Economy: CBN Applauds Nine-Quarters Consecutive Growth

• Raises MPR by 50 basis points to 18.0%
• Retains CRR, Liquidity Ratio at 32.5%, 30% respectively 

BY EDMOND ODOK – The Central Bank of Nigeria (CBN) is upbeat that the Nigerian economy has maintained a positive growth trajectory for nine consecutive quarters, since the country exited recession in year 2020.

This is as the apex Bank’s Monetary Policy Committee (MPC) voted to: Raise the MPR by 50 basis points to 18.0 per cent; Retain the asymmetric corridor of +100/-700 basis points around the MPR; Retain the CRR at 32.5 per cent; and Retain the Liquidity Ratio at 30 per cent.

The CBN Governor, Mr Godwin Emefiele, who spoke after the MPC’s 290th meeting in Abuja on Tuesday, explained that the economy’s improved performance is largely driven by sustained growth in the services and agricultural sectors.

Emefiele also attributed the impressive growth to a  rebound in economic activities associated with economic recovery and continued intervention in growth enhancing sectors by the apex Bank.

The apex Bank’s Governor, who read the MPC’s communique said; “Staff projections showed that output growth recovery is expected to continue into 2023 and 2024.

“The Committee, however, observed with concern, the marginal increase in headline inflation in February 2023, to 21.91 per cent, from 21.82 per cent in January 2023, a 0.09 percentage point increase.”

According to him; “This increase was attributed largely to a minimal rise in the food component to 24.35 per cent in February 2023, from 24.32 per cent in January 2023.

“The core component moderated to 18.84 per cent in February 2023 from 19.16 per cent in January 2023,” the CBN Governor said, adding that the shocks to the food component of inflation were driven by high cost of transportation of food items.

Emefiele also blamed lingering security challenges in major food-producing areas and legacy infrastructural problems for hampering food supply logistics in the country.

He further explained that; “Broad money supply (M3) grew by 13.14 per cent in February 2023, below the 2023 provisional annual benchmark of 17.18 per cent”, adding; “This was driven largely by the growth in Net Foreign Assets (NFA), which was attributed to the increase in foreign asset holdings of the CBN and decrease in foreign claims on Other Depository Corporations (ODCs).

“Money market rates reflected the tight liquidity conditions in the banking system. Consequently, the monthly weighted average Open Buyback (OBB) and Inter-bank Call rates increased to 12.74 and 12.54 per cents in February 2023, from 10.14 and 10.35 per cent in January 2023.”

On current Naira crunch in the nation’s financial system, the MPC, in acknowledging the “ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels”, urged “other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.”

“This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy”, Emefiele added.

Among other decisions reached the MPC members was a majority vote resolution to raise the Monetary Policy Rate (MPR) by 50 basis points with the communique saying; “In Summary, ten (10) members voted to raise the MPR by 50 basis points, one (1) member voted to raise the MPR by 25 basis points and one (1) member voted to hold the MPR. All members voted to keep all other parameters constant.”

On the international scene, the CBN Governor, who noted that new and existing headwinds are undermining the full recovery of the global economy, listed the challenges to include the “recent bank failures in the United States and Switzerland, amidst widespread monetary policy tightening, which introduced a new dimension to the risks confronting the global financial system, as well as, the persisting high but receding global inflation.”

He also said the continued hostilities between Russia and Ukraine and its implications to the smooth functioning of the global supply chain remain a critical strain to the recovery of global output growth.