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KEYNOTE ADDRESS DELIVERED BY MR. IFIE SEKIBO, MANAGING DIRECTOR, HERITAGE BANK, AT A TWO-DAY STRATEGY SESSION THEMED: THE CHANGING ROLES OF CENTRAL BANKS IN DEVELOPING ECONOMIES: THE CURIOUS CASE OF NIGERIA

Mr. Ifie Sekibo, Managing Director/CEO, Heritage Bank

THE CHANGING ROLES OF CENTRAL BANKS IN DEVELOPING ECONOMIES: THE CURIOUS CASE OF NIGERIA
March 2021

A. GLOBAL TRENDS

The Global Financial Crisis, GFC, ushered in a new era in central banking and conduct of monetary policy to achieve macroeconomics growth and stability. The new era gave birth to the widespread use of a relatively and somewhat radical set of policy tools by central banks, generally referred to as Unconventional Monetary Policy Tools, UMPTs.

While the wide use of UMPTs was championed by Advanced Economies, AEs, they have increasingly become regular policy tools for central banks in developing countries, necessitated by the unprecedented impact of the COVID-19 pandemic, and most importantly, evidence of their effectiveness from the experiences of AEs.

Conventional Monetary Policy

While the functions of central banks include, Issuance of Legal tender, Management of External Reserves, Banking system surveillance, Bankers of Last Resort, Banker and Financial Adviser to Government, Price Stability has over the years increasingly emerged as the primary objective of central banks.

To achieve this objective, most central banks before the GFC relied on conventional monetary policy tools, namely control of short-term interest rate via changes in the policy rate and public expectation of its future settings, Open Market Operations, and Banks’ Reserve Ratios. The use of these tools was widely effective in helping central banks achieve price and financial market stability, until the GFC struct in 2008.

According to Simon and Frank (2019), “At first, financial conditions did not respond sufficiently to reductions in policy rates.

“Later on, conventional policy easing ran into the constraints of the effective lower bound. Against this backdrop, central banks gradually introduced a set of policy measures that have come to be collectively known as unconventional monetary policy tools.”

Hayes (2021) similarly noted: “The problem with conventional monetary tools in periods of deep recession or economic crisis is that they become limited in their usefulness. Central banks enact monetary policy to change the size of the money supply and its rate of growth. This is normally done through interest rate targeting, setting bank reserve requirements, and engaging in open market operations with government securities. In periods of severe economic downturn, these tools become limited as interest rates approach zero and commercial banks become worried about liquidity.”

This reality pushed central banks, first in  AEs, and recently in Developing Economies  to adopt UMPTs.

Unconventional Monetary Policy

The four major sets of UMPTs widely used include:

  • Negative interest rate policies (NIRP), which involves central banks setting the policy rates at zero;
  • New central bank lending operations (LO), involving expansion of liquidity facilities to among other things support credit flow to the private sector and helped stabilise market expectations of interest rates;
  • Asset purchase programmes (APP), popularly known as Quantitative Easing, QE, which involves central bank’s purchase of large and long-term government securities for the purpose of injecting liquidity into the system; and
  • Forward guidance (FG), through which central banks clarify their intentions with respect to future policy rate settings and to communicate their commitment to the pursuit of their mandates.

The adoption and use of UMPTs were aimed at two broad objectives. The first is to address disruptions in the monetary policy transmission chain. The second is to provide additional monetary stimulus once the main conventional instrument (the policy rate) was constrained by the effective lower bound.

Assessment of Unconventional Monetary Policy

But as earlier stated, while the adoption of UMPTs was pioneered by AEs, their attraction to DEs was facilitated by the evidence of their effectiveness.

This is showcased in 2019 report of a working group co-chaired by Frank Smets (European Central Bank) and Simon Potter (Federal Reserve Bank of New York) mandated by the Committee on the Global Financial System (CGFS) of the Bank for International Settlement  to take stock of central banks’ experience and to draw lessons for the future.

The report stated: “The assessment of central banks is that UMPTs were effective in terms of both these objectives but that they also have their limits. Their effectiveness is significantly enhanced when deployed in the context of a strategy that encompasses other types of public policy, in addition to monetary policy, in order to mitigate their side effects and boost their effectiveness.

“Overall, the main message is that UMPTs provided policymakers with additional policy space and flexibility, effectively addressing the GFC’s most pernicious consequences and helping central banks pursue the achievement of their mandates when conventional policy was constrained.”

Similarly, IMF Deputy Managing Director Bo Li (2021) stated, “Unconventional monetary policies—including asset purchases—have been used extensively in advanced economies for some time, especially in the aftermath of the global financial crisis.

“These policies have helped to ease stress and improve market functioning. But in an environment where interest rates were constrained by the effective lower bound, large-scale asset purchase programs also importantly aided monetary policy transmission and provided needed stimulus to support faster recoveries and boost inflation toward central bank targets.”

Furthermore, in a research paper titled, What are the macroeconomic effects of asset purchases?, Martin Weale & Tomasz Wielade stated: “Our results suggest that an asset purchase shock that results in the central bank purchasing government bonds worth 1% of nominal GDP, leads a rise of about 0.62% (0.25%) of real GDP and 0.58% (0.32%) in CPI in the US (UK).

“Our results have important implications for policy. In both the UK and the US asset purchases were an effective means of supporting GDP in the aftermath of the financial crisis, and they retained their effectiveness beyond the acute phase of the crisis.

“This should provide considerable reassurance for those who are concerned that, with interest rates still at or close to their lower bound, monetary authorities will find it difficult to respond to renewed global demand weakness.”

Adoption of Unconventional Monetary Policy by Developing Countries

Consequently, when the COVID-19 pandemic struck in 2020 with devastating effect on global economy, central banks in Emerging and Developing Economies, joined their colleagues in AEs in adopting and deploying UMPTs to contain the impact of the pandemic which include decline in government revenue, external sector imbalance and currency depreciation, weak credit flow, rise in loan impairment, and economic recession.

One of the UMPTS widely deployed by central banks across the globe is the Asset Purchasing Programme, APP. In this regard, an IMF study showed that twenty-seven (27) EMDEs deployed APP between March and August 2020 to offset financial markets’ impairments and/or provide direct support to the economy.

These include:  Poland with the objective to alleviate costs of the pandemic on the population and boost confidence and tackle market dysfunctionalities; Indonesia with the objectives to Support fiscal needs, alleviate costs on the population, boost confidence and tackle market dysfunctionalities.

Examples in Africa include Angola, Rwanda, Egypt and Ghana which also implemented APPs for the purpose of providing fiscal support, monetary stimulus, alleviating the cost of pandemic on the population and to boost confidence and tackle market dysfunctionalities.

Speaking on the effectiveness of the UMPTs adopted by EMDEs, IMF Deputy Managing Director Bo Li, said, “So far, at least, these ventures into unconventional policy seem to have been quite successful. EMDE central banks have managed to lower government yields and significantly reduce financial market stress, while avoiding noticeable capital outflow and depreciation pressures, which was a concern that often held them back from using these tools in the past. Given this overall positive experience, it seems likely that EMDE central banks may consider asset purchases during future episodes of market turbulence”,

Risks to Adopting Unconventional Monetary Policy

In spite of the widely attested effectiveness of UMPTs in AEs and EMDEs, there are caveats.

In this regard Frank Smets and Simon Potter, noted: “Embedding UMPTs in central banks’ frameworks requires them to be tailored to the specific legal framework and needs of each jurisdiction.

“The use of UMPTs by central banks would be more effective if other policy agencies are prepared to deal in a timely way with financial vulnerabilities as they arise, reducing the risk that UMPTs will be needed in the first place.

“Similarly, the action of other policy agencies, alongside the central bank, in addressing large systemic crises after they materialise would avoid an overreliance on UMPTs and help central banks to pursue their respective mandates.”

Bo Li of IMF also highlighted the need for central banks in EMDEs to be mindful of three major risks in the use of UMPTs.

He said:“First, EMDE central banks will have to decide on how much maturity, credit, and exchange-rate risk they are willing to take upon their balance sheets.

“Second, they will have to consider the risks of fiscal dominance that may be associated with large-scale purchases of government securities (especially if done on the primary market), as well as the broader governance challenges and political pressures that may emerge if central banks support nonbank financial institutions, or set up funding for lending programs aimed at supporting particular sectors.

Finally, many central banks must now address the challenge of exiting from these programs without triggering financial market instability and without running afoul of political pressures to minimise Treasury borrowing costs—political pressures that are likely to be all the more acute in the current environment of rising interest rates and high public debt.”

B. NIGERIA’S EXPERIENCE

CBN Development Finance Mandate

In addition to the traditional functions of central banks, the Central Bank of Nigeria, CBN, like its peers in other Developing Economies (DEs) has a development function.

The development role of central banks in DEs, according to Ola Vincent (1979) is, among other things, necessitated by the absence of a financial system worthy of mention at the time of their creation.

He noted: “In the LDCs, central banks have first to build up the financial structure and nurture the financial arrangements which they have to regulate for the orderly growth of the economy. Most central banks in developing economies as exemplified by the Central Bank of Nigeria have had to establish money and capital market structures as well as organise their modus operandi.

Most developing economies pursue economic development by formulating and implementing economic development plans. Nigeria has launched and operated not less than four such plans since the eve of her political independence. The financing of these plans has been and remains a major concern of the CBN. Here lies the explanation for the floatation of numerous government development stocks, the unsubscribed portions of which are generally taken up by the CBN.”

Thus, besides the price stability mandate, the development roles of central banks in DEs makes ‘economic growth’ an imperative goal of monetary policy.

This was further enshrined in the CBN Act 2007, which provided the apex bank with the legal backing to undertake developmental functions that are consistent with price stability.

The above sets the stage for the adoption and increasing use of Unconventional Monetary Policies (UMPs) by the Central Bank of Nigeria.

Three Episodes of Economic Crisis

The Nigerian economy has experienced three episodes of economic crisis triggered by developments in the global economy, during which the CBN had to use UMPs to combat the severe impact of each crisis.

First was the GFC of 2007 to 2009, which led to a fall in the price of crude oil which accounts for 70% of Nigeria’s dollar earnings. This led to decline in revenue to the government, reduced forex inflow and the concomitant fall in external reserves and currency depreciation. The crisis also triggered stock market meltdown courtesy of huge patronage for margin trading prior to the crisis. In addition, was   distress in the banking sector triggered by huge Non-Performing Loans and poor corporate governance in banks and reduced credit flow to the private sector.

The second crisis episode occurred between 2014 and 2016, due to the sharp drop in commodity prices. During this period the price of Bonny light, Nigeria’s crude, fell from $115 per barrel in June 2014 to $31 per barrel by January 2016. This led to sharp fall in forex inflow, worsened by capital flow reversal due to policy normalisation by the US Fed. Hence the economy suffered severe naira depreciation, decline in government revenue, build-up in the demand for foreign exchange, and high exposure of the banking sector to the oil and gas sector. The combination of the factors led to double digit inflation and GDP contraction and eventually economic recession in 2016.

Three years after the country recovered from the economic recession, the COVID-19 struck in 2020, with devastating effects similar to the ones produced by the two earlier crises, but with larger magnitude, amplified by domestic challenges of insecurity and border closures, which had produced steady rise in inflation.  As a result, the country in 2020 experienced the second and worst recession in 30 years.

Unconventional Monetary Policy Deployed by CBN

In response to each episode of the economic crisis listed above, the CBN went beyond the conventional monetary policy of adjustment in policy rate adjustment, bank reserve ratio and conduct of Open Market Operations, to introduce some UMPs.

However, most, if not all the UMPs, deployed were different from those widely adopted by AEs and other EMDEs listed above.

However, the UMPs deployed by the CBN had the same ultimate objective which is to restore financial system stability, facilitate output and employment growth through improved credit allocation to the private sector.

Between 2008 and 2021, the CBN deployed three categories of UMPs namely, Liquidity Injection in the banking system, Foreign Exchange management and Real Sector Intervention aimed at availability of credit to the private sector.

Liquidity Injection

These were deployed mostly between 2009 and 2011 and they  include:

  • Injection of N620bn Tier-2 capital into five troubled banks;
  • Guarantee for Interbank Lending;
  • Temporary Suspension of Mop Up Operations;
  • And the creation of the Asset Management Corporation of Nigeria, which purchased the bad loans of banks at a discounted price.

Foreign Exchange Management

These were measures to curb forex demand and also to boost forex inflow into the economy. These include:

  • Forex Restriction on 43 items introduced since 2015 to conserve foreign exchange resources and encourage local production of the items as a way of boosting GDP growth
  • Investors and Exporters Exchange (I&E) Forex window introduced in 2017 to boost liquidity in the forex market and timely settlement of eligible transactions.
  • The Naira Settled OTC Foreign Exchange Futures Market introduced in 2016.
  • New Procedures Receipt of Diaspora Remittances to boost dollar inflow from Diaspora remittances introduced in 2020
  • The “CBN Naira 4 Dollar Scheme” to boost dollar inflow from Diaspora remittances, introduced in 2021.
  • The Non-Oil Exports Proceeds Repatriation Rebate Scheme, which incentivises exporters in the non oil sector to repatriate and sell export proceeds in the official FX market.

Real Sector Intervention

In addition to the above and to ensure credit flow to households and specific sectors in order to drive consumption, employment and economic activities, the CBN introduced direct invention measures some of which include:

  • The N500bn Critical Infrastructure Fund introduced in 2010 and segmented into: The N200bn Refinancing/Restructuring SME/Manufacturing Fund & the N300bn Power and Aviation Fund.

 

  • The N200bn Commercial Agricultural Credit Scheme (CACS) was established in 2009 to encourage banks’ lending to the agric sector. So far, N735.17 billion has been disbursed for 671 projects in agro-production and agro processing.

 

  • The N200bn SME Credit Guarantee Scheme introduced in 2010 to provide 80% guarantee for credit to manufacturing SMEs.

 

  • The MSME Development Fund was introduced in 2013 with a share capital of N220 billion with the aim of channelling low interest funds to the MSME sub-sector of the Nigerian economy through financial institutions.

 

  • The Anchor Borrowers Program, ABP, introduced in 2015 to boost local production of key agricultural commodities to reduce food importation. As at March 2022, N975.61 billion has been disbursed to over 4.52 million smallholder farmers, cultivating twenty-one (21) commodities across the country.

 

  • Textile Sector Intervention Fund, TSIF, introduced with N50bn seed fund to resuscitate the country’s ailing textile industries. As at September 2020, N52.0 billion to finance forty-one (41) projects.

 

  • The Agri-business/SME Investment Scheme (AGSMEIS), an initiative of the Bankers’ Committee, in collaboration with the CBN set up to improve access to affordable and sustainable finance by agri-businesses and MSMEs. According to the CBN, N134.67 billion was disbursed to 37,273 beneficiaries, as of January 2022.

 

  • The N50bn Targeted Credit Fund (TCF), introduced in March 2020 as a stimulus package to cushion the effects of COVID-19 pandemic on households and MSMEs across the country.  So far, N390.45 billion has been disbursed to 797,351 beneficiaries, comprising 660,096 households and 137,255 small businesses.

 

  • The ₦1.0 trillion Real Sector Facility established in 2020 to increase credit to priority sectors of the economy with sufficient employment capabilities, high growth potentials, increase accretion to foreign reserves, expand the industrial base and consequently diversify the economy. So far, N1.75 trillion has been disbursed to 368 projects across the country.

 

  • The Youth Entrepreneurship Development Programme (YEDP) was introduced in 2016 to enhance the credit flow to youth entrepreneurs.  As at June 2021 a total of ₦173.4 million has been disbursed to over 67 beneficiaries.

 

  • The N75bn Nigeria Youth Investment Fund (NYIF) was established in 2020. to improve access to finance for youth and youth-owned enterprises for national development. Under the scheme, ₦2.04billion has been disbursed to 7,057 beneficiaries, of which 4,411 were individuals and 2,646 SMEs.

 

  • The Creative Industry Financing Initiatives (CIFI) was established with N200bn to improve access to long-term, low-cost financing to entrepreneurs and investors in the Nigerian creative and I.T subsectors.  As at June 2021, N3.22 billion was disbursed to 356 beneficiaries across movie production, movie distribution, software development, fashion, and IT verticals.

 

  • The Healthcare Sector Intervention Facility introduced in 2020 to provide credit to indigenous pharmaceutical companies and other healthcare value chain players intending to build or expand capacity. So far, N116.72 billion has been disbursed to finance 124 projects,

 

  • The Nigeria Bulk Electricity Trading Payment Assurance Facility (NBETPAF), and the e-Nigeria Electricity Market Stabilisation Facility – Phase 2 (NEMSF-2), introduced to improve access to capital and ease the development of enabling infrastructure in the Nigeria Electricity Supply Industry. So far N1.5 trillion has been disbursed through both programmes.

 

  • Extension of the moratorium on principal repayments for CBN intervention facility to March 2023.

 

  • Regulatory forbearance that allows banks restructure loans given to sectors severely affected by the pandemic.

 

  • Introduction of Minimum Loan to Deposit Ratio of 65% to encourage SMEs, Retail, Mortgage, and Consumer Lending.

Impact of UMPs Deployed by CBN

The deployment of the UMPs measures, according to the CBN Governor, helped the country to recover from economic recessions of 2016 and 2020, by boosting credit flow, agricultural output and job creations.

With respect to the measures introduced to combat the economic recession of 2016, Emefiele said: “Because of our unconventional FX and development finance policies we have recorded spectacular improvements in domestic production of most of the targeted items. Local manufacturers are consequently reporting major boosts to their revenue and profit.

“After 5 consecutive quarters of negative growth beginning in the first quarter of 2016, a coordinated approach by the fiscal and monetary authorities supported a rebound in the nation’s economy during the second quarter of 2017.

“The recovery has been driven largely by improved non-oil activities especially the agriculture sector which expanded consistently by about 3.5–4.3 percent reflecting efforts at diversifying the economy.

“This was, nonetheless, reinforced by the pickup in the oil sector as oil prices rallied in 2017. The recovery, which has been sustained for eight consecutive quarters, is expected to strengthen in the short- to medium-term.  The CBN has been able to reduce inflation, build our FX reserves, maintain FX market stability, and foster real growth.”

Speaking similarly on the impact of UMPs adopted in the wake of the COVID pandemic, Emefiele while addressing the 2021 Annual Bankers Dinner Night said: “It is gratifying to state that the Central Bank of Nigeria deployed more than N3.5trillion, – about 4.1 percent of Nigeria’s GDP to critical sectors such as agriculture, manufacturing, electricity, and healthcare in order to stimulate and help the economy recover from the deep shock.

“As a result of these measures, we witnessed robust economic recovery as GDP growth stood at 4.03% in the 3rd quarter of 2021, following the 5.01% growth recorded in the 2nd Quarter of 2021. The economy has remained on a positive growth path for four consecutive quarters after the recession in the 3rd quarter of 2020. 41 out of the 46 sectors assessed in the 3rd quarter by NBS, recorded positive growth, as growth was driven by significant improvements in the non-oil sector”

A major contribution of the adoption of UMPs by the CBN is the steady growth in consumer loans in the country. According to CBN data, consumer loans rose by 43% to N1.84 trillion in the first half of 2021 (H1 ’21) from N1.21 trillion in H1’19, representing N630 billion or   increase. This also translated to average annual growth of 21 per cent in consumer loans during the two years period. Also during the two years period, the share of consumer loans in total credit to the private sector rose to 5.7 per cent in H1’21 from 5.2 per cent in H1’19, representing 0.5 percentage growth.

Attributing the growth to the LDR policy of the CBN, FBNQuest Capital Analyst, Tunde Abioye, said, “Loan growth has been substantial, in the double digits, since the CBN established the LDR policy in H1 2019. As a result, it is reasonable to conclude that the CBN’s policy has been quite successful in expanding credit to the private sector as well as the retail end of the spectrum.”

The impact of the UMPs adopted by the CBN is also reflected in the growth recorded in the agricultural sector, a major beneficiary of monetary interventions.

For example, data from the Nigeria Bureau of Statistics, NBS, agric sector contribution to GDP rose to 25.34 per cent in 2021 from 23.11 per cent in 2015.

Further, in spite of the contraction in GDP in 2020 and the challenge of insecurity, the agricultural sector recorded positive growth in each of the four quarters during the year, and even posted 3.4 per cent growth in Q4’2020, the highest since 2017.

Citing the role of the interventions of the CBN  as a factor in the growth recorded in the  in agriculture in  Q4’2020, analysts at Vetiva Capital Management Limited, a Lagos based investment firm,  said: “The agricultural sector maintained a clean sheet in 2020, supported by intervention efforts of the Federal Government and the development finance activities of the Central Bank. This was despite the interruptions to farming activities and food transportation, caused by floods and lockdown measures respectively experienced during the year. (Vetiva Capital (2021) “Nigeria exits pandemic-induced recession”, Economic Research 19 February 2021).

Similarly, analysts at FBNQuest, said: “Our expectation was a slowdown in contraction to -1.95% and was undone by robust growth of 3.42% for agriculture, the sector’s best showing since Q4 ’17. Several times we have made the point that Nigeria’s performance would be more muted than that of most emerging markets due to the protection its large informal economy enjoys from global headwinds (such as COVID-19). The argument still holds but it could now be that the credit interventions of the CBN, state development banks and others are starting to have an impact.” Also reflecting the effectiveness of the foreign exchange measures introduced in 2017, especially the I&E foreign exchange window, net foreign exchange into the economy rose by 105 per cent from $37.19 billion in 2016, to $76.38 billion in 2019. Furthermore, during this period, the naira appreciated from N520 per dollar in the parallel market, on February 20, 2017, to N359 per dollar for most part of 2018 to 2019.

One of the UMP adopted by the CBN which had attracted severe criticism from several quarters including the International Monetary Fund, IMF, is the Forex restriction on 43 items.

However, many local producers have dismissed the criticism of the policy citing its positive impact on their output. An example is Mrs. Oluyemisi Iranloye, Managing Director of Psaltry International Limited (PIL), an indigenous agro-allied company, located in Oyo state, the company specialises in production of food grade starch. She said: “I can’t meet my demands anymore and even those not on our bills are begging us to supply them, even from as far as China. So, we are saving Nigeria a lot of foreign exchange. So, the restriction on forex is good for the local industry because we are now being pushed to do more.”

Prior to the decision of the Central Bank of Nigeria (CBN) to impose foreign exchange (forex) restrictions on 41 items in 2016 (now 43 items) PIL, according to Iranloye, had few customers and plenty of backlogged inventory. Today, the company, she said, boasts of over 50 multinational clients including Nestle and Unilever. The company has saved Nigeria $7 million in foreign exchange drawdown over the two years of the policy. Iranloye said PIL has provided employment for over 300 people comprising 200 permanent staff and 100 temporary workers and has a network of about 1000 farmers about 3000 hectares of cassava farm land under 50-kilometre radius to the factory located in 12 villages.

Support for UMPs deployed by the CBN

While the various UMPs deployed by the CBN have been subject to severe criticism in some segments of the economy, some experts however do not agree with the criticism. One of them is Ken Ife, a professor of economics and a consultant to the Economic Community of West African States (ECOWAS).

He stressed that with what is happening, the CBN has simply prioritised “economic growth, diversification, empowerment and chooses the appropriate mix of monetary policies and support these owing to structural challenges and insecurity at play.

“The CBN has prioritised, and quite rightly, economic growth, diversification and employment, and chooses appropriate mix/blend of monetary policies to support these, and not the other way round, simply because of insecurity and structural factors at play. There may well be some imperfections in the downstream repayments and so forth, but there are adequate safeguards and protections of depositors’ monies. This is nothing to be compared to the inordinate risk of giving away depositors’ monies to politicians to disburse.”

Pro Ife further argued that ABP has reduced the starvation that would have killed more people in the country than COVID-19, and other health challenges, adding that the interventions have not, in any way, reduced the commitment of the apex bank to maintaining financial and price stability.

CBN’s Response

Emefiele, the CBN Governor, though acknowledged the risks and challenges that comes with deployment of UMPs by the CBN, he however averred that the benefits outweigh the cost.

In a May 2019 presentation at the Distinguished Leadership Programme Lecture Series, University of Ibadan, Ibadan, titled, “Up Against the Tide: Nigeria’s Heterodox Monetary Policy and The Bretton Woods Consensus”, Emefiele said: “The cost-benefit analysis of undertaking unconventional monetary policies indicate that the societal gains of such policies outstrip whatever challenges that may subsist.

“The experience since the global financial crises show that growth consideration cannot be sacrificed over the long-term for an exclusive focus on price stability, because unabated real contractions (and the associated persistent negative output gaps) can only lead to declining potential output. An outcome which is entirely dangerous for any economy given the structural fall in its long-run growth trajectory.”

Consequently, he assured that, “We will continue to develop policy instruments and device ways of ensuring that an optimal mix of heterodox policies is continually deployed to engender the overall wellbeing and prosperity of the Nigerian economy. Our overall aim remains the concurrent attainment of price stability, real growth, full employment, and poverty reduction.”

CONCLUSION

Very apparent from the foregoing is that the global trend towards adoption of UMPs especially in developing economies, exemplified by the Nigeria’s central bank, was due to the limitation of conventional monetary policy tools and the onerous responsibility of monetary authorities across the world to do whatever is within the jurisdiction to save their economies from the severe impact of unprecedented economic crisis.

In addition to this fact is the increasing recognition of central banks in developing economies to their development function, and the peculiarities of their economy, especially vulnerability to external economic shocks.

Also, while there have been concerns about the risks of this trend especially from critics who consider adoption of UMPs as overreach by central banks and subversion of the functions of the financial markets, the evidence from global and domestic economic data show the effectiveness of  UMPs in addressing the problem for which they were deployed to address, and thus helped monetary authorities made significant contributions to recovery of their countries from macroeconomic problems of unemployment and contraction in GDP growth.

REFERENCES

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  3. David, A: (2022): Interview to Guardian Newspaper published as comments in article titled, “Central Bank’s unending interventions of lean consequence”, March 21, 2022.
  4. Emefiele, G (2019): “Up Against The Tide: Nigeria’s Heterodox Monetary Policy and The Bretton Woods Consensus”, Presentation at the Distinguished Leadership Programme Lecture Series, University of Ibadan, Ibadan, May 2019)
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