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Inflation Rate Faces Risks, Say Emefiele, Others

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Nigeria's Inflation Rate - Investors King
  • Inflation Rate Faces Risks, Say Emefiele, Others

The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, has said the nation may see a reversal of the decline in inflation rate if the risks threatening favourable macroeconomic conditions are not addressed.o

In a communiqué of the Monetary Policy Committee meeting of May 21 and 22 and the personal statements of members, which were released on Monday, Emefiele, who doubles as the chairman of the eight-man MPC, identified the current budget outlay of over N9tn, the anticipated huge election spending, and the ongoing interest rate hike by the United States Federal Reserve as risks threatening the Nigerian economy.

According to him, inflation is declining but remains high and outside acceptable band, with probable risk of upturn in the short-term.

He described the desire for the concurrence of exchange rate stability, low inflation and low interest as unfeasible because of the structural realities of the economy.

Emefiele said, “For a few analysts, the observed moderation in inflation rate provides justification for policy ease; however, the prevailing realities, especially the double-digit inflation and elevated short-term inflation expectations, do not support this.

“While the trend of disinflation is encouraging, the observed moderation in inflationary pressure is, however, threatened by waning base-effects and the liquidity injections anticipated in the second-half of the year. It is, therefore, imperative to ensure that the path of disinflation is not reversed.”

The CBN governor stated that his immediate predisposition would be for further tightening of the domestic policy stance to rein in expected inflation and ensure foreign exchange market stability.

The Deputy Governor, Corporate Services, CBN, and a member of the MPC, Edward Adamu, said there was a need to build buffers on both fiscal and monetary sides in preparation for a possible downturn.

He stated that the outlook for inflation in the rest of the year appeared largely uncertain owing to the likely surge in domestic liquidity arising mainly from expected fiscal injections and election-related spending.

Adamu said, “The 2018 appropriation passed by the National Assembly promises to be highly expansionary because a sizable portion of the budget would have to be deficit-financed.

“In addition, the payment of contractor debts and the prospects of a new minimum wage down the road, somewhat further complicates the outlook for domestic liquidity. When these likely fiscal injections are taken into account, the outlook for inflation that emerges becomes scarier.

“Therefore, from a financial stability standpoint, inflation threats or risks to the naira exchange rate stability are to be mitigated upfront in order to sustain and deepen the resilience of the industry.”

The Deputy Governor, Financial System Stability, Aishah Ahmad, said, “The ongoing implementation of the 2017 budget, the substantial implementation of the 2018 federal budget within a limited time frame, and the 2019 election season, which have historically had some inflationary impact, are potential risks to the positive trend for inflation.”

She described the positive trajectory of key economic variables such as growth, inflation and exchange rates as gratifying, adding that attention should be paid to further threats to the gains, either in the form of a potential US-China trade war, inflationary fiscal shocks, or flow reversals from actions by the US Fed.

According to her, a further tightening of the monetary policy stance is not out of place to maintain vigilance.

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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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness - Investors King

Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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Private employers

As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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