Central Bank Communication during Economic Recessions: Evidence from Nigeria

This paper analyses the communication strategy of the Central Bank of Nigeria (CBN) during the 2016 economic recession. Applying text mining techniques, useful insights are derived regarding the linguistic intensity, readability, tone, and topics of published monetary policy communiques. Our results provide evidence of increased central bank communication during the recession. However, the ease of reading the published policy communiques declined, especially at the outset of the recession. In terms of tone, we find that negative policy sentiments were expressed during the 2015-2017 period; reflecting the economic uncertainties that trailed the oil price slump of 2014 and its implications for the domestic economy. The negativity of the policy sentiment score reached its trough in July 2016 and recorded an inflexion; signalling the economy’s turning point towards recovery. Based on the results of the estimated topic model, issues relating to “oil price shocks”, “external reserves”, and “inflation” were of concern to the Monetary Policy Committee (MPC) a few quarters preceding the recession while the topics relating to “exchange rate management” as well as “output growth and market stability” were dominant during the recession. Expectedly, the topic proportion for “prices and macroeconomic policies” remain relatively sizeable across the sample period, reflecting the MPC’s commitment to the CBN’s primary mandate of maintaining price stability.