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MPC Sees Holding Interest Rate at 13.5%

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Interbank rate
  • MPC Sees Holding Interest Rate at 13.5%

Analysts are predicting that the Central Bank of Nigeria will leave the interest rate unchanged at 13.5 percent during the two days Monetary Policy Committee (MPC) starting today in Abuja.

Nigeria’s inflation rate moderated from 11.44 percent to 11.22 percent in June, suggesting that prices of goods are starting to reflect recent stability in the foreign exchange market due to the CBN’s intermittent forex intervention at various segments of the market.

Still, foreign direct investment remained low despite the CBN refuting Reuters’ declaration of 40 percent drop in FDI in 2018, the overall performance was below Ghana and other African countries perceived more economically stable than Nigeria.

Therefore, with the U.S Federal Reserve expected to announce a possible rate cut in three days time, Nigerian market experts are projecting that the CBN Monetary Policy Committee will leave interest rates unchanged at the current level to attract global investors that are likely to abandon U.S. assets for emerging economies with reasonable growth.

While it is not certain foreign investors will eventually jump on Nigerian instruments given lack of economic team months after the general elections, it is the only available option to prop up FDI and sustain the foreign reserves in a period when global growth is projected to slow amid trade wars and unrest in the Middle East, Venezuela, Libya etc.

Analysts at Financial Derivatives Company (FDC) said: “The MPC will maintain the current status quo of 13.5 percent benchmark rate and a cash reserve ratio of 22.5 percent.”

“The decision would be premised on rising inflation rate which is above the CBN’s single digit, lower crude oil prices, slow economic growth and the increase in import duty charge,” said the analysts at the Bismarck Rewane-led FDC.

However, analysts at FSDH sees an additional 50 basis points reduction. They said given CBN new position to stimulate economic growth and compel lenders to increase credit facility to the private sector, it is possible the CBN ‘oversee’ MPC will lower interest rates to sustain its ongoing policy, LDR of 60 percent, SDF to N2 billion and caping lenders bills purchase.

“We think the CBN will reduce rates by 50 basis points, given that inflation has slowed further, and exchange rate has remained stable,” said analysts at investment and merchant banking firm, FSDH.

Experts at Investors King said global happenings will prevent MPC from cutting rates twice in the last one year when economic metrics remain the same and in some cases worst.

They predicted that MPC will maintain current interest rates to sustain capital importation, especially when developed economies are projected to lower rates in coming days.

The experts, who had predicted in November 2018 that Nigeria will have to maintain a reasonably high monetary policy rate to remain attractive to investors in 2019, said their position has not changed.

“To sustain capital importation despite falling oil prices and almost stagnant oil output, the central bank has to maintain high monetary policy rate to remain attractive to investors and curb inflation rate while simultaneously sustaining forex intervention.”

The analysts noted that a healthy FDI will sustain the nation’s foreign reserves, curb inflation rate – cost-pull inflation and support the Naira.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

IMF to Review Nigeria’s Growth Forecast Amid Destruction of Businesses, Properties

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IMF Says it May Review Nigeria’s Growth  Amid Recent Development in the Country

Following the destruction of businesses and properties that trailed the #EndSARS protest, the International Monetary Fund (IMF) has said it may review the nation’s growth forecast in view of the new development in the country.

Abebe Selassie, the Director, African Department, International Monetary Fund, made the statement while responding to questions during a virtual IMF press conference on the economic outlook of Sub-Saharan Africa on Thursday.

According to him, the protest is difficult given that Lagos is a very important economic hub and contributes to the overall Nigeria activities.

Selassie said, “On the growth projections in Nigeria, I mean, these protests happened of course, after we had closed, after the period where the data we looked at in making the growth projections for this economic outlook.

“And much will depend really on how these protests evolve.

“Lagos of course, is a very important economic hub and contributes quite a bit of economic activity to overall Nigeria activities.

“So, if these persist and are showing significant effects on economic data, we will internalise them in due course.”

He further explained that the nation’s economy had been a difficult one in the last four years ever since oil prices plunged in 2015-16.

He said, “I think this is exactly why we have been on the record in Nigeria about how really critical it is to get all of the policy induced barriers out of the way to facilitate stronger economic growth.

“For the government to do more to raise revenues through the area of non-oil resources to be able to invest in health education which would, you know, allow people to be more successful at getting jobs but also improve the economy’s potential.

“So, I think that development agenda that Nigeria has, I think, has to be tackled with gusto and vigor so that the millions of jobs that the country needs can be created.”

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Economy

Oil Marketers Lose Millions as Hoodlums Set Petrol Tankers on Fire

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Petrol Importation

Oil Tankers Burnt by Hoodlums as Marketers Lose Millions to Protest

Oil marketers lost millions of Naira to repeated attacks by hoodlums exploiting the #EndSARS protest.

The Independent Petroleum Marketers Association of Nigeria on Thursday said hoodlums have been attacking their trucks since they hijacked the protest earlier in the week.

The association said three petrol laden trucks were burnt again on Thursday in Warri, Delta State.

This came as the Board of Trustees of the Oil and Solid Mineral Producing Area Landlords Association of Nigerian urged protesters across the country to sheathe their swords as the destruction of oil assets and others had become alarming.

Chief Chinedu Ukadike, the Public Relations Officer, IPMAN, who spoke in Abuja said three petrol tankers with petroleum products estimated at about N90 million were set on fire on Thursday.

He said, “The protesters are burning our petrol trucks as we speak right now in Warri. They are burning three trucks. The cost or value of the content in those trucks is about N90m.

“That is outside the worth of the trucks that are being burnt. This is why we asked our tanker drivers to park or temporarily halt the movement of products.”

Ukadike said the association decided to halt the movement of petroleum products on Wednesday to avert a further disaster that could arise attack of oil tankers by angry protesters.

That advise on the temporary halt of tankers movement was vital, particularly for volatile locations where protesters are highly aggressive. So that is what is happening now in Warri, the petrol trucks of oil marketers are being burnt,” he stated on Thursday.

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Economy

LCCI Says FG Loses N700bn to #EndSARS Protest in 12 Days

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Nigeria Loses Over N700 Billion to #EndSARS Protest in 12 Days

The Federal Government lost over N700 billion to the #EndSARS protest in twelve days, according to the Lagos Chamber of Commerce and Industry (LCCI).

Mrs. Toki Mabogunje, the President, LCCI, disclosed this while reviewing the economic implications of the just ended #EndSARS protest.

Mabogunje, who appreciated the value of citizens engagement and the demand for accountability which the protest represents, lamented the negative effect on the nation’s economy.

She said, “These are in consonance with democratic norms. They also form vital ingredients for good governance.

“LCCI is however concerned about the negative impact that the protracted nature of the EndSars protests has on business activities across the country.

“Over the past twelve days, economic activities have been crippled in most parts of the country and has been particularly profound in the urban areas.

“The Nigerian economy has suffered an estimated seven hundred billion naira (N700 billion) loss in the past twelve days.”

She further said the protest has reawakened the need to reform the shortcomings in the nation’s political governance, however added that to protect livelihoods of Nigerians, including business community, the protesters need to move to next stage of civic engagement.

This is necessary to reduce the massive disruptions, blockades and barricades around our major cities and interstate highways. These actions have been at great cost to the economy and the welfare of Nigerian citizens. It should be noted that our economy is still reeling from the shocks of the Covid 19 Pandemic and struggling to recover from its devastating effects,” she added.

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