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Inflation: CBN should maintain tight monetary policy – Experts

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ABUJA: The inflation figures released last week by the National Bureau of Statistics, NBS, which show that prices of goods and services are still rising, indicate that the Central Bank of Nigeria (CBN) will maintain its tight monetary policy, when its Monetary Policy Committee (MPC) meets today, said financial experts.

Inflation measures the rate of increase in the prices of goods and services people consume every day. It is measured by the Consumer Price Index (CPI). The Inflation figures released by the NBS shows that while  the general rate of increase in prices (headline inflation)  declined to 12.0 per cent in December from 12.3 per cent in November, Core inflation, which is the rate of increase of goods and services excluding farm produce , rose to 13.7 per cent from 13.1 per cent. The increase was attributed to rising prices of essential goods and services like housing, electricity and gas.

According to the Bureau, “The increases in the Core (inflation)  index were as a result of increases in the Housing, Electricity, Gas and other Fuels division, in particular liquid (kerosene) and solid fuels (firewood and charcoal), rental and imputed rent prices, clothing prices, garment prices, and air transport fares.”

Reviewing this development ahead of the MPC meeting today, financial experts said this implies that there are still inflationary threats in the economy, especially the huge budgetary spending planned for this year by the Federal Government hence they expect the CBN to maintain its tight monetary policy.

“In order to adjust monetary policy however, the MPC will need to be more certain that lower inflation can be achieved on a sustainable basis.  With the threat of a higher benchmark crude price being adopted in the 2013 budget, we’re not certain that can be taken for granted for the moment. On this basis, we forecast unchanged monetary policy next week”, said Razia Khan, Head of Regional Research, Africa, Standard Chartered Bank.

Also commenting on the development, analysts at Afrinvest PLC said, “We however believe that the upward review of the oil price benchmark to $79 per barrel as contained in the recently passed 2013 budget, provides additional room for increased government spending and therefore poses a direct upside threat to inflation. We therefore expect the CBN’s Monetary Policy Committee to keep the MPR on hold at its next committee meeting scheduled for early next week.”

 

“Ahead of the meeting of the MPC next week and existing inflationary threats, we are conscious of the fact that rates might be held at current levels. However, we maintain our position on gradual reduction of the benchmark rate to single-digit levels even as we remain optimistic on the attainment of single digit rate in the current fiscal year,” analysts at Pro share commented.

Since 2011, the CBN has been operating a tight money supply policy, so as to check the rate at which prices of goods and services rise in the economy. Among other things, the apex bank raised the Monetary Policy Rate, which is the benchmark interest rate, six times from 6.0 per cent to 12 per cent. It also raised the Cash Reserve Requirement (CRR) for bank to 12 per cent from 4.0 per cent.

Despite these measures, the inflation brake though fell slightly last year,  has remained in double digit due to impact of the fuel price increase and increased tariff on wheat and rice. From 12.6 per cent in January, inflation rose to 12.9 in June before dropping to 12.3 per cent in November.

The tight monetary policy meanwhile occasioned high interest rate, and made lending to the government more attractive to banks than lending to businesses. This prompted calls by real sector operators and economic experts for a review of the tight monetary policy of the CBN.

Razia Khan, however, said that it is not economically expedient now for the CBN to change to a loose monetary policy.

She said, “I have picked up on some of that thinking, but my first response would be, is monetary policy actually tight in Nigeria? If we take the 12 months smoothed measure of headline inflation of 12.2 per cent in December and the MPR of 12 per cent, it still implies negative real interest rates – that suggests that policy is reasonably accommodative.

“When Nigerians complain about ‘tight monetary policy,’ they are typically complaining about high loan rates, which make it difficult to finance SMEs, and take away from growth. But the reasons behind those spreads have much more to do with fundamental structural factors, than they do with the current policy stance of the CBN. There is a key important distinction.

“Even if the CBN were to relax its monetary policy, (the naira might weaken, inflation would almost certainly be higher), it is not clear that loans would be any more affordable – those spreads might remain in place.  Greater macroeconomic volatility in that instance might even contribute to higher spreads! The best thing that the CBN can do to contribute to more loan growth over time is to ensure macroeconomic stability to whatever extent possible.

“We should also not lose sight of the benefits of CBN ‘tightening’ – lower imports as policy was tightened in July (compare imports in third quarter with second quarter of 2012), higher external reserves. Nigeria has been able to attract more portfolio investor flows as a result. Its index inclusion and the heavy demand for FGN bonds have arguably made it cheaper to finance government spending.

“This helps in a small way to reduce vulnerability to the oil cycle – all because the central bank was brave enough to tighten policy in the face of opposition. The benefits clearly outweigh any perceived costs. So to assume that there might have been a lot more loan growth if the MPR were 50 or 100 bps lower is missing the point somewhat”, the NBS inflation report for December stated.”

In December 2012, the composite Consumer Price Index which measures inflation rose to 12.0 per cent year-on-year (compared to 12.3 per cent in November). On a year-on-year basis, the relative increase in the headline index in December was as a result of higher prices in the Core Index. This is the second consecutive month where the Core index has deviated from the downward trend it exhibited since the month of July, increasing to 13.7 per cent (from 13.1 in November).

On the other hand, food prices moderated during December, giving temporary respite from the lagged effects of the floods which occurred from July to Mid-October, as well as other demand and supply conditions. The Food index increased year on year to 10.2 percent from 11.6 percent in November.

It should be noted that the Headline Index is made up of the Core Index and Farm Produce items. As Processed Foods are included in both the Core and Food sub-indices, this implies that these sub-indices are not mutually-exclusive. In December, the composite CPI increased by 0.75 per cent month-on-month from index levels recorded in November 2012.

The Urban inflation rate was recorded at 14.5 percent year-on-year, a decrease of 1.3 percentage points from the 15.8 percent recorded in November, while the Rural index increased by 0.4 percentage points to 10.2 percent on a year-on-year basis.

On a month-on-month basis, the Urban All-item index increased by 0.8percent from levels recorded in November, while the Rural All Items index increased by 0.7 percent between November and December. The percentage change in the average composite CPI for the twelve-month period ending December 2012 over the average of the CPI for the previous twelve-month period was recorded at 12.2 percent. The corresponding 12-month year-on-year average percentage change for the Urban index was 14.6 percent while the corresponding Rural index remained unchanged at 10.5 per cent.

Food Inflation: In December, the composite Food Index increased year-on-year by 10.2 per cent to 141.2 points. This was 1.4 percentage points higher than 11.6 per cent recorded in November.

On a month-on-month basis, the Food index increased by 1.0 per cent from November to December. The rise in the Food Index was as a result of higher food prices in various classes within the index led by bread and cereals, higher vegetable prices due to the dry season and higher prices of potato, yams, and other tubers.

The higher food prices occurred largely as a result of increases in eight of the eleven food classes.  On a year-on-year basis, the moderation in food prices in December was the first in five months. The average annual rate of rise of the index for the twelve-month period ending in December 2012 was 11.3 percent when compared to the same period in 2011.

Core Inflation: In December, the “All items less Farm Produce” index which excludes the prices of volatile agricultural products increased by 13.7 percent year-on-year. This was 0.6 percentage points higher than the 13.1 percent recorded in November. On month-on-month basis, the Core index increased by 0.7 percent from levels recorded in November.

The increases in the Core index was as a result of increases in the Housing, Electricity, Gas and other Fuels division, in particular liquid (kerosene) and solid fuels (firewood and charcoal), rental and imputed rent prices, clothing prices, garment prices, and air transport fares. The average 12-month annual rate of rise of the index was recorded at 13.9 per cent (year-on-year) for the 12-month period ending December 2012, 0.3 percentage points from the 13.6 per cent recorded in November.”

 

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Millions of customers still stranded worldwide 24 hours after GT Bank online operations suffered attacks

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GTCO Acquires Funds Management, Pension Firms

By Yemie ADEOYE

GT Bank, one of Nigeria’s leading banks, with operations across Africa and the United kingdom, and with an asset base of about US$3.11 trillion is under a cyber attack which has left millions of its customers across the world stranded in the last 24 hours.

The bank which was renowned for its seamless online operations at inception has suffered dwindling online efficiency in recent years and this current attack didn’t come as a surprise to many of its numerous customers. However, it is becoming worrisome that over 24 hours after its online operations went down, the bank has not been able to arrest the situation and restore its online services.

Stranded GT Bank customers outside the banks premises

Several customers of the bank took to their X (formerly known as twitter) handles to express their frustrations at the bank, as several of the customers in the diaspora are unable to access their accounts and carry on with their transactions.  A customer , Jeff55 who lamented on his X handle about the development, stated that it is a thing of shock that a bank of this size couldn’t afford to have the necessary tools and experts to ensure a full protection of its online operations in this age and time.

Another customer Dimma stated that while Cybersecurity training may seem tedious, the recent #GTBank hack is a stark reminder that everyone is just a click away from a devastating attack.

Several media organisations had reported that hackers have stolen GT Bank website, and intercepted customers Data in massive phishing operation.

At the time of filing this report, Biztellers.com.ng checks on the banks website shows that it is still down and unaccessible, and neither GT Bank media and communications unit nor any of its agencies or surrogates have commented officially on the development.

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Tinubu commends increased crude production to 1.61 mbpd

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Says output surge buoyed by reforms he announced in May 2024 to address gaps in PIA

President Bola Ahmed Tinubu on Sunday declared a resurgence in the oil & gas industry, commending the increased crude production to 1.6 million barrels per day.

The president, who said this in a national broadcast, maintained that the resurgence was buoyed by the reforms he announced in May 2024 to address the gaps in the Petroleum Industry Act (PIA).

Nigeria’s crude oil output got a boost to 1.61 million barrels per day in July 2024 through the president’s directive and the industry leadership provided by the Nigerian National Petroleum Company Limited (NNPCL).

Acknowledging what he called a resurgence of the once-declining oil and gas industry in his Sunday-morning broadcast to the nation, President Tinubu said that oil investors are coming back to Nigeria.

He said; “Our once-declining oil and gas industry is experiencing a resurgence on the back of the reforms I announced in May 2024 to address the gaps in the Petroleum Industry Act. Last month, we increased our oil production to 1.61 million barrels per day, and our gas assets are receiving the attention they deserve. Investors are coming back, and we have already seen two Foreign Direct Investments signed of over half a billion dollars since then.

Read Also : BREAKING: Sell Crude To Dangote Refinery In Naira – Tinubu To NNPC LtdRead Also : BREAKING: Sell Crude To Dangote Refinery In Naira – Tinubu To NNPC Ltd

“Fellow Nigerians, we are a country blessed with both oil and gas resources, but we met a country that had been dependent solely on oil-based petrol, neglecting its gas resources to power the economy.

We were also using our hard-earned foreign exchange to pay for and subsidise its use. To address this, we immediately launched our Compressed Natural Gas Initiative (CNG) to power our transportation economy and bring costs down.

This will save over two trillion Naira a month, being used to import PMS and AGO and free up our resources for more investment in healthcare and education.

“To this end, we will be distributing a million kits of extremely low or no cost to commercial vehicles that transport people and goods and who currently consume 80% of the imported PMS and AGO.

“We have started the distribution of conversion kits and the setting up of conversion centres across the country in conjunction with the private sector. We believe that this CNG initiative will reduce transportation costs by approximately 60 per cent and help to curb inflation.”

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Banking

FBN Holdings On Course For AGM

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Plans are in top gear for the 11th Annual General Meeting (AGM) of the FBN Holdings Plc.

The management made this disclosure in a notice it filed with the Nigerian Exchange Limited (NGX) on Thursday, where it averred that it has not been served with any court order against the proposed AGM.

According to notice, which was signed by the acting Company Secretary, Adewale Arogundade, FBN Holding said, “The attention of FBN Holdings Plc (the Company) has been drawn to recent media reports purporting that the Company has received a Court Order stopping it from holding the Annual General Meeting (AGM) scheduled for August 15, 2023.

“We confirm that this assertion is a false narrative as the Company has, as at the date hereof, not been served with any court order to stop the forthcoming AGM.

“Suffice to mention that the AGM is a statutory meeting of Shareholders that must be held in accordance with the law, further to which the Company will notify the regulators and the public as appropriate if there is any lawful order to restrain the Company from conducting same.

“We hereby assure our esteemed Shareholders that the AGM shall hold on August 15, 2023, as planned and we look forward to their attendance and active participation at the meeting.”

However, court orders published in national dailies showed that the Federal High Court in Lagos had issued an order against the financial institution, barring it from holding its 11th AGM.

The order was entered pursuant to a petition by Olusegun Onagoruwa, in suit No: FHC/L/CP/1271/2022. It was addressed to the bank and some other bank officials.

It read, “Take notice that unless you obey the directives in the judicial order contained in the order made on July 15, 2022, by the Federal High Court, Lagos, by refraining from proceeding with the 11th Annual General Meeting of FBN Holdings Limited proposed for August 15, 2023, from seeking approval to issue or raise share capital in any manner whatsoever, from appointing or confirming the appointment of new directors, or in any other manner taking any step towards implementing, actualising enforcing resolution of the 10th Annual General Meeting of FBN Holdings Plc held on June 20, 2022, or in any other manner overreaching, disobeying or undermining the said order of a court, you will be guilty of contempt of court and you will be liable to be committed to prison and to there imprisoned.”

Biztellers brought you a report that a segment of shareholders had staged a protest at the headquarters of the bank on Monday, calling for the AGM to be held, as well as soliciting regulatory interventions.

It is expected that at the AGM, FHN Holdings is poised to breathe life into plans to seek shareholders’ approval to raise N150bn fresh capital via a rights issue and elect new directors including billionaire, Femi Otedola and Samson Ariyibi among other resolutions.

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