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  • Why we did not reduce interest rate – CBN

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its second meeting for the year, expressing apprehension that the late passage and implementation of the 2018 budget, as well as election spending, could trigger inflationary trends and reverse the economic gains made so far, if pre-emptive measures are not adopted.

    The committee, which for the 11th consecutive time, retained the Monetary Policy Rate (MPR) at 14 per cent, Cash Reserve Ratio (CRR) at 22.5 per cent, Liquidity Ratio (LR) at 30 per cent, and the asymmetric corridor at +200-500 basis points around the MPR, explained that it retained in consideration of the forecast of high liquidity injection in the second half of 2018, upward pressure of prices driven largely by substantial expansion of fiscal policy, which would arise from the late passage of the 2018 budget, outstanding balance from the 2017 budget and pre-election spending, to retain the interest rate.

    Responding to questions, the CBN governor, Mr. Godwin Emefiele, who briefed journalists on the outcome of the MPC meeting, said eight of the nine members of the committee who were part of the meeting voted for the retention of the rate while one rooted for further tightening.

    Emefiele admitted that the MPC had earlier declared that once inflation rate trends downwards to a single digit or double-digit lower rate, it would bring the MPR down.

    According to the latest figures released by the National Bureau of Statistics (NBS), the inflation rate for April was 12.48 per cent, down from 13.34 per cent recorded in March.

    He explained that the MPC decided not to lower the MPR for now as a pre-emptive measure to guard against possible inflationary pressures that the late implementation of the 2018 budget and election expenses might exert on the economy.

    “It is very true that we said until inflation drops to single digit before we take a decision on reducing the interest rate, but you will also observe, in the course of this presentation, we explained the expansion of fiscal activities that we foresee, beginning from around May or June this year.

    “At this time, the fact that we are still on the 2017 budget; the 2018 budget will eventually kick in around June or July, there will be an acceleration in the rate of spending and we also expect a lot of election spending.

    “These indications, expectedly, are meant to expand the economy and spur growth which I will say is commendable, but we also know that those expansionary fiscal measures will gradually lead to an inflationary increase and if that happens, it will reverse the gains we have recorded over time.

    “The committee considered the forecast of high liquidity injection in the second half of 2018, upward pressure of prices driven largely by the substantial expansion of fiscal policy which will arise from the late passage of the 2018 budget, outstanding balance from the 2017 budget and the pre-election expenditure,” he explained.

    Emefiele stated that the MPC felt that further tightening would ensure the mop up of excess liquidity, mindful that despite the moderation in inflation, the current inflation rate was still above the single digit target and that the real interest rate only turned positive in the review period.

    “The objective of the policy stance, therefore, would be to accelerate the reduction in the rate of inflation to single digit, to promote economic stability, boost investor confidence and promote foreign capital flows with complimentary impact on exchange rate stability.

    “Conversely, the committee believes that raising the interest rate would, however, depress consumption and increase the cost of borrowing to the real sector. Moreover, such policy will make deposit money banks to reprise their assets,” he said.

    On the $2.5 billion currency swap deal between the CBN and People’s Bank of China (PBoC), Emefiele disclosed that the framework will be released next week, adding that Nigeria has everything to gain from the deal and nothing to lose.

    “I must say congratulations to Nigeria. After a rigorous almost two and half years of negotiations with the People’s Bank of China, we eventually struck the deal for a currency swap deal between Nigeria and China, with the intention of boosting trade relations between both countries. Like you all know, it will just operate in the normal format or LC (letter of credit) transactions.

    “Like you know, there are some importers from England who will issue invoices in pounds sterling if you want to import goods from England. Or in Europe, they will issue you invoices in Euro as against the dollars if the choice is theirs.

    “Under the China-Nigeria deal, by the time the framework is released, we would begin to see, based on negotiations with Nigerian suppliers, that Chinese suppliers would begin to issue invoices in naira.

    “If China is Nigeria’s largest trading partner controlling close to 35 per cent of total trade, what that means is that all things being equal, by the time we conclude the framework, we should see to it that more invoices would be issued in the local currency against the traditional dollar.

    “I have read some newspapers report on the currency swap, but I can tell you, it is going to be positive and I repeat, strongly positive for Nigeria; for Nigerian imports and also for Nigerians. That is what we expect and we would ensure that we achieve that,” Emefiele stated.

    According to him, the negotiations with the Chinese bank were painstakingly done, adding: “ I am optimistic that Nigerians will reap the positive impact from this, and we do expect that by the time the framework is released, Nigeria will end up being the trade hub in the West African sub-region because there are currently only three countries in Africa that enjoy the currency swap deal with China – South Africa, Egypt and Nigeria.”

    The governor, who also spoke on the innovative measures the CBN would introduce to encourage money deposit banks to accelerate credit growth to the real sector of the economy, noted that as much as possible, the central bank would not want to go back to the era of sectoral allocations.

    He said efforts were being made to come up with decisions that will determine the level of cash reserves that a bank holds.

    He stated that under the proposed policy, banks that increase lending would be compensated while those that reserve their liquidity and resort to trading in government securities or give to those who trade in foreign exchange, rather than granting loans to the real sector would be penalised.

    Emefiele disclosed that the appropriate departments of the central bank will work out the modalities, adding: “That framework will certainly come up and we will task the relevant authorities to work on it and I am optimistic that the Monetary Policy Committee will take that decision at the right time.”

  • Again, CBN retains monetary policy rate at 14 per cent

    The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday left the Monetary Policy Rate unchanged at 14 per cent.

    The CBN Governor, Mr Godwin Emefiele, announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja.

    He explained that eight out of the nine members of the committee that attended the meeting agreed to maintain the current monetary policy stance.

    He said the other one member of the MPC voted that the rates be increased.

    He said apart from the MPR which was retained at 14 per cent, the committee also retained the Cash Reserves Ratio at 22.5 per cent.

    Also retained are the Liquidity Ratio which was left at 30 per cent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.

  • How currency swap deal with China will boost Nigerian economy – CBN

    The Central Bank of Nigeria (CBN) has said the Nigeria-China currency swap deal will help boost the nation’s economy as against fears in some quarters that it will stifle local companies and make the country a dumping ground for Chinese goods.

    The 41 items banned since 2015 will not be valid for the swap exchange, the CBN said.

    Spokesman for the apex bank, Isaac Okorafor said: “The fear is unfounded and I’ll give you reasons.

    “The first one is that we are going to focus on exports to China. Also, remember that we already export cassava products to China as well as leather, hides and skin to China, amongst others.

    “So this deal will open further the export market to China.”

    ”Also, I want Nigerians to know that the items that will come in are not necessarily finished goods, so the issue of Nigeria becoming a dumping ground for China does not arise.

    “This is because the 41 items that had initially been banned from the Nigerian Foreign Exchange Market will still not qualify under the deal,” he said.

    The CBN recently signed a bilateral currency swap agreement with the People’s Republic of China worth about N720 billion.

    On June 23, 2015, the CBN banned some items from accessing foreign exchange in the official foreign exchange market – to encourage local production of these items, conserve foreign reserves, resuscitate domestic industries and improve employment.

    Some of the items banned are: rice, cement, poultry, tinned fish, furniture, toothpicks, kitchen utensils, table wares, textiles, clothes, tomato pastes, soap and cosmetics.

    Also banned sre private jets, roofing sheets, metal boxes, wire rods, steel nails, security and razor nails, ceramic tiles, glass wares, cellophane, plastic and rubber products.

    With the currency swap, the Naira is expected to appreciate against the US dollar as the demand for dollars eases.

    “China accounts for a quarter or more of imports into Nigeria.

    “The exchange of currencies between the Nigerian Central Bank and the Chinese Central Bank will make it easier for our entrepreneurs to have direct access to foreign exchange in Renminbi,” Okorafor said, adding:

    “Before now, when importing necessary machinery or merchandise from China, you first exchange Naira for the dollar before changing it again to Renminbi and this puts pressure on the Naira.

    “Now what it means is that a large portion of the demand for dollar in Nigeria has been lifted off the back of the Naira and put directly on the Chinese Renminbi.

    “And so it is a positive development as it will enhance the value of the Naira and reduce our dependence on the dollar for imports.”

    Okorafor explained that the two central banks were still working on the exchange rates between the Naira and Renminbi.

    “As we speak, the modalities, the operational manual and the guidelines are being developed.

    “But I can assure you that the exchange rate will be such that it will be competitive, fair to all and will not hurt our local producers and importers,” he said.

    According to Okorafor, once everything has been fine-tuned, Nigerian entrepreneurs can access renminbi through the money deposit banks, using similar rules for the dollar.

    A clearing bank would be appointed for the transaction. Such a bankhe appointment was that the bank must have a branch in China, which some Nigerian banks already have.

    Okorafor said one of the advantages of the deal was that it would encourage Chinese companies to set up factories in Nigeria, which would lead to industrialisation and job creation.

    “Chinese investors are interested in setting up shop here. And that is because if they produce here, it will be better for them

    “The cost of transportation, shipping, and all that will be eliminated.”

    “Also, when they do that, they are not going to employ only Chinese workers. A greater portion of the job opportunities in these plants will be filled up by Nigerians,” Okorafor said.

  • EFCC deposits N49m Kaduna International Airport cash with CBN

    The Economic and Financial Crimes Commission (EFCC) said it has deposited the N49 million it intercepted at the Kaduna International Airport with the Central Bank of Nigeria (CBN).

    The EFCC made this known on Thursday while disclosing it closed its defence in the N49 million civil matter with five persons claiming ownership of the money.

    Lead counsel to EFCC, Joshua Saidi informed Justice S. M Shuaibu of the Federal High Court Kaduna, that the Commission by presenting it’s only witness had closed it’s case.

    In his testimony, DW1 identified his sworn affidavit and adopted same, while counsel to the five plaintiff, E. I Dapo didn’t object to it’s admissibility.

    The Court further admitted a Certified True Copy of teller depositing the said sum in the custody of the CBN.

    TheNewsGuru recalls operatives of the EFCC on the 13th of March, 2017 intercepted five 750kg bags filled with crispy naira notes at the Kaduna International Airport.

    Investigation by the financial watchdog revealed that the bags contained a total sum of N49 million bound for Lagos.

    Upon an exparte order granted by the Federal High Court, Kaduna in respect to the intercepted cash, five individuals came forth claiming ownership.

    They are: Oyebanji Plaits Steve, Taiye Omoniyi Oluwaleke, Risikat Taimiyu Titilayo, Fausat Oni and Joshua Kisabo.

    Justice Shuaibu has adjourned the matter to the 28th of June, 2018 to allow for adoption of final written addresses and reply on points of law.

     

  • CBN boosts foreign exchange market with $210m

    …as naira exchanges for N362/$1

    In another round of intervention, the Central Bank of Nigeria (CBN) on Tuesday injected 210 million dollars into the inter-bank Foreign Exchange Market to boost liquidity in the system.

    The acting Director, Corporate Communications, Mr Isaac Okorafor, in a statement in Abuja, said the CBN allocated 100 million dollars to dealers in the wholesale sector.

    He said also the Small and Medium Enterprises (SMEs) segment and invisibles received 55 million dollars each.

    Okorafor, said the continued interventions in the interbank foreign exchange market was mainly to ensure sustained liquidity and stability in the market.

    According to him, the interventions by the CBN had impacted the market positively and guaranteed a stable exchange rate for the Naira, which has since stabilised the foreign exchange market.

    He reiterated that the Bank’s interventions had reduced the country’s import bills and led to accretion to its foreign reserves.

    Meanwhile, the naira exchanged at N362 to a dollar in the Bureau De Change segment of the market.

  • Banks sabotaging efforts on new notes – CBN

    The Central Bank of Nigeria (CBN) has blamed commercial banks for sabotaging its efforts in replacing mutilated notes with new ones in the country.

    Mr Isaac Okorafor, Acting Director, Communications Department of the CBN, made the allegation in Lagos on Thursday in an interview.

    Okoroafor was reacting to lamentation from Nigerians on the high level of mutilated notes in the country.

    The CBN spokesperson said that the apex bank was aware of the development and had taken several measures to addressing the rising incidence of mutilated notes in the country.

    According to him, one of the steps taken by the CBN in mopping up the mutilated notes from the system was reduction in the amount it charges banks for sorting the dirty notes for clean ones from N12,000 to N1,000 per box.

    Okorafor said that the reduction in charges for the commercial banks which lasted for three months from Jan. 2 to March 28 was to encourage them to bring back more dirty notes to CBN.

    He said the sorting charges which used to be N12,000 was later raised to N2,000 per box after the March 28 deadline when the window was closed.

    The director said the opportunity was limited to lower denomination naira notes comprising N50, N20 and N10 notes.

    A cross section of Nigerians have expressed disgust over the mutilated notes in circulation, mainly smaller denomination comprising of N5, N10, N20, N50 and N100 notes.

    He hinted that the bank had adopted another option of withdrawing the unfit notes from circulations rather than depending mainly on the commercial banks on the task.

    Okorafor said that the bank had started engaging associations in various markets to encourage traders to change genuine dirty notes for new ones.

    This, he added, would not attract any cost to traders.

    “The bank has already taken the new measure to Kano, Kaduna and Abuja and also intends to bring it to the south,” he said.

    On hoarding and selling of new currency notes, Okorafor said the serial numbers of the ones given out to the public would be used to trace whoever perpetuated the act.

    He however, appealed to Nigerians to handle the national currency with care as it was a symbol of identity and value and should be handled with respect.

    Okorafor urged the public to always demand for new notes instead of collecting dirty notes from banks.

  • Reps demand CBN’s audited accounts, place hold on FG’s proposed sale of NLNG

    Reps demand CBN’s audited accounts, place hold on FG’s proposed sale of NLNG

    The House of Representatives on Wednesday asked the Federal Government to suspend its planned sale of the Nigerian Liquefied Natural Gas Limited (NLNG).

    It described the NLNG as one of the most successful and lucrative investments of the government, which should be left to run as a major public asset.

    Nigeria has 45 per cent stake in the NLNG, which the government is proposing to divest.

    The session, which was presided over by the Speaker, Mr. Yakubu Dogara, also resolved to investigate the government’s move.

    A motion moved by a member, Mr. Randolph Oruene-Brown, drew lawmakers’ attention to the report of the 2016 ministerial retreat, where the government proposed to generate between $10bn and $15bn (about N4.7tn) to inject into the country’s economy.

    He recalled that to achieve the objective, the government had announced that it would put up key assets for sale, including its stake in the NLNG.

    He stated that the government was about to execute the recommendations of the retreat.

    Oruene-Brown said, “(The House is) aware that the Minister of Budget and National Planning, Udoma Udo Udoma, stated that one of the ways to fund the plan would be through the sale of some national assets and the proceeds reinvested in the economy to raise the needed capital for infrastructural development.

    “(The House is) also aware that the NLNG is one of the most successful ventures that Nigeria has embarked upon when it started from train one through to the sixth train, and now the seventh train in the offing.

    “The House is worried that the Revenue Mobilisation Allocation and Fiscal Commission and the Nigeria Labour Congress, among other organisations, have seriously frowned on this move and warned the Federal Government against the proposed sale of national assets, especially the NLNG.

    “(The House is) cognisant that resuscitating the Nigerian economy from recession is the actual reason for the proposed sale of the NLNG even though there are other options the government may adopt to resuscitate the economy.”

    He added that one of the options was for the government to borrow on “long-term against the dividends in the NLNG, and convert its Joint Venture holdings in some multinational oil corporations into incorporated Joint Venture companies.”

    The lawmaker also suggested that the government could encourage wealthy Nigerians, who could afford to buy the NLNG, to invest directly in the economy.”

    In the alternative, the House noted that such wealthy Nigerians could take advantage of the huge reserves of natural gas in the country to set up their own private LNG.

    The House endorsed the motion in a unanimous voice vote to halt the planned sale, pending the outcome of its investigation.

    A separate resolution of the House directed the Central Bank of Nigeria to comply with the provisions of Section 50(1) of the Central Bank of Nigeria (Establishment) Act, 2004.

    The section reads, “The bank shall, within two months after the close of each financial year, transmit to the National Assembly and the President a copy of its annual accounts certified by the auditor.”

  • CBN to reduce interest rate before year-end – Report

    Entrepreneurs might soon have reasons to smile as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to cut the Monetary Policy Rate, also known as the benchmark interest rate, before the end of the year.

    FocusEconomics, in its latest report, FocusEconomics Consensus Forecast Sub-Saharan Africa, noted that the MPC left the MPR and all other monetary policy parameters unchanged at its first meeting of the year which was held last year.

    “As a result, the monetary policy rate remains at a record high of 14 per cent and the asymmetric corridor at plus 200 and minus 500 basis points around the monetary policy rate. In addition, the committee left the liquidity ratio unchanged at 30 per cent and the cash reserve ratio stable at 22.50 per cent.

    “The bank’s decision to hold the monetary policy rate unchanged at a record high reflects stubbornly high inflation in Nigeria’s economy.”

    The report noted that although inflation had eased somewhat since peaking at 18.7 per cent in January 2017, pressure from food prices along with rising energy prices had kept price pressures elevated and inflation remained well above the CBN’s target of six per cent to nine per cent.

    FocusEconomics said, “Looking forward, the CBN struck a broadly neutral tone in its communique, mentioning that the positive trend seen in key macroeconomic indicators as a result of the tight stance should be allowed more time to fully manifest.

    “However, inflation is forecast to retreat further over the coming months, and assuming the foreign exchange market continues to remain stable or exhibit positive tendencies, the bank’s preferences are likely to swing more towards a rate cut going forward.”

    The next MPC meeting is scheduled for the May 21 and 23.

    The report said, “All of FocusEconomics Consensus Forecast panelists expect the CBN to cut the monetary policy rate before the end of the year, with consensus for the rate to end 2018 at 12.11 per cent. In 2019, the panel sees the monetary policy rate ending the year at 11.75 per cent.

    “The economy ended 2017 on a firmer note, with growth picking up to a two-year high. Activity is expected to have continued gaining steam in the first quarter of 2018, supported by higher oil prices and greater foreign exchange rate supply.

    “Accordingly, recent economic data has pointed up, and the Purchasing Managers’ Index rose to a record high in March. However, authorities have still not passed the 2018 budget, delaying its implementation and an expected boost in government spending.”

    FocusEconomics panelists expect GDP growth to accelerate in 2018 and clock in at 2.6 per cent, the report stated.

    It said, “Higher oil prices, looser fiscal policy and improved FX allocation should support the economy’s momentum this year. That said, several challenges to growth still linger including exchange rate distortions, poor infrastructure and likely political tensions ahead of the February 2019 general elections. Next year, growth is seen increasing mildly to 3.1 per cent.”

    According to FocusEconomics, growth in sub-Saharan Africa’s economy is projected to gain momentum this year, thanks to firmer commodity prices.

    FocusEconomics panelists see regional GDP expanding 3.5 per cent in 2018.

    The report said, “While the economic panorama is improving, several weak spots remain, including high debt loads and large imbalances, which could threaten the region’s outlook. Next year, growth is seen accelerating

  • 2019: Election spending may affect naira stability – CBN

    The Central Bank of Nigeria (CBN) has warned that the economy faces inflation and financial stability risks over the short-to medium-term if expected huge election spending is not checked.

    CBN Deputy Governor (Corporate Services) Adamu Edward Lamtek explained in his personal statement at the last Monetary Policy Committee (MPC) meeting released yesterday by the CBN that if excess liquidity was allowed to build up, the demand for foreign exchange could shoot up in the second half of 2018 and throw the naira exchange rate out of equilibrium.

    Lamtek said: “Such an adverse scenario must be prevented through a proactive monetary policy. This is justified by the reality that exchange rate stability is critical to the current recovery in economic growth and the gradual disinflation. Added to this is that a stable exchange rate should, in the minimum, prevent further deterioration of foreign currency denominated assets of the banking system and improve the resilience of the industry”.

    He said these concerns surely called for a forward-looking and cautious approach to policy. “I see the need for greater coordination of monetary and fiscal policies and continued engagement of critical stakeholders to address misinformation and better anchor expectations,” he said.

    “In addition, I reckoned that some of the supportive administrative measures put in place since last year by the Bank need more time to work their way fully through the economy. I am equally persuaded by the commitment of the Federal Government to the Economic Recovery and Growth Plan (ERGP), especially in the area of infrastructure development, which continues to be relevant to sustaining and deepening growth and development of the country in the medium to long-term,” he said.

    He insisted that the outlook for domestic liquidity, based on expected fiscal actions and election spending, is worrisome and that with an impending Federal Government budget outlay of over N8 trillion and deficit of about N2 trillion for 2018, the short-term fiscal outlook appears expansive. “The delay in the passage of the budget could result in substantial injections in the second half of fiscal 2018 in an attempt to meet planned commitments. The immediate effect of this, combined with the repayment of local debt by the government and election spending would be a surge in banking system liquidity,” he said.

    He said Nigeria’s stock of external reserves continues to grow on account of reduced imports, improved inflows from more favourable oil prices, and increased autonomous inflows through the Investors’ and Exporters’ Foreign Exchange (I&E) Window.

    He said that confidence in the economy is building as the naira exchange rate continues to be stable and the premium between the bureau de change and interbank market segments narrows.

    “The parallel market premium continues to shrink as legitimate foreign exchange transactions migrate to the formal market. It does therefore appear that the bold reforms of the Central Bank on forex policy and in the foreign exchange market in 2016 and 2017 are paying off. It is gratifying that the benefits of these reforms have stretched beyond the stability of the naira exchange rate,” he said.

    Continuing, he said some manufacturing outfits have resorted to using locally available alternatives as raw materials, just as interest in domestic production of certain classes of food like rice and tomato products is growing. Likewise, capital market indicators have trended upward partly in response to positive market sentiments occasioned by the gradual improvement in the macro-economy.

    “Monetary policy cannot, at the same time, be expansionary. At 14.33 per cent in February 2018, inflation is still significantly higher than the Monetary Policy Committee’s preferred range of 6 –9 per cent. Second, the economic recovery we have seen so far has benefitted partly from improved investment inflows. As a direct consequence, the country’s external reserves’ position has relatively improved, just as confidence in the economy,” he said.

    According to him, rising yields in advanced economies, following the drift towards policy normalization as global inflation picks up, poses a significant risk to in-bound investments. This threat is mitigated by a stable naira exchange rate and competitive yields locally. For this purpose, we will need positive interest rates, as do most emerging markets and developing economies.

    “This means that inflation needs to moderate further. Third, there is still work to be done to fully contain banking system fragilities which increased in the wake of the stagflation in 2015 through 2016. The non-performing loans ratio continues to be in excess of the bank’s desired level”.

    “Among other challenges, banks have had difficulty with their foreign currency denominated liabilities (loans) as the exchange rate moved against borrowers as from 2015. Therefore, from a financial stability standpoint, any threat to the naira exchange rate stability must be viewed seriously and promptly addressed to forestall another exchange rate shock,” he advised.

     

  • CBN raises FOREX market with $210m

    The Central Bank of Nigeria (CBN), on Wednesday, injected 210 million dollars into the Inter-bank Foreign Exchange Market in continuation of its efforts to sustain liquidity in the market.

    The acting Director, Corporate Communications, CBN, Mr Isaac Okorafor in a statement said the apex bank offered 100 million dollars to authorised dealers in the wholesale segment of the market.

    He said that the Small and Medium Scale Enterprises (SMEs) segment received 55 million dollars, while 55 million dollars was apportioned to invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA).

    Okorafor urged Deposit Money Banks to continue to honour requests from customers with genuine needs, noting that CBN would continue to sustain liquidity in the foreign exchange market.

    Meanwhile, the nation’s currency continued to maintain stability in the foreign exchange market, exchanging at an average of N362 to a dollar at the Bureau De Change segment of the market.