See outcomes of CBN’s first MPC meeting in 2018

AB9NGK Nigerian Central Bank, Abuja, Nigeria. Image shot 2007. Exact date unknown.

By Codratus Godson


  1. All rates retained
  2. Commends economic policies
  3. Urges for savings by all governments
  4. Wants increase in taxes to close GDP to tax gap
  5. GDP to grow faster in 2018 (close to 2 per cent)


(i) MPR at 14.0 per cent;

(ii) CRR at 22.5 per cent;

(iii) Liquidity Ratio at 30.0 per cent; and

(iv) Asymmetric corridor at +200 and -500 basis points around the MPR.

 The much-expected meeting of the CBN’s Monetary Policy Committee (MPC), the highest monetary policy-making body in Nigeria, has ended and some outcomes have been mentioned.

The MPC was reconstituted and this was their first meeting, attended by nine of them. Major highlights include retaining the previous rates such as interest rate and retention rates. The Committee also commended the on-going economic policies of the FG but noted the increase in oil revenue, thus urging the states and FG to consider savings. The hidden message is appeal to the FG to increase taxes to close the gap between GDP and tax revenue. Bill Gates had also noted this and said Nigeria’s ratio was the lowest in the world, though most persons only heard where he pelted Nigeria for paying more attention to infrastructural development over human capital and welfare such as primary health and education.

Full statement by the CBN:




The re-constituted Monetary Policy Committee (MPC) held its maiden

meeting, the 260th meeting of the Committee, its first in 2018, on 3rd and 4th of

April, 2018 against the backdrop of strengthening global growth and

improving domestic economic conditions. The Committee assessed the

developments in the global and domestic economic environments during

the first quarter of 2018, including the risks to price stability, financial stability,

and economic growth in the short-to-medium term. Nine members of the

Committee attended the meeting.

Global Economic Developments

The strong headwinds which confronted the global economy in 2017 showed

signs of moderation, giving way to prospects for stronger growth in 2018.

Consequently, global output is projected to grow by 3.9 per cent in 2018 from

3.7 per cent in 2017 on the heels of rebound in investment as a result of

improvements in investor confidence, strengthening commodity prices, rising

aggregate demand and accommodative monetary policy, especially in

some advanced economies. With the sustained recovery in oil prices,

aggregate demand is expected to continue to firm up. Growth in the

advanced economies is projected at 2.3 per cent in 2018, and 4.9 per cent

for emerging markets and developing economies (EMDEs). The Monetary

Policy Committee noted some downside risks to the outlook for global growth

to include: continuing normalization of monetary policy in the advanced

economies; new U.S. trade policy; uncertainties associated with the BREXIT

negotiations; and rising geo-political tensions in the Middle-East and on the

Korean Peninsula.

In the advanced and emerging market economies, inflation is projected at

1.9 and 4.5 per cent in 2018, respectively. However, the broad indication from

the IMF is that over the medium to long term, inflation may rise at a modest

pace as general economic conditions remain subdued. Asset prices and

long-term yields in major financial markets are also on the increase,

confirming the possibility of a future rise in the price level.

Domestic Output Developments

Data from the National Bureau of Statistics (NBS) indicate that real Gross

Domestic Product (GDP) grew by 1.92 per cent in the fourth quarter of 2017,

up from 1.40 and 0.72 per cent in the third and second quarters, respectively.

The economy grew overall by 0.83 per cent in 2017. The main drivers of real

GDP growth were agriculture (1.08%), industry (0.56%) and trade (0.35%). Non-oil

real GDP grew by 1.45 per cent in the fourth quarter of 2017 compared

with a contraction of 0.76 per cent in third quarter of 2017, indicating that the

economy is gradually returning to a path of sustainable positive growth.

The Committee also noted the continuous positive outlook based on the

Manufacturing, and Non-manufacturing Purchasing Managers’ Index (PMI),

which stood at 56.7 and 57.2 index points, respectively, in March 2018,

indicating expansion for the twelfth and eleventh consecutive months. The

Committee believes that effective implementation of the Economic

Recovery and Growth Plan (ERGP) by the Federal Government and quick

passage of the 2018 budget will continue to enhance aggregate demand

and confidence in the Nigerian economy.

Developments in Money and Prices

The Committee noted that money supply (M2) grew marginally by 0.07 per

cent in February 2018 (annualised to 0.42%), in contrast to the provisional

growth benchmark of 10.29 per cent for 2018. The development in M2 largely

reflected growth in net domestic credit (NDC) of 4.05 per cent (annualised to

24.30%), emanating majorly from net credit to government, which grew by

19.99 per cent (annualised to 119.94%) against the provisional benchmark of

33.12 per cent. Credit to the private sector also grew by 1.49 per cent

(annualised to 8.94%) in February 2018, compared with the provisional annual

benchmark of 14.88 per cent. Net foreign assets (NFA), contracted by 2.82

per cent, annualized to 16.92 per cent, compared with the provisional

benchmark of -29.31 per cent. Narrow money (M1), also contracted by 2.77

per cent (annualised to 16.62%). The Committee urged the Federal

Government to strongly exercise restraint on domestic borrowing in order to

lower the cost of credit to the private sector.

The Committee noted that the continued low level of lending by banks

remains a constraint to growth of the real sector of the economy. The

Committee advised the Management of the CBN to continue to provide the

required policy impetus to engender improved credit delivery by the deposit

money banks to the economy.

Inflationary pressures in the economy continued to moderate with headline

inflation (year-on-year) receding for the thirteenth consecutive month to

14.33 per cent in February 2018 from 18.72 per cent in January 2017. Monthon-

month food inflation fell by 133 basis points to 17.59 per cent in February

2018, and core inflation also declined marginally by 38 basis points to 11.71

per cent during the same period.

Money market interest rates reflected liquidity conditions in the banking

system as the average inter-bank call rate increased to averagely 12.42 per

cent in February 2018 from 9.49 per cent in December 2017. The Open buy

back (OBB) rate also increased to 13.19 per cent in February 2018 from 8.46

per cent in December 2017. The movement in the net liquidity position and

interest rates reflected the combined effects of OMO auctions, foreign

exchange interventions and statutory allocation to state and local


The Committee also noted the continuous improvement in the level of

external reserves, which stood at US$46.699 billion as at March 29, 2018.

Similarly, the All-Share Index (ASI) rose by 8.5 per cent from 38,243.19 on

December 29, 2017, to 41,504.51 on March 29, 2018. Market Capitalization

(MC) improved by 10.2 per cent from N13.61 trillion on December 29, 2017, to

N14.99 trillion during the same period. The Committee observed that, while

this development may be a reflection of improved investor confidence in the

economy, it cautioned that the Management of the Bank should carefully

monitor the developments and to establish mechanisms for safeguarding the

stability of the foreign exchange market in the event of a sudden capital

reversal. The Committee observed the continued rise in oil prices, but

acknowledged the inherent volatility in commodity prices and urged the

Bank not to relent in building external reserves buffers against any future price

downturns and as a means of sustaining investor confidence in the economy.

The Committee noted the relative stability in the foreign exchange market,

with declining premia across all segments of the market. It observed with

satisfaction, the sustained high level of activity at the Investors’ and Exporters’

(I&E) window of the foreign exchange market. The window continues to

attract more investors, thus boosting foreign exchange supply. Consequently,

total foreign exchange inflow through the central bank increased by 73.00

per cent in February 2018, compared with the previous month. This was

attributed to the increase in receipt of proceeds from Petroleum Profit Tax

(PPT), royalties and crude oil & gas. Total outflow also increased in February

2018 by 15.69 per cent, as a result of higher payments for invisibles, interbank

transactions as well as JVC cash call payments.

2.0. Overall Outlook and Risks

Forecasts of key macroeconomic indicators give a positive outlook for the

Nigerian economy in 2018. This is predicated on the quick passage and

effective implementation of the 2018 budget, improved security, foreign

exchange market stability as well as favourable crude oil prices. On the

downside, the Committee noted the potential impact of the 2019 electionrelated

spending, against the weak backdrop of tax revenue efforts,

herdsmen related violence and rising yields in the advanced economies.

Indications in the US and the UK point to higher interest rates in the short to

medium term.

3.0. The Considerations of the Committee

The Committee noted with satisfaction the gradual return to macroeconomic

stability as reflected in the third consecutive quarterly growth in real GDP in

the fourth quarter of 2017. It also noted the continued moderation in all

measures of inflation as well as sustained stability in the naira exchange rate

and urged the Bank to sustain the stability to avoid a mission drift. In

particular, the Committee welcomed the narrowing of the exchange rate

premium between the BDC segment and the Investors’ and Exporters’ (I&E)

window of the foreign exchange market. Overall, the Committee noted that

the recovery of the economy was strengthening, in view of the return to

growth of the Services Sector. As the fiscal sector continues to settle its

outstanding liabilities, it reduces its domestic debt profile, thus increasing the

liquidity of the banking system. However, the Monetary Policy Committee

observed increasing monetization of oil proceeds as evident in the growing

FAAC distribution, relative to the 2017 level of disbursements. The Committee

urged the Government to initiate strong stabilization programmes and to

freeze the growth in its aggregate expenditure and FAAC distributions in

order to create savings; needed to stabilize the economy against future oil

price related shocks.

Notwithstanding the general improvement in macroeconomic conditions,

the Committee noted the rather slow pace of moderation in food inflation. It

also took note of the potential risk of a pass-through from rising global

inflation to domestic prices. Members, however, expressed confidence that

the tight stance of monetary policy would continue to complement other

policies of government in addressing some of the structural issues underlying

the stickiness of food prices. The Committee noted that at 14 per cent, the

policy rate was tight enough to rein-in current inflationary pressures. The

Committee, therefore, reaffirmed its commitment to price stability conducive

to sustainable and inclusive growth.

The Committee noted with satisfaction the gradual implementation of the

Economic Recovery and Growth Plan, in an effort to stimulate economic

recovery. In the same vein, the Committee urged quick passage of the 2018

Appropriation Bill by the National Assembly, so as to keep fiscal policy on

track and deliver the urgently needed reliefs in terms of employment and

growth for the citizenry.

The Committee noted the relatively strong balance sheets of the deposit

money banks’ and the stable outlook. This is in spite of the concentration of

non-performing loans in a few sectors, which the Committee observed was

satisfactorily being addressed by adequate mechanisms established by the

Bank to address the phenomenon. The Committee also noted that as

Government pays off its huge contractor debts, a sizeable portion of these

non-performing loans will be addressed. The Committee urged the Bank to

strengthen its supervisory oversight and early warning systems to promptly

identify, monitor compliance with extant prudential regulations, sustain

macro-prudential policy and manage emerging vulnerabilities in the banking


The Committee reiterated the Bank’s commitment to delivery of low interest

credit as evidenced in its bold steps to adopt unconventional monetary

policy to aid credit flow to vulnerable and growth enhancing sectors of the

Nigerian economy. The Committee, therefore, enjoined the Bank to continue

to support and encourage credit delivery at single digit interest rate through

other mechanisms in the interim, while encouraging the banking system to

establish frameworks to increase credit delivery to the employment

generating sectors of the economy. In consideration of available data and

evolving macroeconomic indicators, the Monetary Policy Committee is

committed to revisiting its decisions in the short to medium term as the

fundamentals evolve.

4.0. The Committee’s Decisions

In reaching its decision, the Committee appraised potential policy options in

terms of the balance of risks. The Committee also took note of the gains

made so far as a result of its earlier decisions; including the stability of the

foreign exchange market, the moderation in inflation rate as well as the

restoration of economic growth. The launching of the Food Security Council

by the Federal Government to improve food sustainability is a step in the right

direction. The Committee was concerned about the fiscal distortions

associated with absence of buoyancy between GDP growth and tax

revenue, and urged the fiscal authorities to deploy appropriate corrective

measures to address this phenomenon.

The Committee was of the view that further tightening would strengthen the

impact of monetary policy on inflation with complementary positive effects

on capital flows and exchange rate stability. Nevertheless, it could potentially

dampen the positive outlook for growth and financial stability. However, the


Committee is of the view that loosening would strengthen the outlook for

growth by stimulating domestic aggregate demand through reduced cost of

borrowing. This may, however, lead to a rise in consumer prices, generating

exchange rate pressures on the currency in the process. The Committee also

believes that loosening could worsen the current account balance through

increased importation. On the argument to hold, the Committee believes

that key macroeconomic variables have continued to evolve in a positive

direction in line with the current stance of macroeconomic policy and should

be allowed more time to fully manifest.

In consideration of the foregoing, the Committee decided unanimously by a

vote of all members present to retain the Monetary Policy Rate (MPR) at 14.0

per cent alongside all other policy parameters.

Consequently, the MPC voted unanimously to retain the

(i) MPR at 14.0 per cent;

(ii) CRR at 22.5 per cent;

(iii) Liquidity Ratio at 30.0 per cent; and

(iv) Asymmetric corridor at +200 and -500 basis points around the MPR.

Thank you for listening.

Godwin I. Emefiele

Governor, Central Bank of Nigeria

4th April, 2018