The Central Bank of Nigeria (CBN) on Tuesday raised the interest rate by another 100 basis points from 13% to 14% to curb the nation’s rising inflation rate and improve capital inflow.
Godwin Emefiele, the Governor of the CBN, disclosed this on Tuesday after the 286th meeting of the Monetary Policy Committee held in Lagos.
He said the nine-member committee agreed that raising borrowing costs in an economy plagued with poverty, low new investments and weak new job creation is the right thing to do.
Emefiele said, “The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation.”
“Members were conscious of the fact that output growth remained fragile. However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”
In May, the CBN raised the interest rate by 150 basis points to 13%, citing rising inflation rates and the need to curtail consumer prices to protect the nation’s monetary gains going forward. However, since the apex bank raised the interest rate in May, the inflation rate has been on the rise and presently at almost 19% in the month of June. Suggesting that rates increase has not been effective and also highlighted CBN’s other possible motive for aggressively raising rates in line with developed nations.
Presently, Nigeria has little to no fiscal space to wriggle out of possible recession given the size of its debt and revenue generation. Therefore, it needs constant capital inflow to sustain its dollar-dependent economy of 200 million people.
However, rising interest rates in developed economies make Nigerian assets unattractive to foreign investors currently being offered higher interest rates from the USA, to the U.K, Europe, Asia Pacific and so on. Hence, why the CBN is aggressively raising interest rates to sustain the dollar inflow and economic activity.
Nigeria’s foreign reserves stood at $39.441 billion as of July 19, 2022, despite rising oil prices. In the first four months of 2022, Africa’s largest economy spent N947.53 billion on fuel subsidy, and the World Bank estimated that Nigeria will lose N3 trillion in revenue in 2022 as a result of debt servicing.
“When we launched our previous Nigeria Development Update in November 2021, we estimated that Nigeria could stand to lose more than 3 trillion Naira in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich. Sadly, that projection turned out to be optimistic”, said Shubham Chaudhuri, World Bank Country Director for Nigeria.
Therefore, for Nigeria to continue to service its debt amid rising interest rates in developed economies, rising dollar strength and low oil production, Africa’s largest economy needs to lure foreign investors into the economy.
NLNG Boosts Cooking Gas Production to 1.5 Million Metric Tonnes Annually
Nigeria Liquefied Natural Gas Limited (NLNG) has announced a significant milestone in its operations, boosting its annual production of liquefied petroleum gas (LPG), commonly known as cooking gas, to over 1.5 million metric tonnes.
This surge in production underscores NLNG’s commitment to meeting the rising demand for clean cooking energy in Nigeria.
The entirety of NLNG’s 1.5 million tonnes production is now being sold domestically within Nigeria.
Moreover, the company has initiated a landmark shift by starting to supply LPG in naira, moving away from the traditional practice of trading in United States dollars.
This move aligns with calls from stakeholders in the oil and power sectors advocating for naira transactions, especially amidst the challenges posed by currency fluctuations.
During a panel session at the 7th Nigeria International Energy Summit in Abuja, NLNG’s General Manager of Finance, Fatima Adanan, highlighted the company’s dedication to enhancing LPG penetration across the country.
Adanan emphasized NLNG’s vision to make Nigeria a better place by promoting the use of cleaner energy sources like gas.
While NLNG’s production surge is commendable, Adanan acknowledged that Nigeria’s LPG requirements surpass the current output, necessitating imports to bridge the gap.
However, NLNG remains committed to expanding its production capacity to meet the nation’s energy needs and drive increased adoption of LPG as a cleaner cooking fuel.
CBN Raises Benchmark Interest Rate by 400 Basis Points to 22.75%
The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 400 basis points to a record 22.75%.
The decision made by the Monetary Policy Committee (MPC) comes amidst rising inflationary pressures and growing uncertainty in Africa’s largest economy.
Nigeria’s inflation rate rose to 29.90% in January 2024, the highest in over two decades while the nation’s unemployment rate quickened to 5% in the third quarter of 2023. Suggesting that the rising costs have continued to drag on both new job creation and the existing ones.
This coupled with a series of policy adjustments implemented by President Bola Ahmed Tinubu has plunged economic productivity and eroded consumer spending as citizens grapple with high fuel prices, electricity tariffs, a record-high foreign exchange rate, and insecurities.
Therefore, it is surprising that the Monetary Policy Committee (MPC) led by the CBN will further increase borrowing costs by 400 basis points at a time when job creation is paramount.
While the economy reportedly grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, this growth is yet to crystalise as businesses and citizens have taken to the street protest against the harsh economic situation.
Economic experts have started questioning the data from the National Bureau of Statistics (NBS) given its lack of correlation between the data and economic reality.
President Tinubu Unveils Geometric Power Plant in Aba After 20-Year Wait
After two decades of anticipation, President Bola Tinubu, through his representative Vice President Kashim Shettima, inaugurated the long-awaited Geometric Power Plant in Aba, a significant milestone in the city’s quest for reliable electricity supply.
The event, which also saw the commissioning of three rehabilitated roads by Abia State Governor Alex Otti, symbolizes the culmination of years of perseverance and determination to transform Aba’s power landscape.
Addressing the audience, Vice President Shettima hailed the project as a testament to the power of visionary leadership and unwavering commitment to progress.
He said the Geometric Power Plant exemplifies the transformative impact of strategic infrastructure investments on local communities.
Governor Otti echoed similar sentiments, emphasizing the importance of the power project in positioning Aba as a hub for national and international business ventures.
He commended the efforts of Geometric Power Limited while urging them to uphold transparency and avoid exploiting consumers.
The inauguration of the Geometric Power Plant comes amidst growing concerns over Nigeria’s power infrastructure and the need for sustainable solutions to address electricity shortages.
The project, with a capacity of 188MW, holds promise for significant improvements in power supply across Abia State, benefitting nine out of seventeen local government areas.
The Managing Director of Geometric Power Limited, Ben Caven, underscored the scale of investment involved, totaling $800 million.
He highlighted the comprehensive nature of the project, which includes the installation of new power substations and a 27km natural gas pipeline, signaling a comprehensive approach to enhancing Aba’s energy infrastructure.
In conclusion, the inauguration of the Geometric Power Plant represents a transformative moment for Aba, offering renewed hope for economic growth and prosperity powered by reliable electricity supply.
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