CBN Holds 306th Monetary Policy Committee Meeting, Retains MPR at 26.5%

[00:00:07]The Monetary Policy Committee of the Central Bank of Nigeria is expected to announce its interest rate decision today following the conclusion of its two-day policy meeting. While inflation has shown signs of easing with headline inflation moderating to 15.91% in June, global uncertainties continue to cloud the outlook. Renewed tensions in the Middle East have driven oil prices above $85 per barrel, raising concerns about imported inflation even as domestic business activity recovers only gradually. Against this backdrop, most analysts expect the MPC to leave all key policy rates unchanged as it weighs the evolving inflation and growth dynamics.

[00:00:49]To unpack this, I'm joined by Dr. Ayodeji Ebo. Thank you, Dr. Ayodeji, principal consultant, MDU Consulting, for joining us today.

[00:01:00]And with me in the studio, I have Segun Showunmi, economist, Woodbridge and Scott Consulting. Thank you for joining me today.

[00:01:06]>> It's my pleasure to be here.

[00:01:07]>> And by my left or at my left, I have with me Lateef Adebayo, investment advisor, Meristem Stockbrokers. Thank you also for joining us today.

[00:01:15]>> All right, let me begin with you, doctor. Since the last MPC meeting, what would you say have been the most significant domestic and global developments, and how do you expect them to sort of influence today's policy decision?

[00:01:29]>> Okay, thank you, and great question. So, if we look at within the last MPC meeting, uh it was in March, you know, it's the major uh development is on energy costs.

[00:01:44]You know, that was before the That's That period was when the war the US Israel Iran war intensified, which led to significant spike in energy cost. And we saw that impact on inflation for April, May.

[00:02:01]And while we see there's a moderation in June. So, what you would look at even at the last MPC meeting if you read the minutes that there was also a focus beyond just the core inflation.

[00:02:14]The the food inflation which has stubbornly remained high.

[00:02:19]Which we all know the reason why that has continued to remain high. So, that's going to be like one major focus. Then we also look at the exchange rate within that period. There's been more pressure.

[00:02:30]There's been depreciation especially at the parallel market which is the unofficial market. When you look at the spread between the official and the unofficial market, that spread has widened within when we check if you check it from the last MPC meeting up to now. So, I think by and large is that there's there's been higher pressure compared to what was it like or I would say more dis disequilibrium compared to a bit of stability that we had before the crisis started globally.

[00:03:08]>> All right. So, he talked about the fact that there's been a bit of disequilibrium, something like that.

[00:03:13]Yeah. So, how do you think this is going to impact the decision of the MPC? I mean well, the last one was I think 19th to 20th of May and we're having this one going on now. Yeah.

[00:03:23]>> Okay. Yeah, thank you. I mean, I think you so much doctor. He has accurately said the expectations. But then again, in terms of the impact, we do still expect the monetary policy committee to still hold the rates, right? And in terms of impact generally because there's a lot of uncertainty in terms of economical reforms, even in terms of economical policy especially in the energy space. So, this would probably lead to all seeing the rates being held again at least while all this uncertainty dies down. And generally, we might see perhaps inflation just ease a little bit. And additionally, in terms of impact as well on the macroeconomic >> Sorry, you said inflation, you mean ease again?

[00:04:10]>> Ease a little >> Again?

[00:04:12]>> Yes, yes.

[00:04:12]>> With what we're seeing, the escalating tension, do you think inflation is going to ease?

[00:04:16]>> So, as as as much as as much as the escalating tensions and all of that, right? I would say in the energy space, we have seen a lot of firms increasing their production. I mean, in the upstream space, we've seen Aradel, for example, they just acquired another asset. We've also seen Dangote that's coming up very soon with the listing of the refinery. They're doing a lot of acquisitions so that locally, we still have production with energy, right? I mean, you can even see the price of fuel has eased a little bit and all of that.

[00:04:50]It's just It's going to be marginal easing, but it's not going to be something so enormous in general, yeah.

[00:04:57]>> All right, let me get your thoughts, sir.

[00:04:59]>> Well, um just to start off from that, I would be very surprised if there's a easing um in inflation over the next couple of months. And the reason I say that, not that I disagree with anything that he has said, but I think that there's this lagging effect that we have. And I always talk about this, you know, in the Nigerian economy, um the data you are seeing today typically reflects what happened about a few months ago. Let me not put a specific number to it. So, and you would agree that um in the last three, four months, we have seen escalating prices. Um energy we then drives everything.

[00:05:32]Petrol, when I say energy, I mean petrol, which then drives the price of everything, uh food, transportation, and what have you, right? So, the easing that we saw, that mild I won't call it easing, you know, >> [laughter] >> is a two basis points reduction in inflation.

[00:05:48]I think it's that it's just stable. It's just not moving, right?

[00:05:53]So, that's just some stability because indeed in the period before now, there was a bit of stability like the doctor said, exchange rates kind of has been stable.

[00:06:06]So, a lot of the indicators hasn't really moved much, right? But in the intervening period since then, we've seen things kind of almost begin to revert into chaos, especially on the geopolitical side of things.

[00:06:20]And you know, that has an immediate impact on local macroeconomic data in >> Considering that Yemen, I mean they're talking about it.

[00:06:31]>> Absolutely.

[00:06:33]Yes, we have the other straight. The name is very confusing, so I can't say it.

[00:06:38]Bab el-Mandeb, something like that, right? So, the Houthis are threatening to block the Red Sea the straight of the Red Sea, which will block of the Suez Canal. If that happens, that's an additional 7% of crude that will be strangulated in addition to the 20 So, you are talking of almost 30% of total crude supply.

[00:06:58]Prices will explode. And escalation of tensions between Iran and the US is getting worse by the day.

[00:07:05]>> consecutive night >> night with fatalities on the side of the United States. So, you will see crude oil crossed $90 per barrel just yesterday. It's a bit now, but the chances are that you might hit a hundred again. If that happens, petrol prices will go up. And then you will see inflation again, probably ease up move up marginally. Let me not use the word ease.

[00:07:29]>> [laughter] >> So, we don't So, we don't mix it up, right? So, so So, all of that suggests therefore that the MPC will most certainly not do anything but hold.

[00:07:40]Um, things are um, unstable, so they will not stay It's not the time to say oh inflation has come down to a certain degree, so >> So business points >> is, you know, some people are calling it, um, easing like you said earlier, you know, but I say no, no, no, it's just been stable, right? So I don't think we'll see anything from the MPC other than to simply hold things as they have been.

[00:08:01]>> All right, that's interesting. Doctor, let me bring you in. I'm I'm not sure you've told us where you stand, but I think it it's a given. Everybody thinks there should be a hold today, so I want to believe um that's what you're banking on also. But let's take a look at Dangote's plan to sell, um, products, refined products in dollars. What impact should we also expect as a result of that? I mean, I asked for what has changed, domestically and globally, and I'm not sure anybody mentioned that.

[00:08:26]Does that mean that it will have muted impact?

[00:08:30]>> Okay, I think that's a very interesting perspective. Um, in terms of my position, I align, um, with, uh, the other guests as uh we expect that it would hold. Uh, the MPC uh will hold for the current positions.

[00:08:48]Uh, but if we look at, uh, the Dangote position now on pricing, pricing in dollars, I think yes, it's a business decision. If you recall, uh, to mitigate this, government had had, uh, an earlier arrangement, what we call the naira swap agreement, but I seems it seems that that's is not working effectively. And for a business looking at, um, importing in dollars, so it it's helps to actually be able to gauge the prices. And that is going to wait the current crisis that has, uh, resuscitated is actually going to impact significantly on businesses. You know, you you take a look at the cost of energy is between 30 to 50%. Uh across different sectors ranges from two from sector to sector that you that most businesses put in uh for uh beef to produce or for those that are able to provide services. So, that is going to have direct impact even if this is sustained again and prices of uh the PMS price will rise as high as the 1,405 that we saw uh some weeks back.

[00:10:07]>> All right, that's quite interesting. I mean, considering Nigeria's GDP which grew 3.89% in the first quarter and also improved crude oil production. I mean, your numbers were good. Some would say that, you know, with such a firm growth backdrop, you know, it reduces the pressure to ease on growth grounds and I think that has been established here.

[00:10:25]However, can we look at the true state of businesses operating in Nigeria, whether they are MSMEs or large corporates? Do all these macro numbers translate to, you know, other things for them?

[00:10:39]Better things for them rather. Let's begin with you, doctor.

[00:10:43]>> Okay. Yes, I think it has a very strong correlation uh because when you look at it, let's take it from energy.

[00:10:52]The reason why we pay a lot for goods and services is firstly the cost of production is high and energy has high input. Then you also want to look at logistics which is the movement infrastructure that is really down. That means we pay for a lot things that should be moved by uh train train uh rail system is being moved by road. That we would pay a lot. And thirdly is insecurity. So, you will see that all these have direct impacts on businesses. And for some businesses, the margin is uh is also very thin. I think there's one that I missed out that I'd like to talk about is the cost of borrowing which has continued to remain high. So, for most businesses struggle.

[00:11:40]If you don't if you you're in a very competitive sector where you don't have the leeway to increase your prices or you're not a price leader within that space. So, it I would say that it has very direct correlation and for most of the businesses, especially when you look at food that space, you see that in terms of spending average of 50% of income by most Nigerians spend on food followed by transportation. So, when you look at those two sectors because you don't have a choice.

[00:12:14]You have to move and you also have to eat. It depletes the consumer wallet and it's what is left or if something if nothing if something is left that you now begin to look at other secondary things.

[00:12:29]>> All right. What what did you say Dr. Value placing consumer wallet? I think everybody in the studio sort of responded to that and that brings me to my next question talking about households. I think he already sort of mentioned the pressure points, but let me get what you have to say if you have anything to add to the pressure points for households really as we stand.

[00:12:45]>> Yeah.

[00:12:46]I mean, thanks to Dr. again. Majorly for households of course, the regular cost is feeding and movement transportation.

[00:12:54]I mean, there are several Nigerians who do that noted my head when he spoke that the moment we look at the earnings and we look at where the cost is going to more than 50% is on feeding and transportation, right? And what does this mean? It just means most of disposable income which is only the aspect that I want to that I I think I want to touch on is eroded. And if disposable income is eroded, people cannot make sufficient long-term plan because what we just see is the short-term. How do we feed now? How do we move now? But thing being having thoughts in regards of okay, how do I save? How do I position myself at least to be able to beat the inflation rate so that I can get to a position where my funds are working for me, where my money is working for me, and I'm not just spending money on the basic items, right? Which is why I would just say generally as households or as the on the micro scale, it's very important that we start having this long-term thinking beyond the day-to-day feeding and transportation.

[00:14:00]How do we move more towards long-term sustainable savings, long-term sustainable investments, and all of that?

[00:14:08]>> All right, thank you so much. So, we hear that the 306th meeting, or let's say the decision, will be announced any moment from now. So, we join our colleagues in Abuja, so they will be bringing us that.

[00:15:11]Well, there you have it. The CBN governor just sort of I think he's just getting settled in. So, before he comes in, let's just uh pick up from where he stopped. He was talking about, you know, households and all of those things.

[00:15:22]Beyond the rhetorics, really, how do we ensure that there is more money in the pockets of Nigerians? I know the government has rolled out a couple of things, but I want to look at the five the five programs you just talked about recently. And apart from that, we also have this scorecard to track, you know, shared prosperity. These are some of the things the government wants to do. How do you think these things will work out?

[00:15:43]>> Uh man, I think I think we're a long way off.

[00:15:47]People, you know, it's easy to look at the macroeconomic indicators as analysts and say, "Oh, things are getting better." And they are. You know, from a macro point of view, the economy is stabilizing.

[00:15:57]And you could even argue that maybe we are beginning to turn. It's like a huge tanker trying to make it an about-face, right? And when I say tanker, I mean a ship on the on the ocean, right? It will take some time before you even see that it's it's turning before it then makes the turn. So, it will take time.

[00:16:13]However, the damage that has been done to disposable income, like he mentioned, you know, is is is fundamental. And the interventions that are available that you speak about barely scratch the surface.

[00:16:30]>> But these are new ones that have just been built. Hope Gov, Hope PHC, Hope Edu.

[00:16:35]>> What's What's the What's the What's the volume of funds that are available? What would the structure be, you know? People, as we are saying, I mean, I think that my brother here was even very generous when he said 50% is being spent on food and transportation.

[00:16:51]NBS reports, as far back as I think 3 years ago, stated, and this was before the escalation, 60% of monthly spend, the average household spend, is on food. And a further 10 to 15% on transportation. This is NBS statistics.

[00:17:10]So, you are talking of 70%, 75% of your disposable income on a monthly basis going into these essentials without which you cannot exist, Right? So, if you don't find a way to ease off that, then there's very little you can do unless you create wealth. And it takes time. You know, so so the damage that has been done by this maybe arguably necessary reforms is going to be very difficult to fix unless there's some sort of massive See, the money that we saved must be put back in.

[00:17:42]I have repeatedly stated, you may take subsidies away from PMS. You may take subsidies away from energy and from the forest market. The monies that you save must go back into some sort of interventionist schemes, otherwise people will suffer. And that's what we're seeing. So, that's why I ask these programs that we that have just been rolled out, you know, it will be very interesting to see. I haven't seen it, right? So, I can't really speak about it, but it's very interesting to see the the quantum of funding funds that is going to go. People need money.

[00:18:09]>> 3.05 billion dollars.

[00:18:12]>> Okay, so I'll do I'll do a a quick math on that >> [laughter] >> uh to determine uh what we're talking about. So, three three 1 billion 1 billion dollars is about a 1.3 trillion naira. So, you're talking about 4 trillion naira, you know.

[00:18:29]Um I I would still say it's a scratch.

[00:18:33]That's about roughly 8% of the national budget. It's not enough.

[00:18:39]>> All right.

[00:18:39]>> To deal with the dislocations that has happened.

[00:18:41]>> We'll come back to that after that. Now, let's turn our attention to Abuja, where the CBN governor and chairman of the Monetary Policy Committee is speaking.

[00:18:54]>> 106th meeting on July 20 and 21, 2026.

[00:19:03]The committee reviewed recent developments in the global and domestic economies.

[00:19:12]Assessed emerging risks to the outlook and considered their implications for monetary policy.

[00:19:23]11 members of the committee were in attendance.

[00:19:29]Decisions of the MPC.

[00:19:34]The committee decided as follows.

[00:19:39]One, retain the monetary policy rates at 26.5%.

[00:19:49]Two, retain the standing facilities corridor around the MPR at plus 50 to minus 450 basis points.

[00:20:05]Three, retain the cash reserve requirement, CRR, for deposit money banks at 45% merchant banks at 16% and non-TSA public sector deposits at 75%.

[00:20:31]The committee's decision to maintain the current policy stance followed a thorough assessment of the balance of risks.

[00:20:45]Although the headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East.

[00:21:05]In view of the evolving developments, maintaining a cautious monetary policy stance remains appropriate.

[00:21:19]Considerations.

[00:21:21]In arriving at its decision, the committee noted the recent resurgence of hostilities in the Middle East with particular attention to its spillover effects on global energy prices and the potential pass-through to domestic inflation.

[00:21:47]Notwithstanding the development, available evidence suggests that the Nigerian economy has remained largely resilient to the external shocks, reflecting the gains from prior reforms implemented by the fiscal and monetary authorities.

[00:22:14]However, maintaining the current monetary policy stance will provide an opportunity to closely monitor incoming data and assess the trajectory of inflation to guide future policy decisions.

[00:22:40]The MPC acknowledged the federal government's renewed commitment to strengthening policy coordination with particular emphasis on the ongoing collaboration with the monetary authority, which has helped to moderate the impact of the Middle East crisis on the domestic economy.

[00:23:09]Members thus noted that greater alignment between fiscal and monetary policies would enhance policy effectiveness and support the achievement of overall macroeconomic objectives.

[00:23:29]To further strengthen macroeconomic fundamentals, the committee underscored the potential benefits of Executive Order 9.

[00:23:44]Members further commended government's renewed efforts in improving crude oil production and encouraged relevant agencies to strengthen the implementation of reforms to maximize the potential in other sectors such as solid minerals to complement government earnings.

[00:24:09]The MPC welcomed the positive outcome of the banking sector recapitalization exercise, noting the improvement in the resilience of the banking system as reflected in key prudential and financial soundness indicators.

[00:24:33]It nevertheless urged the bank to sustain effective surveillance to preserve financial sector soundness and mitigate potential risks to financial stability.

[00:24:52]Price and other domestic developments.

[00:24:57]Headline inflation, year-on-year, is marginally to 15.91% in June 2026 from 15.93% in May 2026.

[00:25:14]Ending the three consecutive months of uptick in price levels.

[00:25:23]The decline resulted from a decrease in the non-food component, which offset the increase in food inflation.

[00:25:35]Food inflation rose to 17.52% in June 2026 from 16.96% in May 2026, reflecting supply constraints in major food-producing areas and elevated transportation costs.

[00:26:01]However, core inflation moderated to 15.92% in June 2026 from 16.82% in May 2026, largely on the back of exchange rate stability.

[00:26:23]Similarly, the 12-month average inflation rate sustained its decline to 17.63% in June 2026 from 18.36% in May 2026, marking the sixth month of consecutive moderation and reflecting a slower pace of price increases over the medium term.

[00:26:56]On a month-on-month basis, headline inflation declined to 1.66% in June 2026 from 1.75% in May 2026, driven by a slowdown in core inflation.

[00:27:22]Real GDP expanded by 3.89% in the first quarter of 2026 compared with 4.07% in the preceding period.

[00:27:38]This was largely driven by the resilience of the non-oil sector, which grew by 3.94% supported by improvements in telecommunications, financial services, trade, transportation, and other services subsectors.

[00:28:05]Oil sector GDP growth rate declined to 2.57% in the first quarter of 2026 from 6.79% in the fourth quarter of 2025 due to the maintenance of oil facilities and installations.

[00:28:27]However, recent data showed improvement in economic activities as composite purchasing managers' index PMI rose to 50.1 index points in June 2026 from 49.6 index points in May 2026.

[00:28:55]Gross external reserves rose to 52.

[00:29:00]52 billion dollars as of July 17, 2026 from 50.47 billion dollars as of end of May 2026.

[00:29:14]Mainly as a result of receipts from crude oil related taxes and third party inflows.

[00:29:25]This is sufficient to finance approximately 11 months of import of goods and services surpassing the international benchmark of three months cover.

[00:29:44]Global developments.

[00:29:47]Recent estimates indicate that global growth is anticipated to slow to 3% in 2026 compared to 3.5% in 2025 reflecting the impact of heightened geopolitical tensions in the Middle East, trade policy uncertainties and tight fiscal conditions.

[00:30:18]Risks to global inflation remain on the upside.

[00:30:24]Driven mainly by the increasing prices of crude oil and other commodities.

[00:30:34]Inflationary pressures are likely to be further amplified by supply chain disruptions and climate related shocks inhibiting food production.

[00:30:50]Additionally, exchange rate volatility and fiscal constraints pose upside risk to inflation in most emerging and developing economies.

[00:31:06]Outlook.

[00:31:08]Output growth is projected to remain resilient in 2026, anchored on the recent improvement in crude oil production, expansionary purchasing managers index, and the positive impact of timely policy reforms.

[00:31:32]Inflation is projected to moderate further in the medium term on the back of continued stability in the foreign exchange market, lagged effect of previous monetary policy tightening, and improved food supply conditions as the harvest season approaches.

[00:31:59]The key risks to the outlook, however, remains the severe and prolonged escalation of the Middle East conflict.

[00:32:12]In the light of these considerations, the committee reaffirmed its commitment to preserve price and financial system stability, and remains prepared to take appropriate policy measures guided by evolving macroeconomic conditions.

[00:32:39]The next meeting of the committee is scheduled for Monday, 21st, and Tuesday, 22nd of September, 2026.

[00:32:54]Thank you.

[00:32:55]>> Thank you, Mr. Governor, sir.

[00:32:57]Our communique number 163 presented by the chairman of the MPC and the governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso.

[00:33:11]As usual, we'll take questions from members of the press.

[00:33:15]Please, when asking your questions, state your name and don't forget your medium, and then ask your question. One question, please. Thank you.

[00:33:26]>> Thank you very much, Mr. Chairman. I have one question for the governor.

[00:33:28]>> [laughter] >> Mr. Governor and members of the MPC, I'm Nancy from Money Line with Nancy.

[00:33:37]I apologize. Uh Governor, let's take it from where you ended uh your speech. You talked about headline inflation, which has been relatively flat at least the last 2 months. Our inflation rate is 15.91% in June, from 15.92% in uh in May.

[00:33:55]Um and we've seen inflation hover around 15 to 16% for the last uh four uh months. So, I'm wondering if um that is a comfortable place to for the Central Bank's uh MPC looking at it, because I heard you clearly earlier on when you talked about um you'll do everything possible, you know. So, I'm actually wondering with the supply-side risk we're seeing from the spread of homo situation, global energy pressures also adding to what we're having here uh in Nigeria, how uh is the CBN going to tackle headline inflation and if you're still on the trajectory of single digits. So, because inflation that's what hits all of us. It's the thief that we are all chasing. And the side parts, congratulations for the international recognition Central Bank of the Year. Let me just give you that. So, congratulations.

[00:34:56]>> [laughter] >> Well, thank you very much, Nancy. Um again, I think it's appropriate to remember where we're coming from.

[00:35:10]Um 11 months of disinflation and quite frankly from every indication, we were expecting that that by early 2027, we would be where we want to be in terms of inflation and, you know, firmly on track for single digits.

[00:35:32]Unfortunately, as you know, and you said it, um these were shocks that came that, you know, were not anticipated in that manner.

[00:35:43]And has gone on a lot longer than could have been anticipated.

[00:35:50]And really and truly at this stage in the game, who knows how long that is going to be.

[00:35:56]So, it's not something we can wish away.

[00:35:59]It's just something that we need to deal with.

[00:36:04]Um we are pleased, however, on two counts. One is the fact that um inflation has moderated, albeit slightly.

[00:36:17]It has moderated. Headline has moderated. So, that gives us an indication of the fact that the tools that we have implemented so far are bearing effects.

[00:36:31]They are bearing effect.

[00:36:34]Um secondly, and you're absolutely right, there are rigidities, you know, that is our rigidities that really and truly um hit you from different sides.

[00:36:46]Collaboration between the fiscal and the monetary at a time like this cannot be overemphasized.

[00:36:54]And we intend to deepen and strengthen that collaboration such that we are alive to the responsibilities.

[00:37:05]And as I said, we will do what we need to do to ensure that we can contain um rising inflation in any manner and bring it to the single digit that we have said earlier and we still continue to stand by that.

[00:37:20]Um on the other note, I thank you very, very much for your kind words with respect to um the Central Bank award, Central Bank's global award for 2026.

[00:37:39]Um and I I a couple of things I think it's important to say here.

[00:37:45]One is that if you recall for those of you who may have followed, I was very clear in dedicating that award not to the Central Bank Governor, but to the staff and management of the bank.

[00:38:03]I I felt and I do feel that that was a very, very important thing to do because I've understand fully that a lot of the very, very hard work that has been done by the Central Bank has not been done by the governor on his own, but has been done by the whole bank.

[00:38:28]And at times like this, when these recognitions come, it is important to sit down and reflect on the road of travel and why we are this relatively more successful and recognized internationally. By the way, this is not a local recognition.

[00:38:50]And one of the things I said when we received that award is that, you know, the responsibilities of Central Banks around the world are a very solemn one.

[00:39:04]They're very solemn one.

[00:39:06]What do we mean by that? We mean that they are very serious one.

[00:39:11]It's not something that you take lightly.

[00:39:15]Because the decisions you take impact millions of people, and in our case, hundreds of millions of people.

[00:39:25]So, those who are dedicated to the cause, who are working behind the scenes to ensure that the Central Bank is living up to its expectation expectations, need to be recognized.

[00:39:40]The other important thing from that is the resilience of the Nigerian people.

[00:39:47]The resilience of the Nigerian people.

[00:39:51]This has been a hard and tough journey.

[00:39:58]It's not been easy by any stretch of imagination.

[00:40:02]And I know that sometimes I get asked the question that how does that percolate? And you are one of those that have asked me that question a number of times. How does that percolate to the man on the street?

[00:40:17]Now, if you watch, you will see that one of the most fundamental shifts that has taken place over the past couple of years is the stability of our system.

[00:40:34]Now, without that stability, you don't get investment.

[00:40:39]And without that investment, you don't get the growth that you need.

[00:40:43]So, it's been so important to ensure that we worked hard to get that stability in place.

[00:40:53]And that has forming the platform for the greater growth in our economy. Reserves have been up.

[00:41:06]Um as I said, the stability is there.

[00:41:10]And the resilience is gradually paying off. So, I I thought it was very important to mention that. And then finally, finally, >> [snorts] >> I I think one message that certainly I have gotten from this, and I would encourage everybody else to, is the fact that we are not an island.

[00:41:33]We are not an island.

[00:41:35]We would be making a mistake to think that the things we do are not recognized and are not monitored by the rest of the world. They are.

[00:41:48]They are.

[00:41:50]And all the very difficult and painful reforms we've made, which were eloquently spoken about during the awards ceremony, are ones that have been have been tracked by those who make it a point of duty to do so.

[00:42:09]And they can see that they are those reforms have taken us to a journey that is paying off for Nigeria and as things as other things begin to cascade and join with this, I'm confident that there'll be better times ahead for the country.

[00:42:31]>> [snorts] >> Good afternoon, Mr. Governor.

[00:42:36]Members of the MPC, my name is Lukman of The Nation newspaper.

[00:42:40]Mr. Governor, sir, the IMF recently said that the naira is estimated or a bit undervalued. Estimated at about 1,142 naira to the dollar.

[00:42:53]That's what they're saying. This suggests that the currency is about 25.6% undervalued.

[00:42:59]What is the position of the Central Bank on this? Thank you very much.

[00:43:03]>> Thank you very much.

[00:43:05]Um Again, to say that >> The CBN Governor and Chairman of the Monetary Policy Committee, well, Cardoso right there talking about the fact that they have decided to retain all parameters, including the Monetary Policy Rate at 26.5%.

[00:43:30]Of course, I still have right here with me Dr. Ayodeji Ebo, Principal Consultant, MDU Consulting. Thank you, doctor, for staying with us. And right here in the studio, I have Lateef Adebayo, Investment Adviser, Meristem Stockbrokers. Thank you for staying with us. And of course, I still have here Segun Showunmi, Economist, Wood Region Consult. Thank you for staying with me.

[00:43:51]Okay, so let me begin by saying, I believe we're not surprised by the decision the decision of the MPC because those were the things we already highlighted here. But beyond the decision, he talked about some other things and I would like you to respond to them.

[00:44:06]>> Well, I mean, look.

[00:44:08]Off air, we're kind of enjoying the flow of the CBN governor. And it paints the picture of a man that has done well. And he has. We really, really have to give him his flowers. You know, all of the tools And we've been saying this for some months now. All of the tools available to a monetary policy authority has been deployed, and they've been deployed effectively using data.

[00:44:32]Now, what I have liked about what he has done is um in spite of what the data says, this is very important for for Nigerians to understand. In spite of what the data says with regards to inflation, the CBN has not followed.

[00:44:47]You know, it's it's a very interesting thing, you know. And we're talking about this off air as well.

[00:44:51]Um the the reality, our reality and the official inflation numbers are different. Now, the inflation numbers are reflecting the reality that prices are no longer escalating as fast as they used to be, right? So, we have disinflation. We do not have deflation yet. However, the absolute quantum of inflation itself is is not correct. You know, what we've done is that we've I like using the word manipulate because it's a bit um it's a bit um aggressive a word, and it gets attention. We've manipulated the basis for calculating inflation, and we're working towards an answer. And you can hear him saying the promise will deliver.

[00:45:35]>> when you say we've manipulated, the thing is usually you should review the parameters. You should review the basis.

[00:45:41]Of course, and that's what they did.

[00:45:43]>> Absolutely. However, you it's a bit unusual to have a a base year that is just last year, 1 year previous, prior as your base year. What you're doing therefore is you're eliminating the very critical historical information of 2, 3 years before. So, So, you calculate inflation and you start from 2021, the number you will have is significantly different from if you calculate if you start from 2024, which is what we've done. The second thing and why I say we manipulated is that the the proportion apportioned to the components of the basket, especially food and energy costs, um do not align with the data from the NBS itself. We reduced the proportion allocated to food to about 49% as against the 60 65% that is the NBS says um represents the proportion of Nigeria spent, the pocket of Nigeria spent for that item. You see, those are very subtle ways of manipulating the basis of calculation to arrive at an answer. So, what the CBN has done is that they have kept the spread between inflation, so the real interest rate in Nigeria today is about 11%.

[00:46:56]That only happens in an environment of high inflation. Go check it anywhere in the world. Your your your spread the spread between inflation rate and your monetary policy rate is supposed to be determined by where inflation is and what you're trying to do. So, if inflation is very high, what you do is you increase monetary policy rate to thin that spread from negative maybe and then you cross into positive inflation is very bad.

[00:47:20]Right now we're at positive 11%.

[00:47:23]What that suggests is that the CBN knows that actually inflation is not 15%.

[00:47:29]We're probably somewhere around 25% right now, you know, which is which which aligns with where we were before the rebasing was done, which was 34% and then we've seen consistent reduction in inflation for 11 months, which would probably have put us somewhere around 24 25% as at today, which is why you see that MPR is 26. If inflation is truly at 15%, then the CBN would have aggressively eased off MPR. So, you can have an impact on borrowing costs.

[00:48:01]>> But, you know, what about the impact on FPI at the end of the >> Absolutely. Absolutely. I understand that. But, you see, that would not have been an issue if inflation because what the foreign portfolio investor is looking for is real earnings.

[00:48:14]>> Real returns.

[00:48:15]>> Real returns on investment, right? So, if you have a a positive spread of 4%, they'll come. Because in their own environment, they cannot get for the spread of more than 1% at at at maybe 1.5%. So, if you have a positive spread of 4% between inflation rate and MPR rate, then FPIs will come. So, it's not only about the FPIs that the gentleman recognizes with his committee because like he just said, it's not just him.

[00:48:39]They recognize that the inflation numbers don't really reflect reality.

[00:48:43]And if they follow the inflation numbers in >> You know, he didn't say this. You are the one who did this.

[00:48:46]>> I'm the one saying this. So, so, >> [laughter] >> this is my opinion. And I know Sorry.

[00:48:50]And I know that it's probably an unpopular opinion as well, right? So, if they follow inflation numbers and move monetary policy rate as they probably should, inflation will explode.

[00:49:01]Because they would they would ease money supply and we'll see that prices will go up again. So, so, there's an imbalance between lending rates, inflation, and monetary policy rate.

[00:49:13]There is a structural imbalance in that.

[00:49:15]If you check what the traditional relationship between those three parameters are, what is happening in Nigeria is an anomaly.

[00:49:21]>> All right. Uh doctor, let me come to you. First, I'd like you to probably respond to some of the things that the CBN governor has said. And also, I'd like your thoughts on what uh Mr. Shokunbi has just talked about.

[00:49:34]>> Okay. Thank you very much. So, we would when you would see that one, it's in line with expectation.

[00:49:41]And but, you would see that the attributed the decision to the resurgence of the the tension.

[00:49:52]Which I feel that it's also beyond that.

[00:49:56]And that slightly aligns with what Mr. Ashiwaju just like mentioned. I feel that beyond the resurgence of global tension, when you check the month-on-month food inflation rates at over 2.5% to 2.6%. If you analyze that, that's almost 30% inflation rate. It means that if we continue at this rate for the next 12 months, inflation can print close to about 30%. That's food inflation, which is a major consideration, which I mentioned earlier that the last even look at the last minutes or minutes of the last meeting, CBN actually highlighted food inflation as a major concern.

[00:50:41]So, I think that yeah, some of those the consideration, what they have done also the alliance with what we've all expect. And as a result of that, we don't expect any major reaction across the market, the equities market, the fixed income market, and the effects market.

[00:51:03]We think that it's since it's in line with expectation. And so, to me, I respect Mr. Ashiwaju's view. And the way I would also just look at it is that focus of the CBN and what may have slowed them down or make them a bit more cautious is the month-on-month inflation rate. It's still very high. Even if you look at the headline inflation rate at 1.6%. Yes, it dropped, but we expect that this resurgence of global tension would impact again on energy price. So, if we look at if you break down the inflation numbers, the energy sub sector has declined by 4.3% compared to an increase of 0.3% in May.

[00:51:57]But, if you look at between March and April, actually surged by about 6%. So, it means that if this global tension is not curtailed, energy inflation would also now increase significantly, which would impact on headline inflation. You know, the right we know that the energy cost even with the rebasing and the rebalancing of the of the index, energy has also taken a major a major share, which means that it will reflect in the July inflation number if this resurgence in the global tension is sustained for long.

[00:52:44]>> All right. Thank you so much. Let me come to you now. I think great deal of both dealt with that already. So, I'll be coming to food inflation. Even the CBN governor identified that it's been sticky, you know, and all of those things. And he also talked about supply constraints as some of the challenges.

[00:52:59]Speak to this. How How do we really solve food inflation, really?

[00:53:04]>> Right. Um I mean, great question, right?

[00:53:08]The first aspect is we all see it. The consumers see it. I mean, the bread that I bought 1,000 naira earlier in the year is probably around 1,200 or 1,300 now, right? Which is why I also agree with Mr. Shippers' view in regards to some of these data just appear inconsistent. But, in terms of solving the food inflation, we just have to look at the basic necessities that leads to food that is consumed by people. Number one is insecurity. I mean, to transport goods all the way down from the north, some items like maybe pepper, tomato, and all of that, all the way down from the north to the west, sometimes these transporters face a lot of insecurity, probably a lot of tariffs that they're paying on the way just to make sure they are they are safe. And as people in the west, or the Yoruba's would call it, they have to say a lot of money to do those just to make sure they are able to get their goods down to the consumers. And if they're doing all of this, this just means that they would also um include all of these costs as part of the cost of being able to transport those goods. Number one, insecurity, we really really need to do something about that. Then the next item also, which would be the farmers. What are the reforms that goes into that sector? I mean, as naturally, as an advisor, some aspects of the industry that we look at, okay, we're looking at energy, we're looking at financial services. If we're looking at growth, I would argue that the agricultural sector has not really grown.

[00:54:43]So, if agriculture is not growing, how do we really expect this food inflation that is one of the biggest consumption of households to really ease? The transportation, first of all, is an issue. Then again, the resources that the farmers need to be able to get things done is another issue. So, these are just, I would say, the basic things that we really really implore the government to look at so we can have easing in inflation.

[00:55:10]>> All right. We're still talking about food inflation. The government has actually done a couple of things. I mean, it's like the government is really putting out stuff, you know. Okay, so there is this Look at that.

[00:55:19]>> [laughter] >> Okay, so there is this, you know, a reduction in import duties and, you know, things in that regard for food, for vehicles, and all of those things that the government, of course, unveiled, which took effect from July 1 this year. And there are other things the government has really been unveiling, you know, to address some of those, it's cocoa or some of these seeds or fertilizers that they are sharing.

[00:55:40]So, why is it that these things have not necessarily translated into, you know, meaningful change?

[00:55:48]>> I I I think that the for me, the fundamental problem is that a lot of the policies appear to be tokenistic. They're simply not um um proportionate to the size of the problem, right? So, when you talk about duties, for example, okay, great initiative. You know, that was attempted, I think it was last year or was it the year before and we didn't that it didn't come to fruition. So, we're going down that road again. If it works, it will have an impact because we do still import quite a lot of our food um stock. Um however, the the challenge for me is that in line in addition to the things that he has said, look, the the the the solutions to our problem uh there's there's a there's a quick win.

[00:56:33]But, it's a it's it's a political landmine that the government will not I don't even think they they're interested in going down that way.

[00:56:41]Uh aside from that quick win, which is subsidy, by the way, I'll just put it out there. If you really want food prices to come down today, you've got to subsidize food. You've got to subsidize agriculture.

[00:56:54]Um subsidize the inputs and subsidize transportation. And it can be done. It will require some rigorous thinking, some proper regimented planning, but it can be done. Now, if you don't do that, and I know that that won't be done.

[00:57:07]>> government spending >> Of course it will, you know, but but you've got to look you've got to Not necessarily. I thought we've saved a lot of money by removing subsidy. So, let's let's >> that money has been shared.

[00:57:18]>> Oh, I see that.

[00:57:20]You know, so so so that that's it's a very difficult conversation to have, as we've just seen now, you know, with what just happened in this quick exchange, right? So, they won't go there. Now, unfortunately, if you don't go down that road, it takes courage to to say, "Look, this is the problem." And then you confront it and apply the real solution that will affect the ordinary person on the street in the immediate term. If you don't do that, the solutions are structural. There's going There's going to take time. So, he spoke about transportation. How do you fix that? You've got to fix the roads.

[00:57:50]Or, better still, like Dr. Ibe was saying earlier, rail transportation.

[00:57:54]Everywhere in the world, you don't transport food, you know, on by the road. You move them across rail systems because they're cheaper and they're faster, right? So, how long will it take to connect Benue State with Lagos State and with Kano State by rail? We're talking years, right? So, the structural fixes to the problems that the agricultural sector faces will take time to implement and it'll take time even after implementing for them to then begin to trickle down and pass through onto the ordinary Nigerian. So, in my opinion, if we do not take the very difficult decision, "Look, we've removed subsidies, our fiscal health is much better. We now then need to look back and say, "Look, we've got to take some of these savings and reinvest it in the people." And it's not in this hope hope hope all of these programs. And that's why I was smiling. Hope God, hope you hope These are political, you know, come on.

[00:58:45]>> Well, the food milling is what you should probably >> No, but No, no, no, no. It's We're playing We're playing with acronyms when people are suffering, right? And I've looked at the number you say is 3.05 3.05 billion dollars.

[00:59:00]>> Mhm.

[00:59:00]>> Right? If you take the average number of Nigerians that are poverty threatened, it's about 150 million, right? Split that just you know, just as an academic exercise.

[00:59:10]Split the 3.5 billion dollars amongst this one 150 million people. It's 27,000 naira.

[00:59:17]27,000 naira one one off. So, of course, we know that the money will not go to everybody. So, there's going to be some sort of program to determine who gets what and all of that. And you probably get people have more than that, but you can just see that in terms of quantum and effect, it's nowhere near enough.

[00:59:32]So, I think that the government needs to do a little less of politicking and be more interested in the ordinary Nigerian and what they're going through.

[00:59:41]>> So, what you have a problem with is the use of the acronyms?

[00:59:44]>> No, it's it's it's it just shows I mean hope election is six months >> [laughter] >> Election is six months away. Come on.

[00:59:52]Come on.

[00:59:52]>> All right, Dr. Evo, before we go, I I'll come to you to talk to us about the banking sector because the CBN governor also talked about that. He was talking about how that the banks need to sustain effective surveillance so they can mitigate potential risk. I'd like you to speak to that, but before then, can I get your thoughts on what we just talked about now for about 30 seconds before you then talk about the banks?

[01:00:16]>> Okay, so starting with the So, I the submissions are also in line with my thoughts but I will also just add that insecurity is also a major factor that is impacting on food inflation.

[01:00:32]That is major. So, I was checking the NBS data.

[01:00:39]The Benue State, which we call the food basket of the nation, is the has the second highest inflation food inflation rate.

[01:00:51]It means that there's no production of farming going on within that space.

[01:00:56]Means food is scarce. So, that is that just portrays or just highlights that they are very this insecurity is a major issue that should also be focused on. No farming is if farming is not going on, what do we harvest? And if we harvest little, it means that we would have to supplement it with import importing some of these food items from neighboring countries and the cost would go up. So, these are some of the things if we look into insecurity, let people be able to go back to their farm and their lives are safe. As a result of that, production, food production would increase and that may force price to come down while we work on the logistics of moving these items as well as preservation. So, now on the banking sector, Yeah, so the CBA governor has done a lot and he has been close moni- monitoring, you know, the We also saw the latest one is on the holding structure for those that have international uh uh uh branches or they have a international affiliation. So, what the CBA is also just saying is that his focus is on the protection and uh preservation of the banking system, which you or the financial system or stability, but I use the word stability of the financial system, which it will help us that we know that that step uh that helps to build confidence for customers. And if you also know that with the capital that has been raised, you know, what the CBA governor or the the governor and his team is focused on is that yes, you have raised capital.

[01:02:44]We saw what happened in 2007 after the bank 2005 consolidation, how the capital was uh misused. Now, we are going to re-fence this capital and ensure that they are they have value, not just raise the money. They have value to the shareholders that you have committed to. And I think those are some of the policies that has been introduced and the surveillance and the monitoring that we are seeing across uh on a week-by-week basis or sometimes within the month to ensure that the bank's stability is preserved. We can be able to see the shareholders that have committed much to this are able to benefit in the medium to long term.

[01:03:33]>> All right, doctor, before I let you go.

[01:03:36]We know that the the MPC has decided to hold. However, elevated interest rates sort of increase borrowing costs not only for businesses and households, but of course that also happens for the government through debt servicing. Now, talk to us, how should the MPC sort of balance the fight against inflation with the need to support economic growth and then fiscal sustainability?

[01:04:00]>> Okay, thanks. So, I think we sometimes we have too much from the monetary authorities. There's a limit to what they can do about growth. The fiscal authorities should also be held responsible because when you know, like now we we spoken about insecurity, the logistics of moving things, and even creating the enabling environment that will attract foreign direct investment. You really you look at the last capital importation data, less than 3% accounts for foreign long-term capital, which is the capital that will build the economy. So, I would say that yes, cost of borrowing is still very high. It's um to most of the businesses. But when you look at it, there may be other costs, cost of power, cost of transportation, and even the regulatory costs, which would be higher than even the the interest rates that they are paying.

[01:04:58]So, these are some of the things that government can help look into into into it, and as a result, if we are able to be able to bring down that cost, then that would also reduce the cost of production.

[01:05:12]>> All right, thank you so much. I'll let's get your parting words before we go, uh Mr. Shubitan.

[01:05:17]>> Well, I mean I I think that um for me, the CBN has done they deserve all the flowers that that you can ever give them. They've done very well um with the tools that they have available to them to manage the crisis that handed down to them. And we're now achieving some sort of stability. So, like uh Dr. Ebo said, I think we need to start looking more, turning the searchlight towards the fiscal authorities to to be more uh to be as scientific, let me put it that way, as the CBN has been, right? In then moving us forward. Now we've achieved stability, we need to achieve growth. If we drive growth um aggressively, then the poverty question will recede, you know, people's disposable income will go up, income levels will increase because there's economic activity and all of that. So, um there's so much to be done um across board. And and some of these things we make them sound as if they're esoteric and they're difficult, but they're not.

[01:06:12]Power, electricity, you cannot achieve growth if you do not fix electricity.

[01:06:16]And electricity has not moved. It's just the needle has not moved. It's a problem that has just refused to to budge. And it's because we're not doing the right things to sort out. And that's just an example. So, there's so much that the government needs to do um to help trigger growth from this point of stability that we have achieved. And uh we're eager to see that happen. Let the politics period go, you know, and then let's let's see governance. I think there's been too much too much of politics and less of governance.

[01:06:44]>> Okay, thank [laughter] you.

[01:06:46]It's pre-election year, anyway.

[01:06:48]>> Yes.

[01:06:48]>> All right.

[01:06:48]>> Absolutely.

[01:06:49]>> Yeah, I mean, from my end, I would just say, in addition to what he has said, the two major factors we're looking at on the macroeconomic um scale and on the microeconomic On the macro, we've seen CBN do so well with the Monetary policy committee and all of that. But, physical governance is very important. Now, we need to turn there. Now, the government needs to start taking action just like the CBN has done. I mean, the CBN since they this Cardoso's session came in, we've seen FX stabilizing. Even in the equities markets, we have seen the result of this. I mean, in the first half of the year, the Nigerian equities market was the best in the world, even beating Korea. I mean, for you to have that type of statistic, you just understand that we have a lot of foreign investment. But, we that we own this equity market, that we own this investment schemes, how are we opening ourselves on the macro on the micro levels? How are we opening the households? Do the households have enough disposable income to actually be able to invest and be able to get returns from all these policies that we've already put in place. So, I think it's just it's high time that monetary policy committee, well done. The fiscal governance, we need them to start doing the work, all right, and stop being political.

[01:08:07]>> Well, to to add to that, I'll say that the fiscal authority has I mean in in in a short period rolled out a lot of stuff. So, let's just watch and see how those will be implemented and what results or what impact we can derive from those. Thank you so much, Latif Adebayo, for joining me today. Thank you so much, Sasha Moghalu. And thank you, Dr. Abiodun Adedeji, for being a part of this conversation. And thank you to you, too, for watching. I am Perpetua Ononobi Peter. Enjoy the rest of the day and bye for now.

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