broad money supply (M3) declined
to 2.02 per cent in June 2021, compared with 2.99 per cent in May 2021, largely
due to the slowdown in the growth rate of Net Domestic Assets (NDA) and Net
Foreign Assets (NFA). The marginal decline in NDA mirrors the slowdown in
aggregate credit net, which decreased to 4.30 per cent in June 2021 from 4.79
per cent in May 2021.
The All-Share Index (ASI) decreased by 1.28 per cent to 37,947.18 on July 16,
2021, from 38,437.88 on May 31, 2021. Similarly, Market Capitalization (MC)
decreased by 1.30 per cent to N19.77 trillion on July 16, 2021, from N20.03 trillion
on May 31, 2021. The marginal decline in key equity market indicators appear to
be temporary, as there is evidence of growing patronage by domestic investors,
which reflect improved investor confidence in macroeconomic management,
and the return of economic activities.
I note with satisfaction the resilience of the banking industry as shown by the
performance of financial stability indicators. The banking system has remained
strong and stable despite the pandemic-induced shocks to the economy. For
instance, Non-Performing Loans (NPLs) ratio improved (y-o-y) to 5.70 per cent at
end-June 2021 from 6.41 per cent at end-June 2020. Average Capital Adequacy
Ratio (CAR) of the industry remained above the 10.0 per cent regulatory
minimum. Return on Equities (ROE) increased marginally to 18.6 per cent in June
2021 from 18.4 per cent in May 2021, while Return on Assets (ROA) remained flat
over the same period. Total credit increased by N3.14 trillion or 16.61 per cent
between end-June 2020 and end-June 2021, due largely to increase in funding,
CBN Intervention Funds and the Loan-to-Deposit Ratio (LDR) policy. Despite the
increase in total credit, there is need to extend more credit, particularly to the
real sector, in order to close the output gap and strengthen the fragile recovery.
CONSIDERATION FOR VOTING
I am pleased with the moderation in inflation rate for two consecutive months
but feel concerned that it remains above the Bank’s implicit target of 6-9 per
cent, likewise is the tepid increase in output growth in two successive quarters.
The improvement in these macroeconomic variables is largely because of the

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monetary interventions and fiscal stimulus programme to address the negative
impact of the Pandemic.
While the marginal improvement in growth and prices is encouraging, the near
term outlook for the domestic economy remains cautiously optimistic on
account of the threat to global recovery because of the emergence of new
strains of the COVID-19 pandemic, particularly the Delta variant and the slower
than expected speed in the distribution of vaccines across the globe. Therefore,
the economy remains in need of substantial stimulus to address the sluggish fall
in inflation, reverse the adverse impact of the Pandemic and faster path of
recovery.
Other indicators also portray a gloomy picture, such as: negative output gap,
high exchange rates, declining foreign exchange net flows, low accretion to
reserves, growing level of public debt, high unemployment, sustained fiscal
deficit and slow uptake of vaccines.
While monetary policy in most Advanced Economies remain accommodative
for now, indications of impending normalization could hamper capital flows to
Emerging Markets and Developing Economies. Similarly, if the current rise in
inflation in Advanced Economies persist, their central banks may be compelled
to tighten monetary policy. This could lead to higher capital outflows from
EMDEs, including Nigeria, into the Advanced Economies, with adverse
consequences for external sector performance.
Although, crude oil prices have improved, including Nigeria’s Bonny Light
variant, there is urgent need to strengthen current strategies targeted at
stemming down the economy’s reliance on crude oil receipts as the adoption
of other greener and cheaper sources of energy gain momentum across the
globe. I, therefore, welcome the increased contribution of the non-oil sector to
Government revenue in recent times which reflect the gradual diversification of
the economy and call for more policy support for the non-oil sector. In view of
the constrained fiscal space, I underscore the need to accelerate the ongoing
review and automation of the entire tax system, as well as align it with
international laws and standards to enhance its transparency and efficiency.
In the light of continued low accretion to reserves and threat of normalization in
the Advanced Economies, I note that tightening the stance of policy at this
meeting, could attract foreign portfolio investments and dampen pressure in the
foreign exchange market. However, this stance could increase the cost of
credit, reduce investment, reduce aggregate demand and reverse the
moderate economic growth.

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Conversely, easing the stance of policy could lower the cost of credit and
improve financial resource availability in the real sector. But this may stimulate
price development through increased money supply which may portend upside
risk to inflation.
Price stability conducive to growth remains the key objective of the Central
Bank. I would like to reiterate my position in the last few meetings of the Monetary
Policy Committee, that there is need to sustain interventions in critical sectors of
the economy to improve the current growth momentum and address the
pandemic’s lingering effects, while safeguarding macroeconomic stability.
In my consideration, monetary and fiscal stimulus will continue to stimulate
aggregate demand, boost the supply side economy, which in turn will have a
calming effect on prices. Also, various policy measures to improve diaspora
remittances, which is already having the desired impact on foreign exchange
inflows, should be sustained.
In consideration of the foregoing, I vote to retain all policy parameters as follows:
▪ MPR at 11.5 per cent
▪ The Asymmetric corridor of +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
Background:
The resurgence of the Covid-19 pandemic virus especially the Delta variant in
many countries is raising new uncertainties amidst growing health concerns,
casting doubts on earlier economic projections for 2021. Since the MPC’s
meeting of May 2021, the pace of recovery appears to be moderating in some
economies where fresh restrictions are now dampening investors’ confidence.
While these recent developments may have altered the anticipated path of an
accelerated growth rebound in 2021, the steady improvements in vaccination
rates especially in advanced countries still provides some sense of optimism with
ongoing recovery efforts and a strong belief in the ability of national response
measures to sustain the tempo. On the domestic front specifically, the spread of
the recent wave of the virus remains limited and leading indicators of the
economy point to a relatively good GDP recovery in the first half of 2021. There
are however concerns that with these new global uncertainties over the path of
the Pandemic, the domestic economic outlook may appear more fragile.
Looking at recent monetary policy considerations across many countries, the
focus is still clearly on the sustenance of the growth tempo on a durable basis
while still containing the inflationary risks. At this July 2021 MPC meeting therefore,
an assessment of the implications of the developments in the global economy
especially recent disruptions in the recovery path will therefore be key to policy
decisions while also paying close attention to domestic financial system stability.
Assessment of the Global Economy:
The divergence in the pace of growth recovery and the associated inflationary
outlook amongst advanced and emerging market economies may have
weighed in on recent monetary policy choices across central banks. On growth,
several countries showed some weakness in the first quarter of 2021, but some
others had a remarkable recovery rate. CBN staff report show that growth was
particularly strong in the US in the first quarter with an expansion of 6.4 percent
compared with 4.3 percent in the previous quarter and the feeling is that the
substantial fiscal stimulus implemented in the first quarter of 2021 as well as the
advanced reopening of the country’s economy may have played significant
roles. Growth momentum however slowed in many other advanced economies
in the first quarter with the Euro area economy contracting by -0.6 percent and
the UK GDP also contracting by -1.6 percent. There was a similar contraction in
Japan’s GDP growth by -1.0 percent in the first quarter of 2021 compared with
a 2.8 percent growth in the fourth quarter of 2020. Several emerging markets
also experienced a first quarter 2021 slump. CBN staff report indicate that output

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growth in China in the first quarter of 2021 declined to 0.6 percent compared
with 3.2 percent in the previous quarter, while that of Brazil also lowered to 1.2
percent compared with 3.2 percent in the fourth quarter of 2020. After this 2021
slow start, global recovery rate however seems to have been strengthening as
from the second quarter supported by sizeable fiscal and monetary measures.
In some economies, the COVID-19 resurgences may still be disrupting the
rebound. Preliminary UK GDP estimates for 2021 quarter two, show a growth rate
of around 5 percent and the recovery is driven by the surge in consumer
spending as restrictions were eased. Growth is also expected to rebound in
China in the second quarter as household spending and manufacturing
production accelerate modestly, but there are strong predictions that the high
daily case numbers of the new variants of COVID-19 since March will likely
restrain second quarter growth in other emerging and developing countries.
Overall, global GDP is still projected to surge between 6.0 and 6.5 percent in
2021.
Some pro-inflationary risks are emerging at the global level with a hardening of
commodity prices, particularly crude oil, reflecting both global supply shortage
and rising demand. Interestingly, even with the increases in the price of crude
oil, the pass-through to consumer prices may have been limited as CBN staff
report show that headline inflation in recent months increased only in a few
countries while it declined in most other advanced and emerging market
economies. While month-on-month inflation in the US increased marginally to 0.9
percent in June 2021 compared with 0.6 percent in the previous month, it
declined in the UK to 0.5 percent from 0.6 percent in May 2021. Similar declines
in June 2021 headline inflation rates are reported in India, China, South Africa
and Brazil.
On the basis of these developments, central banks in most advanced and
emerging market economies have maintained accommodative monetary
policy stance even with the surge in inflationary expectations. Only few central
banks adjusted rates upwards in response to the increase in underlying
inflationary pressures. The Bank of England at its recent meeting maintained
bank rates at the present level of 0.1 percent and continued its massive bond
purchase programmes. The US Federal Reserve also continued its supportive and
extraordinary accommodative monetary policy programme, keeping rates
constant, but enlarging its bond buying programme, while in the EU, the 20 billion
pounds’ monthly asset purchase programme has continued to reinforce the
accommodative stance of its policy rates. The few countries that have hiked
policy rates in recent times such as Russia, Ukraine, Brazil have based their

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decisions on the high inflation expectations which perhaps may have shifted
their balance of risks towards a pro-inflationary outlook.
Domestic Macroeconomic Conditions:
On the domestic front, economic activity further picked up since the second
quarter of 2021 even much stronger than anticipated. Official real GDP figures
are not yet published, but preliminary CBN staff estimates suggest that real GDP
may have increased by 1.49 percent in the second quarter, up from 0.51
percent in the first quarter of 2021. The outcome reflects a better sectoral growth
performance especially for the manufacturing sector, reinforced by an
improving terms of trade position. The Manufacturing Purchasing Managers’
Index (PMI) moved from 43.9 index points in May 2021 to 45.5 index points in
June, but the non-Manufacturing PMI slightly declined from 44.1 index points in
May to 43.0 index points in June 2021. Commodity prices have remained high,
especially for oil, thus sustaining revenue gains for government and some high
frequency indicators such as import of capital goods are now posting strong
recovery rates since May 2021. Overall, the domestic growth outlook is positive
at least in the medium term. With improving oil prices and somewhat better
investment conditions backed up by the supportive fiscal and monetary sector
stimulus, a return to pre-pandemic levels is not unlikely.
Headline inflation (year-on-year) moderated further in June 2021 to 17.75
percent from 17.93 percent in May, driven by softening of food and core
inflation, but on a month-on-month basis, there was a marginal rise in headline
inflation from 1.01 percent in May to 1.06 percent in June 2021. This month-onmonth increase was caused by marginal uptick in the farm produce inflation
eventhough there was a reduction in that of processed food. Going forward,
with the incessant farmer/herder clashes on a decline and the pickup in farming
activities, buffered by rains and the support interventions, it is expected that farm
produce price pressures will be controlled.
Gross external reserves have remained strong eventhough there was a decline
from 34.18 billion dollars in May to 32.78 billion dollars in June 2021, but still
continue to provide adequate cover of up to 6.13 months of import of good and
services and a buffer against short term shocks in the foreign exchange market.
Since the last MPC meeting, the naira exchange rate at the I&E window has
somewhat been stable, only depreciating marginally by 0.02 percent from
N410.00/US$ at end-May 2021 to N410.10/US$ at end-June 2021. This is mainly
attributable to rising dollar demand from both genuine commodity importers
and illegal hoarders using the BDC and parallel market windows, thus often
outweighing the supply of dollars. We however expect the naira to remain under

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pressure in the medium term as genuine merchandise importers ramp up their
foreign currency demand as more trading partners globally reopen their
economies for business. This may also not affect the domestic currency stability
given the increasing level of foreign reserves and the likely ban of BDC’s from
unjustified dollar demand.
System liquidity remained ample eventhough aggregate domestic credit grew
by only 4.30 percent in June 2021 compared with 4.79 percent in May 2021.
While credit to central government declined during this period, the credit to the
private sector grew. This progress is largely attributed to the sustenance of the
CBN’s credit enhancing policies. The banking sector itself remains stable and
resilient, with strong liquidity and capital adequacy ratios. The ratio of gross nonperforming loans (NPLs) to total loans further declined from 5.8 percent in May
to 5.7 percent in June 2021. Interestingly, repayments and recoveries were noted
in key sectors including, oil and gas, manufacturing, construction and
agriculture.
The latest published labour market data from the National Bureau of Statistics
show that unemployment rate increased from 23.1 percent in 2020 quarter two
to 33.3 percent in 2020 quarter four, while underemployment rate reduced to
22.8 percent in 2020 quarter four compared with 28.6 percent in quarter two of
2020. However, employment intentions of industries indicate that firms may hire
more workers in the coming quarters as economic activities pick up generally.
The domestic fiscal sector however remains weak with the persisting wobbling
revenue performance which continues to pose risk for growth and inflation. CBN
staff data show that the Federal government revenue collected between
January and April 2021 was 39 percent below the target amount for that period.
As such, in April 2021, the Federal fiscal operations had a deficit close to 63.0
percent, which has kept the public debt stock ballooning. Nigeria is however
not alone in the debt pile-up as many other governments and corporations
around the world amassed considerable debt as they weathered last year’s
global recession, but the peculiarities in Nigeria require some fiscal and structural
reforms to help forestall any impending debt-related vulnerabilities.
Decision:
In consideration of the current and evolving domestic and global
macroeconomic situation, it is clear that the ongoing accommodative
monetary stance of the Central Bank of Nigeria is still appropriate as it is
supportive of economic recovery with no visible threats yet to domestic inflation.
It is however important for MPC to closely monitor the economic environment
which may remain uncertain for the foreseeable future while new policy

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decisions including further monetary stimulus to support higher growth will
continue to be data dependent.
I will thus vote to:
• Retain the MPR at 11.5 %
• Retain the CRR at 27.5%
• Retain the Asymmetric Corridor of +100/-700 basis points around the MPR
• Retain the Liquidity Ratio at 30.0%

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6. OBADAN, MIKE IDIAHI
INTRODUCTION
The 280th meeting of the Monetary Policy Committee was held at a time when
optimism about global economic recovery from the debilitating impact of
COVID-19 had gained momentum in the hope that full recovery could happen
in no distant future. The optimism is observable not only in the area of growth but
also in trade, financial markets, commodity markets, among others, although
the prices of precious metals like gold, silver and copper gradually moved
downwards. The notable achievements in the production of vaccines and
administration of vaccines, especially in the developed economies has played
a significant role in the optimistic expectations. However, downside risks are a
possibility.
HIGHLIGHTS OF GLOBAL ECONOMIC DEVELOPMENTS
Growth, Trade, Commodity Markets and Financial Markets
Although there are perceivable downside risks associated with the Pandemic,
global growth is forecast to remain on track for a full recovery in 2021 such that
the IMF, in its World Economic Outlook, has revised global growth forecast for
2021 from 5.5 per cent to 6.0 per cent. The increasing positive global growth
outlook is premised on the gradual but steady easing of restrictions across the
globe and steady return of economic agents to business activities coupled with
the deployment of vaccines across the globe which is evidently reducing the
mortality rate associated with the COVID-19 pandemic. The challenge to full
recovery though is that while vaccine administration is apparently on course in
the advanced countries, it is not so in the Emerging Market and Developing
Economies (EMDEs), especially Sub-Saharan Africa where in the most populous
country, Nigeria, only about 0.7 percent of the population have had access to
vaccines. Vaccination rollout has been very uneven in favour of the advanced
countries. That vaccination remains slow in the EMDEs, reflecting both the
demand and supply side problems bedevilling them, is a threat to global
recovery which the advanced countries must seek ways to redress. Also posing
a notable threat to full global economic recovery is the spread of the more
contagious strains of the virus, especially Brazil’s Gamma variant and India’s
Delta variant. It is even in the self-interest of the advanced countries to ensure
rapid and globally equitable distribution of vaccines.
With the deployment of vaccines to combat the pandemic along with positive
sentiment regarding global growth, confidence is gradually being restored in
the financial markets. Global trade is rebounding faster than anticipated in 2021

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after falling sharply during the first wave of the pandemic in the second half of
2020. The recovery in global trade was aided by strong monetary and fiscal
policy support from governments as well as the effective vaccination coverage
against COVID-19. The World Bank has projected global trade to grow at 8.3 per
cent in 2021 and 6.3 per cent in 2022, reflecting the responsiveness of trade to
the reopening of economic activities.
There is a broad uptick in commodity prices, especially crude oil prices, which
signposts the likelihood of rising global inflation in the short to medium term and
the earlier than expected commencement of monetary policy normalization.
Indeed, prices have inched up in such a way that inflation is gradually increasing
towards the long-run objectives of the central banks of many developed
countries. Unlike earlier forecasts, crude oil prices have recovered in such a
remarkable way that they reached a two-year high of US$75.09 on 25th June
2021. However, the price of Bonny light declined moderately to US$74.16 per
barrel on 30th June 2021. This compares with US$50.43 per barrel on 4th January
2021 and the trough of US$14.67 per barrel recorded on 27th April 2020. In the oil
futures market, forecasts indicate that the price of crude oil is expected to lie
between US$76.30 per barrel in August 2021 and US$72.17 per barrel by
December 2021.
While the Pandemic intensified, occasioning massive fiscal and monetary
supports in the form of stimulus packages, upticks in global debt levels elicited
deep concerns. However, global debt levels declined in Q1 2021, for the first
time in nearly ten quarters, driven by a fall in debt levels in the developed
economies, while indebtedness across developing economies hit a fresh record
high. Total global debt declined by US$1.7 trillion to US$289 trillion with financials
accounting for nearly half of that decline, while government indebtedness
continued to increase.
A CBN survey of 14 countries’ central banks between May and June 2021
showed that the exchange rate of most countries depreciated against the US
dollar, reflecting policy adjustments to ease pressure on economies and create
the required room for macroeconomic recovery.

Continued Fiscal and Monetary Response to the Challenges posed by COVID-

Notwithstanding the progress achieved in combating COVID-19 and significant
movement on the path of economic recovery, governments have continued to
provide fiscal and monetary policy support to their economies even though the

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burden of debt is increasing. Monetary and fiscal policy continues to support
the recovery and create jobs required to achieve full recovery. Examples:
• Quantitative easing remains the policy instrument of choice amongst
major advanced economy central banks and in some cases, direct
liquidity injections have been used to jumpstart growth. With inflation
rising appreciably, early normalization of monetary policy is now
envisaged amongst policy makers.
• The Federal Reserve Bank maintained its asset purchase programme of
treasury securities and agency mortgage-backed securities as a means
of injecting liquidity to the economy to support economic recovery while
maintaining guidance of the likelihood of tapering its bond-buying
programme in the fourth quarter of 2021. US Federal Reserve Bank
retained its overnight rate at 0.00-0.25 per cent.
• The European Central Bank (ECB) maintained its liquidity support
programmes to drive recovery; retained its benchmark policy rate at 0.0
per cent; and held all other monetary policy parameters constant,
including its overnight deposit rate of -0.5 per cent and its monthly asset
purchase programme of 20 billion euros.
• The Bank of England’s Monetary Policy Committee voted unanimously to
maintain monetary accommodation, retaining its policy rate at 0.10 per
cent while also maintaining its bond purchase programme.
• China, as the only major economy to have overcome the downside risks
of the COVID-19 shock, is gradually progressing towards full recovery.
Nevertheless, the Peoples Bank of China, at its June 2021 meeting,
maintained its policy rate at 3.85 per cent to support economic
recovery.
• In India, the Reserve Bank of India, at its June 2021 meeting, retained its
policy rate at 4.0 per cent while the government maintained its spending
plans to support the recovery of the economy.
• The survey of 14 central banks by the CBN revealed a strong trend
towards continued monetary accommodation by both the advanced
and emerging market economy central banks.
However, with the progressive recovery of economic activities, the pace of price
development is increasing. Consequently, there are underlying signals from
some major central banks indicating that the normalization of monetary policy
may soon be a reality.
DOMESTIC ECONOMIC DEVELOPMENTS
In Nigeria, like the global economic prospects, optimism is gradually gaining
momentum about the domestic economy against the backdrop of the

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increasing recovery of the global economy, significant increases in crude oil
prices in the oil market and continued monetary and fiscal stimulus by the CBN
and Government, respectively. The economy has steadily shown signs of
recovery though weakly. The National Bureau of Statistics (NBS) data, showed
that the GDP increased by 0.51 per cent in Q1, 2021, compared to 0.11 and -
3.62 per cent in Q4 and Q3, 2020, respectively. However, growth remains low
and fragile and below pre-COVID-19 levels. Nevertheless, gradual economic
recovery is expected to continue through 2021 amid the easing of lockdowns in
the domestic and international environment, rebound of economic activities,
recovery in oil prices, effective COVD-19 immunization, and a turnaround in
manufacturing activity in 2021 and continued implementation of stimulus
packages. CBN Staff estimates for real GDP in the second, third and fourth
quarters of 2021 are 1.49, 2.18 and 2.62 per cent, respectively.
All the three measures of inflation in the country - headline, food inflation and
core inflation - showed deceleration in June 2021. The year-on-year headline
inflation moderated to 17.75 per cent in June 2021, from 17.93 per cent in the
previous month, but remained significantly above the ceiling of the Central Bank
of Nigeria’s single-digit inflation range of 6.0 - 9.0 per cent and the Bank’s policy
rate of 11.5 per cent. Food inflation trended downwards to 21.83 per cent in
June 2021 from 22.28 per cent in May 2021. Core inflation declined to 13.09 per
cent in June 2021 from 13.15 per cent in May 2021. And CBN Staff forecast shows
that headline inflation will drop to 17.4, 16.08 and 13.98 per cent in July,
September and December, respectively. Nevertheless, inflation remains
considerably high and worrisome making it imperative for policy to address the
key propelling factors: low productivity in the economy, lingering negative
impact of insecurity in food producing communities, multiple taxation of
interstate food transportation by federal, state and local governments, bribery
settlement of bandits/herders by farmers to buy peace on the farms, settlement
of security officials in the course of transporting produce, depreciation of the
naira, upward adjustment of energy prices, obnoxious role of market
unions/associations and non-targeted monetary expansion.
There is continued good news from the oil market for the country. As was shown
above, crude oil prices have increased significantly for some time now and
remain high. The futures market is also optimistic. With crude oil prices remaining
significantly high, it behoves the Government to ensure that the foreign
exchange and naira revenue earning opportunities are not missed by resolving
possible oil production challenges and ensuring efficient management of oil
proceeds through more transparency on the part of the NNPC. Revenues
earned should not be squandered in a pro-cyclical manner. Rather, the

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Government should begin to build fiscal buffers through saving of part of the
revenue beyond the budget benchmark while another part is used to reduce
fiscal deficits. Saving of oil windfalls for the rainy day must now be a priority so as
to effectively deal with future shocks.
The Federal Government’s fiscal operations are still hobbled by poor revenue,
limited fiscal space and burgeoning expenditure such that as at April 2021, a
deficit of N3,177.5 billion was recorded which was 78.2 per cent above the
budget benchmark. In light of the fiscal challenges, the public debt stock has
continued to rise while debt service absorbs a significant proportion of revenue.
Nigeria’s public debt stock as at Q1 2021 stood at N33.1 trillion (US$87.239 billion).
External debt represents 37.67 per cent (N12.470 trillion), while domestic debt
represents 62.33 per cent (N20.636 trillion). The debt is not sustainable in terms of
revenue.
Besides, economic performance in other areas is still worrisome. Limited
accretion to external reserves is causing serious pressure in the foreign exchange
market and on the exchange rate. So far, for various reasons, the significantly
increased oil prices have not impacted much on external reserves and
exchange rate stability. As at June 2021 the nation’s external reserves could
cover 6.13 months of import of goods and services, and 8.23 months of import
for goods only. The balance of payments position remains weak. The overall
balance of payments deficit as a percentage of GDP was -1.31 per cent in Q1
2021.
OPINION
If the forecast of significant improvement in growth is to be realised, monetary
policy tightening cannot be an option at this time. Continued monetary and
fiscal policy support to the recovery efforts is indispensable. For monetary policy
support, the development finance interventions would need to continue,
targeting output expansion with a view to lowering inflation from the supply side.
Any non-output targeted monetary expansion needs to be minimised so as not
to neutralise the impact of the development finance interventions.
As at now, the expected impact of the development finance interventions on
inflation is being undermined by insecurity in the food producing communities in
the country. Thus, a major resolution of the food inflation challenge is an
effective handle on insecurity. The Government should double its efforts in this
regard.

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It is also crucial to implement other inflation control measures:
• Ensure exchange rate stability
• Avoid sharp increases in energy prices
• Improve business environment for farmers, manufacturers, MSMEs by
addressing legacy infrastructure problems, especially transport and
electricity, and eliminating multiple taxation of products (farm produce)
and transports conveying them
• Make InfraCo functional to take a big burden off Government in the
area of infrastructure development
• Closely monitor the activities of all economic agents dealing in the
foreign exchange market to prevent foreign exchange racketeering
and the associated inflationary implications
• Check the monopolistic practices of market unions/associations so as to
minimise their arbitrary jacking up of goods prices and exploitation of
consumers. Most of the observed sharp increases in prices in recent
times are not related to the cost of production but to arbitrariness and
impunity. Market unions/associations should be considered for
prohibition, especially those involved in marketing of agricultural food
items.
Although the rate of inflation is still high, it is on a deceleration path. The situation
neither warrants an easy monetary policy nor further tightening of policy. Extant
policy measures seem to be working. It is necessary to continue with them.
Therefore, I vote to hold the parameters at their extant levels as follows:
MPR


-
11.5%
CRR


-
27.5%
Liquidity Ratio


-
30%
Asymmetric Corridor

-
+100/-700 basis points around the MPR

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7. OBIORA, KINGSLEY ISITUA
In the face of a weak economic recovery and a
slowly decelerating inflation, I voted to: retain the
MPR at 11.5 per cent, the CRR at 27.5 per cent,
the LR at 30 per cent and the asymmetric corridor
of +100/-700 basis points around the MPR. I
believe this stance would continue to strengthen
the growth recovery and complement the Bank’s
policy measures, whilst also rein in inflationary
pressures, driven mainly by supply-side factors.

The world is still in the grips of the Coronavirus Disease (COVID-19) pandemic.
Whilst the incidence of cases of the COVID-19 pandemic is receding in some
locations, the emergence of a new variant (delta), which is more deadly and
faster in transmission than the earlier variants, is causing great anxiety across the
world, especially in Southeast Asia, Latin America, and Africa. These regions,
unfortunately, are already in the third wave of the pandemic but with limited
supplies of vaccines. As a result, globally, the number of cases and deaths
continue to rise from 124 million and 2.5 million, respectively, during the May MPC
meeting to 195 million and 4 million in July 2021. The number of administered
vaccines doses stood at 3.9 billion as of 27th July, 2021. From this amount, only 1.1
per cent of the people in Low-income countries have received at least one dose
of the vaccine, which further indicates the widening gap in vaccination
between developed and developing countries. Therefore, there is an urgent
need to address this inequality. According to the World Health Organisation
(WHO), “equitable access to safe and effective vaccines is critical to ending the
COVID-19 pandemic.”
Despite these worrying trends, a strong global recovery is expected in 2021. The
Global Purchasing Manger’s Index continues to strengthen, trending above 50
points benchmarks with 55.5 per cent in June down from 56.0 in May 2021. The
index is driven by increased consumer spending, production, new orders, and
employment. Consequently, the recent projections by the IMF, the World Bank,
and OECD indicate that the global economy will grow by 6.0, 5.6, and 5.8 per
cent, respectively, in 2021. The projected growth is attributed to the vaccination
programmes, monetary policy accommodation and fiscal policy support in
various advanced, emerging, and low-income countries. These projections also
show a growth divergence across regions and countries. Whilst the IMF forecast
the United States, the United Kingdom, and China to grow strongly by 6.4, 5.3,
and 8.6 per cent, South Africa, Nigeria, and Angola are projected to grow by

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3.1, 2.5 and 0.4 per cent, respectively. This implies that though advanced
economies with better access to vaccines are recovering strongly, many
emerging and developing economies with limited access to vaccines and weak
policy support continue to lag. Overall, these projections are subject to
uncertainties, especially those emanating from the dynamics of the COVID-19
pandemic and the underlying economic structure of each region and country.
The domestic economy is sustaining its growth recovery, driven by policy
support. Official data from the National Bureau of Statistics (NBS) shows that the
economy continues to recover from 0.11 per cent in Q4 2020 to 0.55 per cent in
Q1 2021. The recovery is driven by the expansive monetary policy stance of the
Central Bank of Nigeria (CBN) and the fiscal policy support by the Federal
Government. The oil sector improved from a contraction of -19.75 per cent
(year-on-year) in Q4 2020 to -2.21 per cent in Q1 2021. The improved
performance was driven by rising oil prices bolstered by increased global
demand and supply restraints imposed by the OPEC+ members. Moreover, since
the last MPC, average oil prices have continued to rise from US$68.5 per barrel
to US$73.15 per barrel, which will further support domestic economic recovery.
The non-oil sector grew by 0.79 per cent in Q1 2021, which was 0.89 per cent
points lower, compared with 1.69 per cent in Q4 2020. Growth in the non-oil
sector
was
driven
mainly
by
the
Information
and
Communication
(Telecommunication), Agriculture, Food, Beverage and Tobacco and Human
Health and Social Services sector. Headline inflation (year-on-year) moderated
further to 17.75 per cent in June from 17.93 per cent in May 2021, attributed to
the food component, which decreased to 21.83 per cent in June from 22.28 per
cent in May 2021. Also, core inflation decreased to 13.09 per cent in June from
13.15 per cent in May 2021. Furthermore, the current account balance has
significantly improved from a deficit of US$5,264.53 billion (4.5 per cent of GDP)
in Q4 2020 to a lower deficit of US$1,750.64 billion (1.8 per cent of GDP) in Q1
2021, reflecting a decrease in the imports of goods and services and net out
payment of investment income.
The Banking system remains stable and resilient in the face of a weak economic
recovery. The Capital Adequacy Ratio (CAR) and the Liquidity Ratio(LR) both
stood at 15.5 and 41.3 per cent in June 2021, above their prudential benchmarks
of 15.0 and 30.0 per cent, respectively. Consequently, the gross banking sector
credit increased by N1.55 trillion from N22.68 trillion at the end of December 2020
to N24.23 trillion at the end of March 2021. The increased credit was recorded in
manufacturing, consumer credit, general commerce, information and
communication and agriculture. This improved performance was driven by the
policy of loan-to-deposit ratio (LDR), the extension of regulatory forbearance

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and other macroprudential measures. Although the Non-Performing Loans
(NPLs) was above the regulatory benchmark of 5.0 per cent, it improved from
6.41 per cent in June 2020 to 5.70 per cent in June 2021, reflecting strengthening
risk management practices, Global Standing Instruction (GSI) policy, and caseby-case review of regulatory forbearance. However, average monthly
weighted average Inter-bank Call and Open Buy Back (OBB) rates rose to 16.87
and 16.39 per cent in June 2021 from 15.95 and 16.18 per cent in May 2021,
showing tight banking system liquidity conditions. The reduction in the liquidity
conditions is part of the effort to ensure a stable banking system and rein in the
monetary side of inflation pressures. Overall, the banking system continues to
increase the flow of credit to the real economy while preserving the banking
sector resilience.
Although the global and domestic prospects have brightened, short to medium
term challenges persist. The global concerns for COVID-19 infections remain
high, especially given the uneven progress in vaccines rollout, reimposition of
lockdown measures in several locations as third-wave rages as well as the
complex evolution of the virus. The virus continues to mutate into more lethal
variants with severe health and socio-economic consequences across the
world. Therefore, the top priority is to save lives and livelihoods, and return the
global economy to the pre-pandemic levels, which can be achieved through
timely and equal access to COVID-19 vaccines.
Domestically, the country is already in the third wave of the COVID-19 pandemic
as delta variant continue to take its hold. The infections have resurged, with
175,000 confirmed cases and 2000 deaths. Also, growth remains fragile as
medium-term prospects are severely constrained by the slow pace of
vaccination programmes, limited fiscal space, lingering insecurity, and longstanding infrastructural challenges. Furthermore, official data from the NBS shows
that some sectors are yet to fully recover from the adverse effect of the first and
second waves of the COVID-19 pandemic, especially oil refining, Air transport,
accommodation and food services, and trade. Consequently, in June 2021,
both manufacturing and non-manufacturing Purchasing Manager’s Indexes
(PMIs) continued to remain below the 50 index points at 46.6 and 44.8 index
points, respectively. Although the headline inflation is decelerating, it is still
above the implicit target of 6-9 per cent. The double-digit inflation is driven by
food component as well as high electricity tariffs, and price of Premium Motor
Spirit
(PMS),
and
exchange
rate
adjustments.
However,
with
the
commencement of harvest season and various interventions by the CBN to
boost food supply, I believe inflation rate will decelerate fast in the near term.
Also, rising oil prices will help improve the Federal Government revenues and

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narrow the fiscal and current account deficits as well as ensure exchange rate
stability. Furthermore, the CBN in conjunction with the Federal Government
continues to support the critical sectors of the economy through various
targeted interventions in households, SMEs, health, agricultural, manufacturing,
and ICT. I believe these interventions have largely contributed to the exit of the
country out of recession in Q4 2020 and alleviate the severe economic hardship
faced by many Nigerians. However, given the strong economic headwinds and
the need to avoid a prolonged weak recovery with its attendant socioeconomic consequences on lives and livelihoods, more action is needed to put
the economy on a robust recovery path.
Considering the fragile recovery and a slowly moderating inflation, and the
policy actions already taken by the Bank, I believe the best course of action is
to leave our policy parameters unchanged. On that basis, I voted to:
• Retain the Monetary Policy Rate (MPR) at 11.5 per cent;
• Retain the Cash Reserve Requirement (CRR) at 27.5 per cent;
• Retain the Liquidity Ratio (LR) at 30.0 per cent; and
• Retain the asymmetric corridor to +100/–700 basis points around the
MPR.

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8. SHONUBI, FOLASHODUN A.
This meeting held at a time when central banks worldwide have somewhat
unanimously
embraced
unconventional
measures
as
an
alternative,
considering the obvious limitations of conventional monetary tools. The global
economy is overwhelmed by so much uncertainty, in the midst of frantic efforts
by world leaders and institutions to sustain and also enhance the slow rebound
from the negative impacts of the pandemic. The domestic economy remained
challenged by high general prices, weak growth, high unemployment and low
government revenue, despite high oil prices and an appreciable stimulus
regime.

Brief Review of Global and Domestic Economic Developments
Despite the downside risks to growth, due to fast mutating COVID-19 virus and a
wide gap in access to vaccination, gradual reopening of economies supported
by sustained monetary and fiscal stimulus has enhanced the prospects of
rebound in global growth. On account of the improved outlook, the
International Monetary Fund (IMF) projected global growth at 6.0 per cent in
2021. Growth in the advanced and, emerging market and developing
economies (EMDEs) were estimated at 5.1 and 6.7 per cent, respectively.
Inflation in advanced economies generally trended above target levels, while
exchange rate pressure and weak supply chain continued to put pressure on
prices in the EMDEs.

Against the backdrop of dismal performance of the domestic oil sector, two
consecutive quarters of output expansion in the fourth quarter of 2020 and first
quarter of 2021 marked a change in the structure of domestic economic growth.
Though the composite manufacturing and non-manufacturing Purchasing
Managers’ Indices remained at the sub-optimal levels, below the 50.0 index
points, both rose in July 2021, relative to the levels in the preceding month.
Domestic headline inflation decelerated further to 17.75 per cent in June 2021,
for the third consecutive month, on account of decline in both food and core
inflation to 21.72 and 13.09 per cent, respectively. On month-on-month basis,
however, headline and food inflation rose, while core inflation declined.

The banking sector remained resilient and continues to be the major channel for
supporting the domestic economy. Industry total asset and credit rose further at
end-June 2021, just as industry liquidity and capital adequacy ratios stayed
above the regulatory minimum. Notably, the non-performing loan ratio
improved marginally to 5.7 per cent, though it was slightly above the prudential

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maximum of 5.0 per cent. Monetary aggregates developments and money
market rates reflected the impact of the Bank’s liquidity management measures.

Despite the high global crude oil price, the fiscal authorities continue to grapple
with low revenue, even as the Government is pressured to increase expenditure
to alleviate the impact of economic hardship and stimulate aggregate
demand. Total revenue and expenditure remained generally below the budget
benchmark, leading to a steady rise in Government’s debt portfolio. In the
external sector, foreign portfolio investment increased, on account of somewhat
renewed confidence in the business and investment environment, just as
external reserves rose marginally as at July 22, 2021, relative to the level at endJune 2021.

Considerations and Decision
Though gap in access to vaccination constitutes a major risk to growth,
widespread lifting of restrictions and lockdown, higher than expected rebound
in global trade and increased global financial market vibrancy suggests a bright
prospect for global growth. While these enhanced outlook and high crude oil
price provide leverage opportunity for the domestic economy, sustained
increase in general prices in the advanced economies portends risk of quicker
than expected return to global monetary policy normalization.

Clearly, the domestic economic environment is still challenged on multiple
fronts. Inflation has delightfully trended downward for the second consecutive
month after nineteen months of consistent increase, but remained at a
significantly high level, with implications for investment and purchasing power.
Though growth is largely driven by the non-oil sector, it remain fragile at below
pre-pandemic levels. The situation calls for a redoubling of effort by the fiscal
and monetary authorities to intensify implementation of various stimulus
programmes.

So far, we have witnessed tremendous positive outcomes from development
finance interventions by the Bank. Successive rise in the composite PMI and
improvement in the indices of new orders and employment components of the
manufacturing PMI, together with decline in the index of the stock of the finished
goods component, underscores gradual recovery and likelihood of further
expansion in the coming months. This is especially delightful, given the current
limitations of conventional tools. The signals I must say, is encouraging and
intervention measures obviously remain the most potent tool for now.

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While I recognise that the Federal Government has made some progress in the
vaccination programme, and also facilitating further reopening and stimulating
the economy, especially in an era of very low revenue. There is room for more
to be done to enhance the slow recovery. Government must aggressively
explore every collaborative opportunity with the international community to
access more doses of COVID-19 vaccine, while also stepping up the campaign
to encourage the populace to come forward to get fully vaccinated towards
achieving herd immunity.

Addressing the widespread insecurity challenges is a task that requires
Government to step-up efforts in order to reverse the negative effect on the
overall business and investment environment. I also reckon that the fiscal
authority will continue to explore private-public partnership options to
aggressively shore-up investment in public infrastructure.

As mentioned in my previous statement, I encourage the present efforts by the
Bank to intensify implementation and widen the scope of the interventions. This
I believe will further strengthen the weak purchasing power, promote investment
and expand the productive base. I urge strengthening of the current
collaboration between the fiscal and monetary authorities in all areas, and in
particular to expand the capacity for the uptake of excess food harvest towards
building-up reserves to serve as stabilizer for food prices.

Knowing fully well that recent combined effort of the monetary and fiscal
authorities have sustained the slow domestic economic recovery and caused
the recent reversal in inflation, I agree with other members of the Committee not
to alter a working strategy. Clearly, all that is needed at this time is to do more
of what we are presently doing and which has worked so far, to enhance
productivity, growth and eventually sustain the reversal in inflationary pressure.
We should rather intensify and widen the scope of ongoing interventions to
enhance purchasing power and facilitate further expansion of economic
activities, while the fiscal authority strive to ingeniously address insecurity and
infrastructure challenges.

I therefore vote to Retain:
• MPR at 11.50 per cent;
• Asymmetric corridor of +100/-700 basis points around the MPR
• Cash Reserve Ratio (CRR) at 27.5 per cent; and
• Liquidity Ratio (LR) at 30.0 per cent.

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9. EMEFIELE, GODWIN I.
GOVERNOR OF THE CENTRAL BANK OF NIGERIA AND CHAIRMAN, MONETARY
POLICY COMMITTEE
My overall inclination during this meeting is that of cautious optimism. As global
economic recovery continues in 2021, I note that it is not yet uhuru, especially
for EMDEs including Nigeria. Outlook of the domestic economy remains fragile
with tepid growth and sluggish disinflation even as downside risks to growth and
inflationary pressure persist. I recognise the need to consolidate recovery at this
time and strengthen the structural base of the domestic economy. I am mindful
of the policy dilemma before us as we desire faster disinflation and growth. As
global rebound intensifies within the short-term, Nigeria’s fragile prospect must
be strengthened to ensure the growth of per capita income.
Stronger recovery of global economy is expected as countries increasingly reopen from covid-19 restrictions. This will be reinforced by the rebound in
merchandise trade and industrial production, even as international services
activities (like tourism) remain muted. However, brightening short-term global
growth outlook remains uneven, vaccine-dependent and largely driven by
advanced economies. In many advanced economies, growth outcomes in the
first two quarters of 2021 surpassed forecasts and may improve further.
Accordingly, global growth projections for 2021 and 2022 could yet be
upgraded, reflecting a widespread pick-up in economic activities, increased
vaccine rollout, and continued government stimulus across countries. This could
be accompanied by moderate uptick in global inflation and a prospect of
monetary policy normalisation in the short-term. However, unequitable
administration of vaccines in the face of mutating strains of the COVID-19 virus
remains a major threat to recovery among vulnerable EMDEs.
Sustained synchronisation of fiscal and monetary support for businesses and
households as well as better macroeconomic sentiments (as economic agents
acclimate to the new-normal of life with the Pandemic) is expected to
strengthen the Nigerian economy. Short-term outlook of the domestic economy
is brightening as key macroeconomic metrics show favourable outcomes,
although they remain vulnerable and outside desired levels. The sizable and
coordinated expansionary policy to boost consumer spending, support
businesses and curtail the adverse shocks from COVID-19 continue to drive a
rebound in output growth. The upturn of domestic economic activities is
progressive but marginal and below historical average. Disinflation has equally

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been recorded for three consecutive months albeit sluggishly. Our mediumterm aim is to revert to growth rates above historical levels, raise per capita
income (as GDP outpaces population growth rate), and achieve single-digit
inflation rate.
In the near-term, l expects domestic fragility to gradually dissipate and inflation
to moderate, following our various supply-side interventions. Recent data show
continued upturn in manufacturing and non-manufacturing PMIs in July 2021 to
46.6 and 44.8 points, respectively, indicative of weak but improving domestic
conditions. Accordingly, real GDP, driven by recoveries in non-oil activities (i.e.
agriculture and industry sectors) and rebounding crude oil prices, is projected
to grow by nearly 1.5 percent in 2021Q2 from 0.5 percent in 2021Q1 and 0.1
percent in 2020Q4. In-house analyses project growth for the entire 2021 at 3.2
percent (while the IMF forecasts 2.5 percent), based on orderly implementation
of macroeconomic policies. To ensure sustainable and fast-tracked GDP
growth (surpassing population growth) rate, we will continue to collaborate with
fiscal authorities to proactively target and stimulate high impact productive
sectors.
Reflecting the continued fall in food inflation, headline inflation rate moderated
slightly (for the 3rd consecutive month) to 17.8 percent in June 2021 from 17.9
percent in May. The exchange rate, energy prices and lingering insecurity
remain the key drivers of inflation. Near-term inflation expectations are
prominently outside the CBN corridor and prescribes a quickening disinflation.
Notably, current inflation level is not unanticipated given our decisive
expansionary policy stance aimed at reversing the adverse effects of the
COVID-19 shocks on real output. This underscores the continued need to
delicately balance inflation and growth objectives.
Domestic financial market conditions appear constrained, with a bearish stock
market, tight money market conditions, and coarse foreign exchange market.
Liquidity tightness illustrates the rise in market interest rates during the month.
Weighted average inter-bank call and open-buy-back rates rose from 16.0 and
16.2 percent, respectively, in May 2021 to 16.9 and 16.4 percent in June.
Correspondingly, month-on-month growth rate of aggregate money stock (M3)
declined from about 3.0 to 2.0 percent, reflecting the slowdown in NFA and
NDA. Though the pace of aggregate credit net fell from 4.8 to 4.3 percent, it
recorded a year-to-date growth of N1.6 trillion due to the various policies and
initiatives of the Bank to expand credit flows to the real sector of the economy

Classified as
Classified as
at this critical time. Amidst rising credits, the banking system remained pleasingly
stable and resilient as indicated by robust industry averages of key FSI.
In my consideration, I note that the direction of economic developments is
satisfactory but the pace is less-than-desired. Output growth rate, though
positive for two consecutive quarters, remains tepid, fragile and below
potential. Inflation rate has moderated for three consecutive months but stays
at growth inhibiting levels. I note also the frail but improving short-term domestic
outlook and the need to accelerate the pace of GDP growth over population
growth rate to ensure increased welfare of the Nigerian economy and
reductions in the levels of poverty and unemployment. I note the fundamental
trade-off between GDP and inflation, especially as recovery remains fragile and
inflation higher-than-desired. I continue to favour measures to boost domestic
supply capacity and quicken reversion to pre-2015 average.
With weak growth and high inflation, I recognise the policy quagmire of either
to ease (strengthen growth), tighten (curb inflation) or hold (allow continued
permeation). All three options are justifiable at this time, given the short-term
outlook. I am not willing to distort the current trajectories of either growth or
inflation. Though, the mandate of price stability remains sacrosanct and justifies
the need to tighten, the overall economy remains weak and vulnerable to
adverse policy shocks. I believe that an aptly timed and measured tweak will
aid disinflation without significantly undermining output growth. I am again
inclined towards a balanced and cautious decision. My position is thus to
maintain the current stance of monetary policy and avoid policy-induced
distortions, while deepening our interventions. Therefore, I vote to:
1. Retain the MPR at 11.5 per cent.
2. Retain the asymmetric corridor at +100/–700 basis points around the MPR.
3. Retain the CRR at 27.5 percent; and
4. Retain liquidity ratio at 30.0 percent


GODWIN I. EMEFIELE, CON
Governor

July 2021