- ECB Looks Down Stimulus Exit Path as Politics Threaten Economy
The European Central Bank is finding out just how tricky its policy path could be in a year when political spats are overshadowing the economy.
The account of the March 7-8 Governing Council meeting listed concerns including that U.S. import tariffs — announced just before the gathering — would hurt “all countries involved.” It also pointed to potentially unforeseen consequences of Britain’s withdrawal from the European Union and economic slack that might be greater than previously thought.
Policy makers were still confident enough to remove their pledge to ramp up asset purchases should the outlook deteriorate. At least one official suggested the euro area might be close to the self-sustained growth and inflation needed to halt that scheme.
Five weeks on, the data have weakened and the direction of the trade dispute between the U.S. and China, the world’s two biggest economies, is more unclear than ever.
“The ECB may look at a longer wind-down of the program,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “It would be a major surprise if they decided to extend once again, but considering the level of uncertainty right now, a longer exit path could be a logical option.”
The latest blow hit a couple of hours before the account was published, with a report that euro-zone industrial production unexpectedly shrank for a third month. Multiple measures this year have missed economists’ estimates, suggesting last year’s 2.3 percent expansion may have been the peak.
The prime concern is not so much the direct impact of U.S. President Donald Trump’s tariffs on imported steel and aluminum — from which a number of allies are exempt — and proposals for more on as much as $150 billion of Chinese goods. It’s more China’s retaliation and the damage the conflict could do to sentiment, prompting a self-fulfilling economic downturn.
“There was widespread concern that the risk of trade conflicts, which could be expected to have an adverse impact on activity for all countries involved, had increased,” the ECB account showed. “It was also cautioned that negative confidence effects could arise.”
Looming Policy Shift
Policy makers have stressed that they’re not yet worried about the euro-area economy’s domestic strength and that wage and inflation pressures are gradually increasing. Executive Board member Benoit Coeure, speaking in Paris on Thursday, said “the possibility of larger-than-estimated slack does not mean that monetary policy will have to remain unchanged.”
Still, the ECB account showed policy makers see global risks as tilted to the downside, and President Mario Draghi said this week that he’s especially monitoring any signs optimism is fading.
The Governing Council next meets to set policy on Apr. 26, when officials are likely to discuss how and when they might be able to end their bond-buying program, though most economists don’t expect a decision before June. The program is currently due to run until at least September.
Trade threats are also high on the agenda for the Federal Reserve. The minutes of its March 20-21 policy meeting released Wednesday showed a “strong majority” saw downside risks for the U.S. economy from the prospect of retaliatory actions.
The World Trade Organization warned on Thursday of signs a looming global standoff has started to affect business confidence and investment decisions, possibly jeopardizing growth that is already projected to be lower this year than in 2017. International Monetary Fund Managing Director Christine Lagarde said on Wednesday that the world economy must avoid being sucked into a protectionist spiral.
“For now, the trade-war risk is just that, a risk,” according to Florian Hense, an economist at Berenberg Bank in London. He said that an escalation of the conflict can probably be prevented while momentum in the euro area could pick up in the coming months.
“The medium-term outlook has not changed in such a way that we would expect the ECB to adjust its policy,” he said. “We expect the ECB to let asset purchases run out at the end of this year before hiking the refi rate for the first time in June 2019.”
Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance
African Development Bank (AfDB) President, Akinwumi Adeshina has extolled the tenacity and impacts of Africans in Diaspora on cross-border remittance.
According to the AfDB President, Africans in the diaspora are the continent’s largest financiers through their yearly remittances.
Speaking at an event organised by the Bank in collaboration with the African Union Commission, Adeshina noted that cross-border remittance into Africa is more than development assistance to the continent.
Investors King earlier reported that remittance into Nigeria and other countries in the sub-Sahara Africa region hits $53 billion in 2022.
The AfDB President said, “The value of remittances from the African diaspora doubled from $37 billion in 2010 to $87 billion in 2019, reaching $95.6 billion by 2021. Yet official development assistance to Africa in 2021 was $35 billion, or 36% of the remittances from the diaspora”.
Adeshina added that Egypt and Nigeria are among the top-ten remittance recipients globally, with $31.5 billion and $19.2 billion, respectively in 2021.
While speaking on the advantage of cross-border remittance to the African continent, the AfDB president noted that remittances have helped to meet financial, food, education, and health needs of many Africans, “it as well as serve as countercyclical sources of finance,” he said.
“The African diaspora has become the largest financier in Africa! And it is not debt, it is 100% gifts or grants, a new form of concessional financing that is the key for livelihood and security for millions of Africans” he added.
Similarly, Adeshina further positioned the need to eliminate premium charges on cross-border remittance into Africa. He noted that cross-border into Africa is twice what is it for South Asia.
He concluded that the Africans in diaspora can add more than remittance and investment, noting that they have skills, knowledge and know-how which can be needed for the development of the continent.
“They can help build world-class universities, and they can be mentors for the new generation of Africans,” he said.
E-Naira Transaction Volume Rises to N5 Billion in November Amid Intensified Campaign
More Nigerians embrace eNaira wallet as CBN takes adoption campaign across the nation
The Central Bank of Nigeria, (CBN) has disclosed that e-Naira transaction volume rose to a record N5 billion in the month of November following a series of campaigns initiated to encourage adoption.
Investors King had earlier reported how the e-Naira adoption team visited a number of parks in Abuja and the University of Lagos among other locations to drive the adoption of the digital currency.
Speaking at the Second Edition of the Africa Cashless Payment Conference, CBN’s Director of Information and Technology, Hajiya Rakiya Mohammed noted that transaction on the e-naira platform does not attract any charges.
She stated that Nigeria’s financial ecosystem is large to accommodate everyone.
Hajia Rakiya added that the e-Naira platform can be operated in any of Nigeria’s major local languages, stating that onboarding onto the e-Naira platform is a simple process.
She further stressed that the primary goal of the e-naira is to reduce the amount of cash in circulation, thereby downsizing the cost of producing paper currency, increase in revenue and direct disbursement to citizens.
Meanwhile, the e-Naira circulation has reached N401.82 million as more Nigerians embraced the digital currency.
It could be recalled that on October 25, 2021, CBN launched the e-Naira making Nigeria the first African country to have a digital currency.
During the unveiling of the e-Naira in Abuja, President Muhammadu Buhari stated that the digital naira would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.
On his part, the CBN Governor, Godwin Emefiele disclosed that the e-Naira offered Nigerians endless possibilities in using financial services.
While admonishing more Nigerians to embrace the digital naira, Hajia Rakiya noted that “both banked and unbanked can use it, and it can be done through USSD *997#. We have integrated it with telecoms and NIBBS instant payments plus integration with money transfer operations so you can use e-naira for cross border”.
CBN Will Redesign Naira Notes Every Five to Eight Years; Say Emefiele
The central bank will henceforth redesign the nation’s legal tender every five to eight years
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has said the bank will henceforth redesign the nation’s legal tender every five to eight years.
The apex bank governor revealed at the unveiling of the new naira notes on Tuesday.
Godwin Emefiele explained that the naira redesign is in line with global best practice noting that the naira needed to be redesigned and re-issued every five to eight years.
According to the CBN governor, previous administrations lacked the political will to approve the redesign of the naira notes. Stating that it is regrettable that the naira has not been redesigned for the past 19 years.
“In the past, I have to confess that attempts by the CBN to redesign and re-issue the naira notes have been resisted. It is only President Muhammadu Buhari that has exhibited the courage to do so,” the CBN governor stated.
Emefiele added that going forward, naira notes will be redesigned at intervals to address some peculiar issues.
“After today, the CBN will begin to redesign and reissue the naira every five to eight years,” he said.
Investors King had earlier reported that President Muhammadu Buhari unveiled the redesigned naira notes at the Federal Executive Council (FEC) meeting today.
Among those who joined the president with the unveiling include the CBN governor and the EFCC chairman.
Recall, in October, the CBN announced it will redesign the N200, N500 and N1,000 notes in line with its mandate.
Meanwhile, the CBN governor has disclosed that the new naira notes can not be counterfeited because of the features embedded in them.
Similarly, he added that security agencies would be monitoring people making withdrawals at the counter to sniff out money laundering and unravel illegal usage.
“The CBN has moved to a cashless economy. We will restrain the volume of cash someone will withdraw over the counter. We will follow up with the person’s data to know the reason for such withdrawal,” he concluded.
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