CBN monetary policy committee members worry over Nigeria’s economic recovery

CBN monetary policy committee members worry over Nigeria's economic recovery

Members of the Central Bank of Nigeria’s Monetary Policy Committee, MPC, have expressed worry over the fragility of the country’s economic recovery.

The country’s economy slipped into recession in the third quarter of 2020 and exited in the following quarter.

According to the National Bureau of Statistics, the country’s real GDP grew 4.03 percent (year on year) in the third quarter of 2021, showing sustained positive growth over the last four quarters since the recession witnessed in 2020.

Despite the growth, the committee members have expressed worries and recommended measures be taken to boost the growth.

The officials expressed their concerns in their personal statements contained in the communique of the last CBN MPC meeting of 2021.

According to the CBN governor, Godwin Emefiele, while the economy has responded to the bank’s policies, it remains fragile and needs more boost.

“With our various development finance support for the real sector and administrative measures to deal with excess liquidity, recovery of the Nigerian economy is strengthening,” he said.

“It, however, remains fragile and below potential. There is an increasing need to boost growth through deliberate reforms and reinforce the structural base of the economy. I note that whilst the short-term domestic outlook is improving, it is imperative to maintain coordinated policies to bolster economic fundamentals.

“I support pro-growth measures, at this time, and favor price stability conducive to growth. Current inflation is higher-than-desired and needs to be curbed. We, however, also need to consolidate GDP growth, create jobs and boost the welfare of Nigerians. I, again, recognize the trade-off between GDP and inflation, but favor the rectification of supply constraints” he said.

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Also, the deputy governor, Economic Policy, Obiora Isitua, highlighted the headwinds that could affect the full recovery of the economy.

“Although headwinds to the domestic economy that include slow vaccination rate, insecurity limited fiscal space, lingering and infrastructural deficits could severely affect the prospect of a full recovery in the medium term, the current positive trajectory of output growth and moderating inflation supported by the Bank’s aggressive interventions in the key targeted sectors of the economy offers prospects of a stronger economy”.

The deputy governor, Corporate Services of the bank, Adamu Lametek, also raised concerns on the fragility of the economy at this point.

“For Nigeria, I do not think the time is rife to look away from economic growth for at least two reasons. Though impressive, growth is still fragile and should benefit from a slightly much longer policy support.

“The second consideration is that the current pressures on domestic prices appear to be largely supply related, in which case, increasing domestic output of goods and services and easing distribution bottlenecks should go a long way in alleviating the pressure.

“Already, this is happening and, I should emphasize, extra financial support will be important especially to those sectors that are struggling to recover”.

Another member of the committee and a professor of economics at the University of Ibadan, Adenikinju Festus, noted the factors contributing to the weak economy.

“Despite the general improvements, albeit marginal in economic performance in October 2021, there are vulnerabilities and uncertainties in global and domestic economies.

“Insecurity remains a potent challenge to the Nigerian economy and domestic price formation.”

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He said the drop in crude oil output due to oil theft and pipeline vandalism should be of concern given the predicted barrels per day in the 2022 budget.

“The incidence of COVID19 virus and its variants, given the low vaccination coverage in Nigeria presents its own uncertainty on the economy in the medium term.

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“The rising negative sentiments among world leaders and leading investors to financing new investments in the development of fossil energy may affect long term development of the petroleum sector.

“Furthermore, there is also the uncertainty around 2022, being a pre-election year. Usually, foreign investors are less likely to commit to new investment in the country, affecting foreign exchange reserves”.

He advised the need to harmonise monetary policy with the development targets in the newly approved Medium monetary Term National Development Plan.


Another member and also a professor of economics at the University of Benin, Obadan Idiahi, in his submission noted some key issues in the country’s monetary policy direction.
Part of which are the economic growth performance, inflationary pressures, weak crude oil capacity, weak fiscal position of the Government, and the normalization of monetary policy in the advanced economies.

He warned that the vulnerability of the economy must be taken cognizance of.

“The growth achieved has not reached a level that provides room for comfort. It is not solid and there are numerous headwinds including uncertainties in the global economy arising from the resurgence of COVID 19 infections in the advanced countries, the looming normalization of their monetary policies; foreign exchange market pressures; unpredictable global oil market, and risk of continuing low oil production; legacy infrastructure deficits and the persisting insecurity.

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“Indeed, the latter is a major factor in the persisting output gap as it has increasingly impacted food supply, prices, and other physical-economic activities negatively”.

The committee at its last meeting unanimously voted to retain the Monetary Policy Rate (MPR) at 11.5 per cent with the asymmetric corridor of +100/-700 basis points around the MPR.

Other parameters like the Cash Reserve Ratio (CRR) were retained at 27.5 percent as well as the Liquidity Ratio at 30 percent.

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