The prevailing global and domestic developments that impacted the Nigerian economy informed recent monetary policy decisions adopted by the Central Bank of Nigeria (CBN), its governor, Godwin Emefiele, has said.
Emefiele stated this in briefing to the Diplomatic Community on recent Monetary Policy Decisions of the CBN in Abuja on Tuesday.
He said the briefing was necessary to clarify the contextual realities that shaped those decisions and the expectations for the future, while providing an update on the crisis that trailed the recent Naira redesign policy.
On the contextual influences on the policies, the CBN governor said over the last few years, the global economy experienced a series of shocks, including the devastating effects of the COVID-19 pandemic, and the dislocations as a result of the Russian-Ukrainian war.
“Together, these and other disruptive global developments have influenced monetary policy decisions of the central banks in many countries as they struggle to balance the objective price stability with the desire for long-run output stabilisation,” Emefiele said.
During the Monetary Policy Committee meeting in January, Emefiele said the apex bank noted that the impact of the year-long war in Ukraine was still strong on the global macroeconomic conditions, with prevailing risks to short-term prospects escalating.
The conflict, he said, has reflected on the adverse effects exerted on output and inflation, which climbed to about 21.34 percent in December of 2022.
Although he said inflation was beginning to moderate in some key economies, energy supply bottlenecks impacted rising prices, which affected business confidence and eroded the purchasing power of households.
To mitigate external shocks, curtail domestic constraints, strengthen economic fundamentals, elicit structural rebalancing, and boost long-run prosperity, Emefiele said the CBN adopted programmed policy measures to tackle emerging issues.
With CBN’s interventions to support critical economic activities, the CBN governor said long-standing structural constraints have been resolved, while bolstering domestic productivity with favourable effects on market prices.
He expressed satisfaction that key performance indicators, namely non-performing loan (NPL) ratio (4.21 percent no liquidity ratio (44.12 percent) and CAR (13.76 percent), are all outdoing their prudential limits, with wide-ranging stability of the banking system.
On the macroeconomic outlook, Emefiele said the MPC during its last January meeting noted the increasing likelihood of a global recession in 2023.
He said the broad outlook for the recovery of both the global and domestic economies remain uncertain, with the path to full recovery clouded by significant downside risks as a result of the lingering headwinds from the Russian-Ukraine war, heightened inflationary pressure across several economies and sharp slowdown of economic activities in China with the resurgence of COVID-19 pandemic across its major cities.
Forecasts, based on available data on key macroeconomic indicators, he said, showed that the Nigerian economy would continue to grow through 2023, but at a subdued pace.
“The continued high level of insecurity; perennial scarcity of Premium Motor Spirit (PMS) and high cost of other energy sources; increased spending towards the 2023 general elections; rising cost of debt servicing; and deteriorating fiscal balances, remain the key sources of shocks to the Nigerian economy,” he said.
