Connect with us

Economy

MPC Meets Today, May Cut Interest Rate

Published

on

CBN

The Central Bank of Nigeria’s Monetary Policy Committee will today (Monday) begin its two-day bi-monthly meeting to review the state of the economy.

It is expected to take key policy decisions that will influence the direction of the economy.

Top on the agenda of the meeting is the need to tackle the biting recession occasioned by slow growth in the economy, rising inflation, and the volatility in the foreign exchange market.

In a notice posted on its website, the  CBN stated that 252nd meeting of the MPC would hold at 10am on Monday and Tuesday at the corporate headquarters of the apex bank in Abuja.

Economic experts expect the 12-member MPC to begin an expansionary monetary policy by reducing the Monetary Policy Rate (the benchmark interest rate), and lower the Cash Reserve Ratio.

According to the economists, the MPC will need to reduce the liquidity ratio and take measures to address the lingering volatility in the foreign exchange market.

The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the MPC might have no other choice than to purse an expansionary monetary policy considering the state of the economy and the recent stimulus package announced by the fiscal authority.

He said, “We expect an accommodative monetary policy as against a contractionary one. The CBN will want to complement the effort of the fiscal authority, especially as regards the stimulus package that was recently announced.”

In an economic bulletin released on Friday, Rewane added, “The divergence between the year-on-year headline inflation and the annualised monthly rate of 6.17 per cent poses a major dilemma to the apex bank. Even though the monthly measure is more relevant to inflation expectations, it may need to maintain consistency with the previous measure.

“The clamour for a stimulus package and lower interest rates by the government and the public will force a more accommodative stance by the committee in spite of other considerations.

“The high inflation environment has reduced consumer spending, real returns and corporate profitability margins. The markets have reacted accordingly.”

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, was also of the view that the MPC would begin an accommodative monetary policy.

He said, “It is clear that we have not been able to control inflation with the tightening policy. If the overriding consideration is to reflate the economy, the MPC will need to reverse the last increase made in the MPR by reducing it from 14 to 12 per cent. The committee may need to cut the Cash Reserve Ratio from 22.5 per cent to 20 per cent and then to 15 per cent later.

A professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, also said he expected the committee to reduce the MPR in order to lower interest rate on bank loans and subsequently boost credit in the economy.

He said, “This is a time to begin an expansionary monetary policy. The MPC must reduce the MPR, reduce the liquidity ratio or maintain the status quo. We have seen that the inflation we are experiencing is cost-push, i.e caused by increase in cost of capital and not by demand pull. So we need to reduce the cost of capital in the economy.

“There is also a need for the committee to tell us how they intend to tackle the volatility in the exchange rate. They need to tell us whether the volatility is being caused by speculators or real demand. If it is caused by real demand, there is nothing they can do about it. However, if it is activities of speculators, then they must state how they intend to deal with it.”

The MPC had during its July meeting hiked the MPR by 200 basis points to 14 per cent.

The 14 per cent MPR announced by the CBN is the highest in over a decade.

However, the committee left the CRR and the liquidity ratio unchanged at 22.5 per cent and 30 per cent, respectively.

The CBN Governor, Mr. Godwin Emefiele, who announced the decision of the committee after a two-day meeting held at the apex bank’s headquarters in Abuja, said eight out of the 12 members of the committee attended the meeting.

Out of the eight, he said five members voted in favour of monetary tightening, while the other three voted to hold the MPR at 12 per cent.

In taking the decision to increase the MPR, the CBN governor said the committee was faced with two policy choices – whether to hold or reduce the rate to stimulate growth, or increase it in order to curb inflation.

Emefiele, however, said when considered from the standpoint that the primary mandate of the CBN was to maintain price stability, the committee decided to focus on its mandate by checking inflationary pressures.

The governor explained that members of the committee agreed that the economy was passing through a difficult phase, adding that the concern was that headline inflation had risen significantly in June.

The committee, he said, noted that inflation had risen significantly, eroding real purchasing power of fixed income earners and dragging down growth.

The CBN governor said the high inflationary trend had culminated in negative real interest rates in the economy, noting that this was discouraging savings.

According to him, members of the committee also noted that the negative real interest rates did not support the recent flexible foreign exchange market as foreign investors’ attitude had remained lukewarm, showing unwillingness to bring in new capital under the circumstance.

He said the decision to raise interest rate would give impetus to improving the liquidity of the foreign exchange market and the urgent need to deepen the market to ensure self-sustainability.

The governor said members were of the opinion that the liquidity of the foreign exchange market would boost manufacturing and industrial output, thereby stimulating the much needed growth.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Egypt Leads Nigeria, South Africa in Foreign Direct Investment

Published

on

Global debt

Egypt Leads Nigeria, South Africa in Foreign Direct Investment

The United Nations Trade Association has Nigeria recorded a total of $2.6 billion in Foreign Direct Investment (FDI) in 2020, below the $3.3 billion posted in the preceeding year.

South Africa, Africa’s most industrialised nation, reported $2.5 billion during the same year, slightly below Africa’s largest economy and 50 percent below the $4.6 billion attracted a year earlier.

The report also noted that Africa recorded a total of $38 billion FDI in the same year, representing a 18 percent decline from the $46 billion posted in the corresponding year of 2019.

However, Egypt led Nigeria and South Africa with $5.5 billion FDI, an increase of 38 percent from the preceeding year.

The report read in part, “FDI flows to Africa declined by 18% to an estimated $38 billion, from $46 billion in 2019. Greenfield project announcements, an indication of future FDI trends, fell 63% to $28 billion, from $77 billion in 2019. The pandemic’s negative impact on FDI was amplified by low prices of and low demand for commodities.

UNCTAD also noted that global foreign direct investment declined by 42 percent to an estimated $859 billion, down from $1.5 trillion in 2019.

The decline was concentrated in developed countries, where FDI flows fell by 69 percent to an estimated $229 billion. Flows to Europe dried up completely to -4 billion (including large negative flows in several countries). A sharp decrease was also recorded in the United States (-49%) to $134 billion.

Continue Reading

Economy

FG to Partly Fund Six Rail Projects Connecting All Regions

Published

on

rail project

FG to Partly Fund Six Rail Projects Connecting All Regions

The Federal Government will pay a total sum of N71 billion to partly fund six rail projects connecting all regions of the country.

In the report obtained from the Federal Ministry of Finance, Budget and National Planning, the six rail projects marked for development this year are Lagos-Kano rail line (ongoing), Calabar-Lagos (ongoing), and Ajaokuta-Itakpe-Aladja (Warri).

Others are the Port Harcourt-Maiduguri railway, the new Kano-Katsina-Jibiya-Maradi line in Niger Republic and the Abuja-Itakpe and Aladja-Warri Port and refinery/Warri new harbour.

The Buhari administration will also spend N15.1 billion on the development of safety and security of critical projects, airport certification, runway construction, terminal building, among others in the aviation sector in 2021.

Last week, Rotimi Amaechi, Minister of Transportation, said the Lagos-Kano line would be connected from the Ibadan end of the Lagos-Ibadan railway and would cost $5.3 billion.

We are waiting for the Chinese government and bank to approve the $5.3bn to construct the Ibadan-Kano. What was approved a year ago was the contract,” the minister said.

He added, “The moment I announced that the Federal Government had awarded a contract of $5.3bn to CCECC (China Civil Engineering and Construction Corporation) to construct Ibadan-Kano, people assumed the money had come in; no.

“We have not got the money, which is a year after we applied for the loan. We have almost finished the one of Lagos-Ibadan. If we don’t get the loan now, we can’t commence.”

Continue Reading

Economy

FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

Published

on

FG Launches E-ticketing Platform to Deepen Train Usage and Convenience

In a bid to improve the usage and enhance the convenience of train transport in Nigeria, the Federal Government on Thursday announced the launching of the Electronic Ticketing platform for the Kaduna-Abuja rail services.

The N900 million E-ticketing platform was introduced by the Minister of Transportation, Chibuike R. Amaechi, and the Nigerian Railway Corporation.

Amaechi said the new platform would improve efficiency, promote accountability, reduce leakage and enhance economic growth, as well as save time.

The E-ticketing platform was a Public-Private Partnership project done in conjunction with Secure ID Solutions, who provide and would manage the system for 10 years in an effort to recoup its investment before the Nigerian Railway Corporation take charge.

Kofo Akinkugbe, the Chief Executive Officer, Secure ID Solutions, said as the new E-platform issued 25,000 tickets after a successful pilot test on Thursday.

Potential Travelers can book via three ways:

1. Mobile app
2. Website
3. POS or Cash at the station

A validator would be used to scan the ticket barcode to ascertain its authenticity before boarding.

Amaechi further announced that self-service ticket vending machines at various train stations would be introduced soon.

Continue Reading

Trending