Markets

Recession: It’s up to You, CBN Tells Government

Published

7 years ago

November 23, 2016

Recession: It’s up to You, CBN Tells Government

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday admitted that its monetary policy tool has run out of options and that the economy could only get the needed support from effective implementation of fiscal policies.

The verdict formed the basis for the committee’s decision to retain benchmark rate at 14 percent and this confirms yesterday’s exclusive report by The Guardian about impending depression as there is no harmony between monetary and fiscal policies of government.

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence the economy. It is the sister strategy to monetary policy with which the central bank influences money supply.

CBN’s statement sends a wrong signal to the economy,” Dr. Franklin Ngwu, who teaches Economics at the Lagos Business School, said by telephone.

“There are good points to what Governor Godwin Emefiele is saying but there is supposed to be proper synergy between the CBN and government to bring confidence to economic agents and investors.”

Ngwu argues that giving “impression of exhaustion” shows that the CBN and fiscal policy makers are not prepared to bring robust economic policies to address the current economic challenges.

The National Bureau of Statistics (NBS) Monday announced a third negative growth in three quarters. The Gross Domestic Product (GDP) — one of the primary indicators used to gauge the health or size of a country’s economy — for third quarter (Q3) of the year shrank by -2.24 percent after recording -2.06 per cent in the preceding quarter ending June 30, 2016.

The apex bank after its committee’s meeting Tuesday retained all major rates. It kept the Monetary Policy Rate (MPR) — the minimum rate banks borrow from the CBN — at 14 per cent; Cash Reserve Ratio (CRR), 22.5 per cent; and Liquidity Ratio, 30 per cent.   The asymmetric window (representing allowance for banks’ lending) was left at +200 and -500 basis points around the MPR. This means the apex bank will lend to banks at 16 per cent and borrow from them at nine per cent.

This is the second time apex bank is keeping main interest rate on hold since the July increase to 14 per cent, as it strengthens its efforts to battle the galloping inflation.Emefiele, said inflation was largely structural and so the CBN’s current tight monetary policy stance combined with an improved agricultural harvest should limit growth prices of goods and services.

He said he would expect fiscal policy to do most of the work of improving Nigeria’s growth performance.“Considering the importance of price stability and being mindful of the limitations of monetary policy in influencing output and employment under the conditions of stagflation, committee decided unanimously in favour of retaining the current stance of monetary policy,” he said.

Meanwhile, the committee has urged government to devise strategies to settle its contractual obligations, which sit across all sectors of the economy.“These accumulated debts have slowed business activities of economic agents; most of who are indebted to the banking system, thus compromising the integrity of the financial system.

“As we are about to enter 2017, there is need for the Muhammadu Buhari-led Federal Government to quickly inflate the economy, there is a most urgent need to pay all outstanding salaries of workers in Federal, State and Local government.

“The economic team should be strengthened with more capable hands with a clear economic direction for the country urgently provided. “For a start, we need to clearly identify our areas of comparative advantage which interestingly is in Agriculture and informal economy and then robustly support each of our six geo-political regions to specialise in two or three. Nigeria is an economy with two limitedly sub-economies —the formal 25 percent and the informal, about 75 percent.”

Ngwu advised the CBN to rethink its approach in policy formulation and implementation while government policies should be evaluated and approved based on their job-creating impact. “Outside good economic policies, of fundamental importance is the need to moderate the tone of governance from the current perception of division, acrimony and negativity to that of hope, unity and prosperity,” said Dr Ngwu.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

Published

1 day ago

April 17, 2024

Samed Olukoya

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

Published

1 day ago

April 17, 2024

Samed Olukoya

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

Published

2 days ago

April 16, 2024

Samed Olukoya

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.