The Central Bank of Nigeria’s Monetary Policy Committee will today (Monday) begin its two-day bi-monthly meeting to review the state of the economy.
It is expected to take key policy decisions that will influence the direction of the economy.
Top on the agenda of the meeting is the need to tackle the biting recession occasioned by slow growth in the economy, rising inflation, and the volatility in the foreign exchange market.
Economic experts expect the 12-member MPC to begin an expansionary monetary policy by reducing the Monetary Policy Rate (the benchmark interest rate), and lower the Cash Reserve Ratio.
According to the economists, the MPC will need to reduce the liquidity ratio and take measures to address the lingering volatility in the foreign exchange market.
The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the MPC might have no other choice than to purse an expansionary monetary policy considering the state of the economy and the recent stimulus package announced by the fiscal authority.
He said, “We expect an accommodative monetary policy as against a contractionary one. The CBN will want to complement the effort of the fiscal authority, especially as regards the stimulus package that was recently announced.”
In an economic bulletin released on Friday, Rewane added, “The divergence between the year-on-year headline inflation and the annualised monthly rate of 6.17 per cent poses a major dilemma to the apex bank. Even though the monthly measure is more relevant to inflation expectations, it may need to maintain consistency with the previous measure.
“The clamour for a stimulus package and lower interest rates by the government and the public will force a more accommodative stance by the committee in spite of other considerations.
“The high inflation environment has reduced consumer spending, real returns and corporate profitability margins. The markets have reacted accordingly.”
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, was also of the view that the MPC would begin an accommodative monetary policy.
He said, “It is clear that we have not been able to control inflation with the tightening policy. If the overriding consideration is to reflate the economy, the MPC will need to reverse the last increase made in the MPR by reducing it from 14 to 12 per cent. The committee may need to cut the Cash Reserve Ratio from 22.5 per cent to 20 per cent and then to 15 per cent later.
A professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, also said he expected the committee to reduce the MPR in order to lower interest rate on bank loans and subsequently boost credit in the economy.
He said, “This is a time to begin an expansionary monetary policy. The MPC must reduce the MPR, reduce the liquidity ratio or maintain the status quo. We have seen that the inflation we are experiencing is cost-push, i.e caused by increase in cost of capital and not by demand pull. So we need to reduce the cost of capital in the economy.
“There is also a need for the committee to tell us how they intend to tackle the volatility in the exchange rate. They need to tell us whether the volatility is being caused by speculators or real demand. If it is caused by real demand, there is nothing they can do about it. However, if it is activities of speculators, then they must state how they intend to deal with it.”
The MPC had during its July meeting hiked the MPR by 200 basis points to 14 per cent.
The 14 per cent MPR announced by the CBN is the highest in over a decade.
However, the committee left the CRR and the liquidity ratio unchanged at 22.5 per cent and 30 per cent, respectively.
The CBN Governor, Mr. Godwin Emefiele, who announced the decision of the committee after a two-day meeting held at the apex bank’s headquarters in Abuja, said eight out of the 12 members of the committee attended the meeting.
Out of the eight, he said five members voted in favour of monetary tightening, while the other three voted to hold the MPR at 12 per cent.
In taking the decision to increase the MPR, the CBN governor said the committee was faced with two policy choices – whether to hold or reduce the rate to stimulate growth, or increase it in order to curb inflation.
Emefiele, however, said when considered from the standpoint that the primary mandate of the CBN was to maintain price stability, the committee decided to focus on its mandate by checking inflationary pressures.
The governor explained that members of the committee agreed that the economy was passing through a difficult phase, adding that the concern was that headline inflation had risen significantly in June.
The committee, he said, noted that inflation had risen significantly, eroding real purchasing power of fixed income earners and dragging down growth.
The CBN governor said the high inflationary trend had culminated in negative real interest rates in the economy, noting that this was discouraging savings.
According to him, members of the committee also noted that the negative real interest rates did not support the recent flexible foreign exchange market as foreign investors’ attitude had remained lukewarm, showing unwillingness to bring in new capital under the circumstance.
He said the decision to raise interest rate would give impetus to improving the liquidity of the foreign exchange market and the urgent need to deepen the market to ensure self-sustainability.
The governor said members were of the opinion that the liquidity of the foreign exchange market would boost manufacturing and industrial output, thereby stimulating the much needed growth.
FG Reduces Expenditure on JV Oil Assets by 62%
NNPC Lowers Spending on JV Oil Assets as Demand Drops
In a bid to reduce expenditure following a plunge in revenue generation, the federal government has cut down on spending on oil and gas assets currently being developed through a joint venture with private companies.
Federal Government lowered its expenses by 61.83 percent in the month of July, according to the latest report from the Nigerian National Petroleum Corporation.
The report showed NNPC, which has an obligation to make cash call payment for the development of the assets, only made $94.84 million or N34.14 billion cash call in July, down from $248.48 million or N89.45 billion in June.
The joint venture is managed by both the NNPC and private firms in proportion to their equity holdings and receives produced crude oil the same ratio.
This was largely due to the plunge in NNPC’s export receipt from $378.42 million in June to $122.44 million during the month under review.
“Of the export receipts, $67.45m was remitted to the Federation Account while $54.98m was remitted to fund the JV cost recovery for the month of July 2020 to guarantee current and future production,” it added.
In addition to the dollar allocation of $54.98 million to the JV cash call account, the naira portion of N14.35bn ($39.86m) was transferred to the account from domestic crude oil receipts in July, according to the NNPC.
Nigeria: Bread Scarcity Rages As Bakers Strike in Lagos, Abuja Over Price Hikes
Post Covid-19 Economy in Nigeria Sees Scarcity And Price hike in Bread Production
Residents of Abuja and Lagos are lamenting the increased scarcity in bread and a hike in its price as bakers went on strike to protest the hike in price of flour and other ingredients.
“I have asked around for bread but I can’t find any, and this is strange,” said Amos Idoko, a resident of Utako area in Abuja.
The strike affected roadside kiosk operations and families who rely on bread for a breakfast staple with many running out of bread last weekend across some communities surveyed in the FCT, Nasarawa and Niger state.
Some of the bakers said the strike started Friday and may end today, but there will be a hike in the price of bread.
A leader of the bakers group in the FCT and an official of Zuma Bread in Abuja, Abdullahi Muhammed, said the strike action was to protest the hike of flour and other ingredients for bread making.
Daily Trust reported exclusively recently that foreign-dominated flour millers have increased the price of flour for more than three times between March and August 2020, even with the COVID-19 pandemic.
“For instance, a bag of wheat flour sold between N10,000 and N12,000 last year now sells for N14,000,” he said
“Bag of sugar sold for about N11,000 last year now sells at N18,000. A 25-litre cooking oil previously N8,000 is now N15,000,” he said.
A dealer in wheat flour and baking ingredients in Kubwa – Abuja, Shehu Lawan, said dealers now rely on the parallel market to source for forex instead of the Central bank of Nigeria (CBN), making it difficult for them to maintain previous prices.
Lawan also said other issues that affect cost in bakery commodities, include government tax increment, cost of transport, among others.
In Lagos, Mr Ajao Ismail, who works at Royal Bite bakery in Palm Avenue of Mushin, said there was an earlier scarcity of bread in Lagos but that most bakers have resumed operations as of Sunday evening but with the bread price increasing.
“The market is dull at the moment because we have lots of bread that we have not sold. When there was scarcity, the demand was higher than the supply, now that most of the bakers are no longer on strike, there is more bread. People are reacting to the price.”
Ajao explained that the price of bread can return to how it was pre-COVID provided the government intervenes.
“If the government can work towards ensuring the price of flour, sugar, milk and butter is reduced to what it was in January 2020, we promise to reverse the price of bread to what it was.
“Bread now sold for N300/350 will return to N250 and the one sold for N500 will return to N400,” she noted.
The bakers had shut down for a number of days last week in Lagos. Premium Bread makers Association of Nigeria (PBAN) and Association of Master Bakers and Caterers Association of Nigeria (AMBAN) in briefing said the prices of ingredients
The spokesperson of PBAN, Emmanuel Onuoha, confirmed the scarcity. “If we don’t do this, people will think it is their right to buy cheap bread,” he said, adding that bakers now run at a loss even as most of them could no longer meet their loan repayment obligations.
It was also learnt that other states might also embark on the temporary cessation of production in response to the high cost of baking ingredients comprising flour, sugar, margarine, among others.
FG Spends N10 Trillion on Petrol Subsidy in 14 Years – NNPC
NNPC Says FG Has Spent N10 Trillion on Petrol Subsidy in the Last 14 years
The Nigerian National Petroleum Corporation said the Federal Government spent a total sum of N10 trillion on petrol subsidy between 2006 and 2020.
This was disclosed on Saturday by Mele Kyari, the Group Managing Director, NNPC, during an interview on Liberty FM, Kaduna.
According to the NNPC boss, the federal government removed petrol subsidy because of the fraud perpetrated by some cabals in the oil industry.
He said the beneficiaries of petrol subsidies were marketers who smuggled federal government subsidised product into neighbouring countries for bigger gains.
The NNPC boss said these marketers made more profits by producing fake documents to collect subsidy for fuel they never imported or sold.
He said, “The crude oil is a global commodity and its price is not hidden. Everyone can calculate and know how much the cost of every final product from the crude at international market is.
“Since the inception of the country, the government has been paying subsidy on petrol to make it cheaper for Nigerians to buy below the cost price.
“This subsidy is designed to assist the masses of Nigeria; that is the intention, but in reality, the masses are not the beneficiaries. First, the masses are not the owners of the exotic cars buying fuel, owning the filling stations and doing the oil business.
“This subsidy that the government has been paying over the years is the root of all the atrocities and fraud committed in this country.
“If you look at it from 2006 till 2020, we have spent over N10tn on fuel subsidy. Apart from that, there is also subsidy on foreign currencies. Everybody knows how much is dollar in the market, but government is also subsidising it. So, this and the fuel subsidy within this period is around N14tn to N15tn.
“What was happening with the subsidy is that, some marketers were smuggling fuel to other neighbouring countries because it was cheaper in Nigeria due to the subsidy.
“Another one is those who use fake documents and bring to government to collect subsidy for fuel they never imported and the previous government was paying them.
“So, it was not the masses of Nigeria that were enjoying this subsidy except some cabals, who are rich and powerful.”
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