MPR = 11.5%p.a

CRR = 27.5%

Liquidity ratio = 30%

Status Quo Again! - No Surprise!

Chickens coming home to roost!

Inflation! Inflation!!

15.75%

Recession Over in 2021

Positive growth likely in Q2/Q3’21

Q4’20 estimate: -4.8%

-8

-6

-4

-2

0

2

4

Q1'20 Q2'20 Q3'20 Q4'20* Q1'21* Q2'21* Q3'21* Q4'21*

GDP Growth (%)2021

“W-Shaped Recovery”

Inflation - A Thief of Value!

“N1,000 under your mattress in Jan 2019 now equals N730” Down 28% in 2 years

“$1,000 under your mattress in New York is now worth $997”

“GH₵1,000 under your mattress is now worth GH₵821”

Down 0.3% in 2 years

Down 18% in 2 years

12.2

12.43 13.2514.96

7.75

13.24

21.51

26.82

0

5

10

15

20

25

30

Q1'20 Q2'20 Q3'20 Q4'20

Inflation (%) M2 growth (%)

Nigeria: Why Inflation is High

M2

growth

(%)

Inflation

(%)

Q1’20 7.75 12.20

Q2’20 13.24 12.43

Q3’20 21.51 13.25

Q4’20 26.82 14.96

“Inflation is increasing as Money Supply climbs”

Money Supply is not the only cause....

Devaluation effect (32.5%)1% devaluation = 0.02% inflation

M2 growth(17.33%)

Logistics & distribution costs

PMS price up 14% (yoy)

Insecurity & Boko-HaramSupply Chain Disruptions

(0.86%)

Inflation - The Drivers

Ways and means advances(N11trn – 30% of M2)

Savings to

GDP

ratio (%)

Investment

to GDP

ratio (%)

Nigeria 20.62 26

South

Africa

14.95 18

Kenya 4.45 17

Ghana 20.95 26

Singapore 53.75 25

15.75

3.1

5.62

10.4

0.5

3.48

6.98

13.6

0

5

10

15

20

Nigeria South Africa Kenya Ghana

Inflation Rate (%) 91-day T/bills

When Interest Rates Inflation

• Currencies are more stable

• National savings rates increase

• And inflation is generally lower

• South Africa reported 16-year record low inflation (3.1%) in Dec’20

Solutions - It is Not either A or B

Containing Inflation is not a binary choice.....

Reduce

negative

rate of

return

(-15.25%)

Reduce

M2

Growth

(17.33%)

Q4’20 GDP

(-4.8% est.)

– Feb 22

Reduce

Forex

Rationing

Increase

trade flows

($2.6bn)

Agric

+1.39% (Q3’20)

Sectors that Can Help

Manufacturing

-1.51% (Q3’20)

Petroleum

-13.89% (Q3’20)

Trade

-12.12% (Q3’20)

2.20 1.58 1.390.43

-8.78

-1.51

5.06

-6.63

-13.89

2.82

-16.59

-12.12

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

Q1'20 Q2'20 Q3'20

Agric growth (%) Manufacturing growth (%) Petroleum (%) Trading (%)

Agric Sector Growth Intervention

Sectors that Can Help

•Efficiency in agric intervention•Increased forex sales

Commodities Jan ’21

New Yam(medium size)

Tomatoes (50kg)

Garri (50kg) (Yellow)

Chicken (1kg)

Beans (Oloyin) (50kg)

Cement (50kg)

Flour (50kg) N14,500

N13,700

N1,700

N22,000

N3,600

N1,000

N7,000

N40,000

Jan’20 Direction% Change

60.0

-

66.67

40.67

90.28

-

-

Onions (50kg)

Pepper (50kg) N14,000 133.33

N8,500

N7,200

N1,700

N15,000

N2,500

N600

N7,000

N25,000

N6,000

Average increase of 72.22% in 2020 - 7 3

Food Basket – Impact on you

Rice (50kg) N27,500 N27,500

70.59

44.0

Summary

Good News Difficulties

External Reserves ($36.52bn)

Oil prices ($56.08pb)

Anchor Borrowers

programme (2019: N190bn)

Forex rationing

Exchange rate pressures

(32.5%)

External Debt ($31.99bn)

Inflation will continue to rise!

OutlookQ4’20 GDP to be released on Feb 22 (estimate: -4.8%)

January inflation due on Feb 16 – approximately 16%

Inflation to moderate in Q3

Currency pressures to remain and adoption of exchange rate flexibility is

expected – N478/$

CBN to likely adopt a tightening policy stance in Q2’21 – MPR 12.5%

Oil production to increase slightly (1.6mbpd) as OPEC relaxes its production

quota 1.6mbpd

Oil price to trade $50pb-$55pb in the near term