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CBN Survey Shows 12-month Interest Rates Rise

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  • CBN Survey Shows 12-month Interest Rates Rise

The Central Bank of Nigeria (CBN) has released the second quarter 2018 Inflation Attitudes Survey, which showed that interest rates had risen in the last 12 months by 0.8 points to 32.4 points. The first quarter figure stood at 31.6 points.

The survey, conducted from May 19 to June 7, 2018 through a sample size of 2070 households randomly selected from 207 Enumeration Areas (EAs) across the country, had a response rate of 80.4 per cent.

On the other hand, 7.4 per cent of respondents believed that interest rates had fallen, 17 per cent of the respondents were of the opinion that the rates stayed about the same in the last 12 months, while 43.2 per cent of the households had no idea. The result revealed that more households perceived that interest on bank loans and savings rose over the past 12 months.

On the expected change in interest rates on bank loans and savings over the next 12 months, more respondents (26.6 per cent) were of the view that the rates will rise, while 15.6 per cent believed that they will rates fall.

According to the survey, a net rise value of 10.9 per cent was recorded compared to 9.4 per cent attained in the previous quarter. About 57.8 per cent of the respondents either expected no change or had no idea.

Similarly, the respondents were asked whether it would be best for the Nigerian economy for interest rates to rise or fall. The results showed that 37.2 per cent indicated that it would be best for the economy if interest rates fell, while 12.8 per cent opted for higher interest rates. The results further revealed that 13.2 per cent would make no difference, while 35 per cent had no idea . Also, these responses revealed that most of the respondents favored lower interest rates for the Nigerian economy.

Responses on what the impact a rise in interest rates in the short and medium terms would have on prices 40 per cent agreed that a rise in interest rates would make prices in the street rise slowly in the short term, as against 14.0 per cent that disagreed. While in the medium term, 39.2 per cent agreed that a rise in interest rates would make prices in the street rise slowly, 13.5 per cent disagreed .

Similarly, respondents were asked to choose between raising interest rates in order to keep inflation down, and keeping interest rates down to allow prices to rise. Responding, 26.3 per cent prefer red interest rates to rise in order to keep inflation down compared to 28.0 per cent who said they would prefer prices to rise faster, while 45.6 per cent had no idea.

The survey showed that these responses suggest that given a trade-off, more of the respondents would prefer higher interest rates to higher inflation, which is suggestive of the respondent households’ support for the bank’s price stability objective.

To assess whether people are aware of the way monetary policy works in Nigeria, respondents were asked if they knew which group of people met to set Nigeria’s monetary policy rate.

Responding, 27.6 per cent felt it was the Monetary Policy Committee, 10 per cent felt it was the Federal Ministry of Finance, 17.0 per cent believed it was the government, 4.7 per cent felt it was the National Assembly, while 2.3 and 38.3 per cent answered ‘others’ and ‘do not know’, respectively.

More so, when asked to identify which group mostly influenced the direction of interest rates, the result indicated that majority of the respondents (40.6 per cent) were aware that the Central Bank of Nigeria influences the direction of interest rates.

About 8.7 per cent mentioned the ministers, 4.3 and 10.8 per cent was of the opinion that civil servants and Banks influence the rates, respectively, while 35.4 per cent had no idea. On what best described the Monetary Policy Committee, 20.6 per cent felt it was influenced by the government, 12.6 per cent felt it was the Federal Ministry of Finance, and 8.1 per cent believed that it was the national assembly, while 10.7 per cent thought it was not influenced by any arm of government and 47.4 per cent had no idea.

Respondents were asked if they were satisfied or dissatisfied with the CBN’s management of interest rates in Nigeria.

They were “asked what would become of the Nigerian economy if prices started to rise faster than they do now”. “The survey result showed that 49.7 per cent of the respondents believed that the economy would end up weaker, 11.0 per cent stated that it would be stronger, 17.7 per cent of the respondents believed it would make a little difference, while 21.5 per cent did not,” the survey said.

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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Finance

Nigeria’s Public Debt Hits ₦121.67 Trillion as Borrowings Surge – DMO

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The Debt Management Office (DMO) of Nigeria has announced that the country’s total public debt has risen to ₦121.67 trillion ($91.46 billion) as of March 31, 2024.

This represents an increase of ₦24.33 trillion from the ₦97.34 trillion ($108.23 billion) recorded at the end of December 2023.

The surge in debt is attributed to both domestic and external borrowings by the Federal Government, the 36 state governments, and the Federal Capital Territory (FCT).

The DMO’s report reveals that Nigeria’s domestic debt now stands at ₦65.65 trillion ($46.29 billion), while the external debt is ₦56.02 trillion ($42.12 billion).

The DMO noted that the rapid increase in public debt is largely due to new borrowing to partially finance the 2024 Budget deficit and the securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria (CBN).

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria,” the DMO stated.

Despite the rising debt, the DMO remains optimistic about future debt sustainability, contingent on improvements in government revenue.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the Government’s Revenue to enhance debt sustainability,” the DMO added.

The increase in debt comes at a time when President Bola Tinubu is preparing to present the 2024 Supplementary Budget to the National Assembly.

This follows the President’s approval of the ₦28.7 trillion 2024 Appropriation Bill on January 1, 2024, which was ₦1.2 trillion higher than the budget originally proposed in November 2023.

The 2024 budget, dubbed the “Budget of Renewed Hope,” set ambitious targets, including pegging the oil price at $77.96 per barrel and estimating daily oil production at 1.78 million barrels.

However, the naira has faced severe depreciation, plunging to nearly ₦2,000/$1 in February, before stabilizing around ₦1,500/$1.

Economic analysts warn that the escalating debt and currency depreciation could pose significant challenges to Nigeria’s economic stability.

The government’s ability to manage its borrowing and stimulate revenue generation will be critical in navigating these fiscal pressures.

As Nigeria grapples with these economic realities, the focus remains on finding sustainable solutions to manage the growing debt burden while fostering economic growth and stability.

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Banking Sector

Federal High Court Sets Date for Contempt Hearing in GTB vs. AFEX Loan Case

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The Federal High Court in Lagos has scheduled June 27, 2024, for the next hearing in the ongoing contempt suit filed by Guaranty Trust Bank Plc (GTB) against directors of AFEX Exchange Commodities Limited.

The case revolves around a disputed N17.81 billion loan obtained under the Central Bank of Nigeria’s Anchor Borrowers’ Programme.

Presiding over the court, Justice Chukwujekwu Aneke set the date following a session where arguments were presented by the plaintiff’s lead counsel, Mr. Ade Adedeji (SAN), and the respondent’s counsel, Prof. Olawoyin (SAN).

The core issue pertains to the alleged disobedience of a court order by the directors of AFEX Exchange Commodities Limited.

GTB, through its counsel Ajibola Aribisala (SAN), has accused AFEX and its directors—Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi—of contempt for failing to comply with a court directive.

The bank alleges that these directors did not appear in court as mandated, which led to the initiation of contempt proceedings.

During the latest session, Adedeji emphasized the necessity for the directors to appear in person, stating, “My lord, the parties in contempt are not in court. The contemnors cannot sit in the comfort of their homes and send a lawyer to court in contempt proceedings. The law is trite that they must appear before the court.”

In response, Olawoyin argued that he had only recently been briefed on the matter and was not fully aware of the prior developments.

He noted that some of the individuals listed as directors were no longer with the company, adding that one current director, Mr. Akinyinka, was present in court, while another was on pilgrimage.

The contempt case traces back to a suit marked FHC/L/CS/911/2024, where GTB sought to recover the loan amount through legal measures.

On May 27, Justice Aneke granted an interim Global Standing Instruction (GSI) injunction, which directs over 20 banks to transfer funds credited to AFEX into its account with GTB until the debt is settled.

Also, the court authorized GTB to take possession of AFEX’s 16 warehouses across seven states and sell the commodities stored within, as these were procured using the CBN’s loan facility.

The N17.81 billion loan comprises N15.77 billion in principal and interest outstanding as of April 17, 2024, and an additional N2.04 billion covering recovery costs and incidental expenses.

As the court prepares for the next hearing, the financial and legal communities are closely watching the proceedings.

The outcome will significantly impact not only the involved parties but also set a precedent for handling similar cases in the future.

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Banking Sector

CRC Credit Bureau Celebrates 15 Years with Record 14% Credit Penetration in Nigeria

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CRC Credit Bureau Limited celebrated its 15th anniversary with a record 14% credit penetration rate.

The occasion was marked with the CRC Finance and Credit Conference 2024 held in Lagos, where key industry stakeholders gathered to reflect on the bureau’s journey and discuss future trends in credit risk management.

Founded in January 2010 and licensed by the Central Bank of Nigeria (CBN), CRC Credit Bureau has played a pivotal role in enhancing access to credit across Nigeria.

Dr. Tunde Popoola, the Group Managing Director/CEO of CRC Credit Bureau Limited, highlighted the bureau’s journey, noting that from its inception with a single product, CRC has expanded its offerings to 18 products covering all aspects of the lending value chain.

Speaking at the conference, Dr. Popoola underscored the bureau’s contribution to Nigeria’s financial sector, stating, “CRC Credit Bureau has been instrumental in transforming access to credit in Nigeria over the past 15 years. We started with a vision to simplify credit access through reliable data and have since grown to serve millions of Nigerians.”

The event focused on the theme “Sustainable Financing Options: Innovations in Credit Risk Management,” emphasizing the importance of sustainable finance amid economic challenges.

The conference provided a platform for stakeholders to discuss strategies for mitigating risks and enhancing the efficiency of credit operations in Nigeria.

Reflecting on the current state of credit penetration, Dr. Popoola noted that while Nigeria has made significant progress, the 14% penetration rate still falls below global benchmarks.

He highlighted that CRC Credit Bureau currently holds credit scores for 33 million Nigerians, facilitating over 29.4 million searches in 2023 alone, with an additional 10 million searches conducted in the first quarter of 2024.

Joel Owoade, Chairman of CRC’s Board of Directors, acknowledged the economic headwinds impacting businesses in Nigeria but stressed the importance of sustainable financing to mitigate risks associated with lending.

“As we navigate economic fluctuations, sustainable financing remains crucial to fostering economic stability and growth,” Owoade remarked.

The conference also featured insights from industry experts on leveraging artificial intelligence (AI) in credit risk management and regulatory frameworks to support AI-driven innovations.

Olaniyi Yusuf, Managing Partner of Verraki, highlighted the potential of AI to create jobs and enhance economic productivity, calling for supportive regulatory environments that balance innovation with risk management.

Representatives from the Central Bank of Nigeria (CBN) emphasized the regulator’s efforts to promote sustainable credit practices.

Dr. Adetona Adedeji, Acting Director of the Banking Supervision Department at CBN, outlined initiatives such as the National Collateral Registry and Global Standing Instruction aimed at enhancing credit access while minimizing risks.

As CRC Credit Bureau looks ahead, Dr. Popoola expressed optimism about the future, stating, “We remain committed to driving greater financial inclusion and expanding credit access in Nigeria. Our focus is on leveraging technology and strategic partnerships to deliver innovative solutions that meet the evolving needs of consumers and lenders.”

The celebration of CRC Credit Bureau’s 15th anniversary underscored its pivotal role in Nigeria’s financial sector, marking a milestone in the nation’s journey towards broader financial inclusion and sustainable economic growth.

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