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Economy

Experts Speak on Interest Rate Increase as Inflation Fails to Slowdown

The Monetary Policy Committee led by the Central Bank of Nigeria raised the interest rate by 100 basis points to 14% on Tuesday.

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Interbank rate

In an effort to ease the rising inflation rate and encourage capital importation, the Monetary Policy Committee led by the Central Bank of Nigeria raised the interest rate by 100 basis points to 14% on Tuesday.

The apex bank had raised the interest rate twice in the last two months from 11.5% to 14%, representing a combined increase of 250 basis points despite the weak Naira value, slowing economic activities and growing uncertainty ahead of the general election in 2023.

Speaking on the development, Prof Uche Uwaleke, a professor of Capital Market and Chairman of the Chartered Institute of Bankers of Nigeria, Abuja Branch, said, “The hike in the MPR in quick succession from 11.5 per cent to 13 per cent in May and now to 14 per cent could signal panic on the part of the CBN and heightens uncertainty.

“This policy stance may not necessarily curb inflationary pressure given the pressure is not coming from monetary factors but from high costs of petroleum products, electricity and insecurity, ditto for rising exchange rate.

“So, expect to see in the coming months higher cost of borrowing, widening government deficit, slower economic growth, rising unemployment and bearish stock market.”

Explaining the possible impact of higher interest rates on Nigeria’s economic growth, Dr. Muda Yusuf, the Founder/Chief Executive Officer of the Centre for The Promotion Of Private Enterprise, said “the new MPR hike means that the cost of credit to the few beneficiaries of the bank credits will increase which will impact their operating costs, prices of their products and profit margins. The equities market may be adversely impacted by the hike.”

The Deputy-President of the Lagos Chamber of Commerce and Industry, Dr Gabriel Idahosa, also commented on the negative impact of higher borrowing costs.

According to him, higher interest rates would further push Nigerians below the poverty line.

According to him, the Nigerian situation, with over half the population living below the poverty line, did not justify raising interest rates in the manner it was being done in advanced economies where the income level was significantly higher than Nigeria’s.

Idahosa said, “Our own economy cannot stand this kind of rate hike, where you have unemployment, inflation going to 20 per cent. Manufacturers are not able to cope with current interest rates because of the cost of production. Diesel alone is sending many of them out of business. If you now add a high-interest rate, it’s not good for businesses that are already suffering from those other issues of inflation and power supply. They are supposed to do it on paper because the monetary policy says if you have inflation, you should increase interest rates.

“People in advanced countries are earning much more than they need to survive. So, when you increase rates like this, they will be able to save more. It makes sense in a mature economy, but half of the Nigerian population are currently below the poverty line, by all indices.”

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

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Economy

2025: The End of Gas Flaring

The Federal Government through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has inaugurated a 12-member ‘Gas Flare Commercialization Program Team’ to manage the nation’s gas flaring.

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gas flaring

The Federal Government through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has inaugurated a 12-member ‘Gas Flare Commercialization Program Team’ to manage the nation’s gas flaring.

According to Engineer Gbenga Komolafe, the Chief Executive of NUPRC, gas flaring in the oil gas industry has been a continuous menace that needs to be eradicated because of its adverse effect on the people’s health, the Environment and also a major resource waste and value erosion to the country.

Gbenga mentioned that to monetize gas resources is to take a positive step toward securing energy security, especially in this period of global energy transition. He said as a nation, Nigeria needs to ensure it harnesses every available gas resource in other to create value.

He declared that the NUPRC is resuming the procedure of issuing flare sites to competent technical companies, after a complete bidding process.

This process is crucial and important in respect of the direction of the federal government’s policy to ensure every gas resource is properly developed for national development.

He laid emphasis that the wasteful disposal of natural gas is not only hazardous with serious health and environmental consequences but also a waste of resource and value to Nigeria.

In addition to this, he stated that the FG declared the period 2021 to 2030 as the DECADE OF GAS, a period which the country must change direction from oil centered exploitation to a gas-focused industrial development.

Although the World Bank has set 2030 as the target year to end gas flaring, Nigeria has set the country’s deadline tp 2025.

President Muhammadu Buhari made a commitment towards the Paris Agreement during the COP26 Leaders’ Summit to achieve Net Zero carbon emissions by 2060,” he said.

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Economy

China Reaffirms Commitment to Maintaining Cooperation With Africa

Wu- Peng, has reaffirmed China’s commitment to maintaining cooperation with Africa

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China Nigeria

The director general of the ministry of foreign affairs of China, Wu- Peng, has reaffirmed China’s commitment to maintaining cooperation with Africa.

Wu-Peng disclosed this at a meeting held with African journalists under the auspices of the China Africa Press Centre (CAPC) in June 2022 in Beijing.

Quoting the president of China, Xi Jinping, Wu-Peng said China will work hand in hand with African countries to implement linked programs in the next three years”.

According to Wu-Peng, this includes programs related to the medical and health sector, poverty alleviation, agricultural growth and promoting investments.

We’re still fighting to contain Covid-19 since the outbreak of the pandemic, China has so far provided about 260 million doses of vaccines to 55 African countries and African Union,” the Director General said.

He also mentioned that China had also made provision for about 120 batches of emergency supplies to African countries and they all have diplomatic relations with China and also contributed to Africa’s early recovery from the Covid-19 pandemic.

China has already constructed the African CDC in Addis Ababa and it will be completed in 2023.

The other program I would like to make mention is the agricultural sector. When FOCAC was held in 2021, there was no Russia-Ukraine crisis, yet we focus and invested in Agriculture in Africa.

The reason been, we believe in the potential of Agriculture in Africa, the growth and development is huge, there are still lots of arid land in Africa, Wu-Peng stated.

Unfortunately, Africans still have to import grapes from the outside which costs a lot of currency and actually damages Africa’s international balance sheet.”

He said that the failure to prioritize agriculture could obstruct fast economic growth in Africa, suggesting that more should be done through Public Private Partnership (PPP) to ensure food security.

The director general laid emphasis on the need for proper implementation of the report from the FOCAC meetings to bring to life the realization of set goals and objectives.

“This does not make sense, you have lands, you have labor forces, I think we just need the right policy to promote price investments in industrial large scale farms to improve our food security.

Why this is has become very important is due to the Ukraine crisis, food prices globally surged and going forward, we must finish construction of the project in the nearest future.

African governments have already noticed developments of agriculture is a huge priority to deal with the crisis of hike in food prices, we want Africas countries to have up to date plans from FOCAC meetings and the findings of the results.

“Usually, when we have FOCAC meetings we just produce documents, we need more concrete actions, we must be focused,” the director general said.

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Economy

Inflation Rises to 17 Year High in Nigeria

Inflation rate, grew at a 19.64% rate in July, the highest since September 2005 when inflation peaked at 24.32%

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consumer prices

Prices of goods and services rose to a 17-year-high in Africa’s largest economy Nigeria in the month of July, the National Bureau of Statistics (NBS) reported on Monday.

The Consumer Price Index (CPI), which measures the inflation rate, grew at a 19.64% rate in July, the highest since September 2005 when inflation peaked at 24.32%. This was 1.04% higher than the 18.60% recorded in June 2022.

On a monthly basis, inflation expanded by 1.817%, an increase of 0.001% from 1.816% filed in June 2022.

As expected, food inflation also grew by 0.99% from 21.03% year-on-year in July 2021 to 22.02% in July 2022. According to NBS, the increase in the food sub-index was caused by increases in prices of Bread and cereals, Food products n.e.c, Potatoes, yam and other tubers, meat, fish, oil, and fat.

On a month-on-month basis, the food inflation rate in July was 2.04%, this was a 0.01% insignificant decline compared to the rate recorded in June 2022 (2.05%). This decline is attributed to a reduction in the prices of some food items like Tubers, Maize, Garri, and Vegetables.

Rising economic uncertainties amid a series of policy changes like the increase in duty on imported raw materials, high electricity tariffs,  fuel, etc needed to manufacture the necessary food items are responsible for the persistent increase in inflation.

Also, the extended decline in the value of the Nigerian Naira against its global counterparts has made foreign goods or imported goods expensive for Nigerians. Therefore, manufacturing companies are now passing the increase to final consumers already struggling with low earnings and a high unemployment rate.

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