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CBN’s Monetary Policy


Central Bank of Nigeria Communiqué No. 105 of the Monetary Policy Committee Meeting of Monday and Tuesday, January 25 and 26, 2016

The Monetary Policy Committee met on 25th and 26th January, 2016 against the backdrop of weakening global economic prospects as well as increased risks in the domestic economic environment. In attendance at the meeting were 10 out of the 12 members. The Committee reviewed the ensuing international and domestic economic and financial environments in 2015 as well as the outlook for the first half of 2016.

On the global front, uncertainties and geopolitical tensions have increased in the Middle East, leading to a major standoff between two major oil producers; Saudi Arabia and Iran, in the face of improving relations between the United States (US) and Iran. In the global oil market, both Iran and the US are emerging as new suppliers while OPEC appears to have shifted from protecting price to defending market share. These developments underscore the conclusion that the current global oil prices would remain for a much longer period. Widespread stock market weaknesses and worsening macroeconomic conditions in China have further exacerbated the already stifling global economic challenges. These uncertainties have blended well with domestic vulnerabilities to affect the monetary policy environment in Nigeria.

International Economic Developments

The Committee noted the considerable divergence in global output recovery in 2015, as growth picked-up in the most advanced countries compared with slowdown in majority of emerging and developing economies. Following the slowdown in the emerging market economies, the IMF in its January 2016 World


Economic Outlook (WEO), revised its global growth estimate from 3.4 to 3.1 per cent and 3.4 per cent in 2015 and 2016, respectively.

In the United States, growth has remained relatively firm with 2015 third quarter growth rate revised to 2.1 per cent from an earlier estimate of 1.5 per cent. The country’s overall growth in 2015 is expected to be the strongest since the post-crisis recovery began in 2010. Likewise, 2016 growth rate has been projected at 2.6 per cent. The major drivers of this growth remained improvements in consumption spending supported by a robust labor market recovery; low inflation stemming from soft global crude oil prices; massive and dynamic investments in the non-oil private sector, improved foreign investment demand due to the recent normalization of monetary policy by the Fed, as well as housing market recovery.

Japan’s recovery in 2015 remained fragile despite the continuous policy stimulus by the Bank of Japan. The Bank’s asset purchase program injects ¥6.7 trillion ($56.71 billion) monthly into the economy, with the possibility of expansion. However, this has done little to restart growth which is estimated at 0.8 per cent in 2015. Private consumption and investment spending remained modest in 2015, worsened by rising skill shortages. Japan’s outlook for 2016 remains dampened by the feeble response of the economy to monetary and fiscal stimuli.

In the Euro area, weakening fiscal consolidation and improving labor market conditions generated 1.5 per cent growth in 2015 with prospects for achieving 1.7 per cent in 2016. The European Central Bank (ECB) further eased its monetary policy stance in December 2015, despite the Bank’s continuous monthly asset purchase of €60 billion ($64.8 billion), as both inflation and wage growth remained subdued. In the same vein, the Bank of England continued its accommodative monetary policy through its ₤375 billion ($540 billion) asset purchase program, even as it announced a decision to reinvest another ₤6.3 billion ($9.07 billion), being the proceeds of redemption of the December 2015 gilt (government securities) held in the Asset Purchase Program. The Bank also maintained its core rate at 0.5 per cent in an attempt to herd inflation towards its target rate.

Growth in the emerging markets and developing economies (EMDEs) decelerated to 4.0 per cent in 2015, the lowest since 2009, as both external and domestic challenges continued; owing to low commodity prices, financial market volatility, slowing productivity, policy uncertainty and eroding policy buffers as well as weak global trade. The slowdown in the majority of EMDEs has also been attributed to spillovers from weaknesses in major emerging economies, diminishing capital inflows, rising borrowing costs and other geopolitical factors.

The stance of monetary policy in the advanced economies is expected to remain largely accommodative in 2016, except for the United States where monetary policy normalization has commenced. Against the background of suppressed commodity prices and slow recovery, global inflation is expected to remain moderate through 2016.

Domestic Economic and Financial Developments


Domestic output growth in 2015 remained moderate. According to the National Bureau of Statistics (NBS), real GDP grew by 2.84 per cent in the third quarter of 2015, almost half a percentage point higher than the 2.35 per cent recorded in the second quarter. However, third quarter expansion remained substantially below the 3.96 and 6.23 per cent in the first quarter of 2015 and corresponding period of 2014, respectively. The major impetus to growth continued to come from the non-oil sector which grew by 3.05 per cent compared with the growth of 3.46 per cent posted in the preceding quarter. The major drivers of expansion in the non-oil sector were Services, Agriculture and Trade; contributing 1.42, 1.03 and 0.79 percentage points, respectively. The outlook for the fourth quarter of 2015, based on staff estimates, suggests further improvements over the third quarter growth level.
The economy is expected to continue on its growth path in the first quarter 2016, albeit less robust than in the corresponding period of 2015.


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