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MPC meets today, inflation, rising unemployment in focus

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Members of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) will today begin their two-day meeting in Abuja amid concerns of rising inflationary pressure and worsening unemployment.

The committee is expected to review the domestic and external macroeconomic conditions and financial markets developments since its last meeting in January and provide forward guidance on how it intends to balance the competing goals of price and exchange rate stability.

Commenting on today’s meeting, analysts at Cordros Capital Limited noted that the persistent increase in inflation was primarily due to the combined effects of ongoing security challenges in the country, forex liquidity challenges, and poor distribution networks.

“Although a dovish monetary policy contradicts rising inflationary pressures, we expect the committee to reiterate that a hike in interest rate will oppose its current growth mandate, given the adverse impact on the rising cost of borrowing for households, businesses and the government,” the Lagos-based firm stated.

Also, analysts at Greenwich Merchant Bank envisaged that the committee should back its pro-growth stance by holding the key parameters at their current levels.

“On the domestic scene, the committee would assess the economy’s surprise exit from its recession (thanks to the non-oil sector growth of 1.7 per cent), along with the optimistic outlook for 2021.

The analysts noted that “higher oil prices, which have returned to pre-pandemic levels sustained inflationary pressures (inflation rate rose to 17.3 per cent in February, from 16.5 per cent in January), higher unemployment readings (unemployment rate settled at 33.3 per cent in Q4:2020, up from 27.1 per cent in Q2:2020), pressure on external reserves from ongoing FX difficulties, and the country’s ballooning debt levels will all be factored in.”

They pointed out that overall, the policy-setting committee remains faced with three options: to tighten, hold, or lower the key policy rate.

They said: “Although, we opine a tightening stance could drive back capital flows to help boost external reserves, stem inflationary pressures and bring in the much-needed price stability, it could also distort the progress achieved so far in supporting growth.

“On the other side, while a loosening stance could hasten an economic recovery, helped by the lower credit environment, it could also worsen the real rate of returns and persistent price pressures.

“Against this backdrop, we see the committee embracing its current stance. We remain conscious of the MPR’s weak transmission effect, which supports the bank’s use of unorthodox policies, as assets remain unanchored by the policy rate.

“Case in point, the steep rise in Open Market Operation (OMO) yields appears to have set the tone of fixed income rates, pushing up stop rates at the Primary Market Auctions (PMAs) for T-bills and the bonds to 6.8 per cent (average 364-day) and 11.8 per cent, from 1.2 per cent (average 364-day) and seven per cent respectively.”

It added that a possible increase in the MPR just might suggest that authorities are prioritising efforts to control inflation over economic growth.

Speaking in a chat with THISDAY, Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said he doesn’t expect any change in the monetary policy instrument.

“Unemployment is a fiscal lagging indicator that you do not use monetary policy tools to address; it is inflation that is a big problem.

“I don’t think the MPC will adjust any of the tools because it is a very complex situation. I won’t be surprised that they do, but I am not expecting anything,” Rewane added.

Also, Head of Research, United Capital Limited, Mr. Wale Olusi, anticipates that the MPC would hold interest rate, but would continue to tighten using its open market operations.

According to him, leaving the interest rate at the current level would encourage economic growth. At the last meeting in January, the MPC left all the monetary policy tools unchanged.

The Monetary Policy Rate (MPR) was left at 11.5 per cent; cash reserve ratio (CRR) at 27.5 per cent and asymmetric corridor at +100/-700bps around the MPR, and the liquidity ratio at 30 per cent.

Surprisingly, the domestic economy had exited the COVID-19 induced recession in the fourth quarter of 2020 with real Gross Domestic Product (GDP) growth growing marginally by 0.11 per cent year-on-year, compared with a contraction by 3.62 per cent recorded in the previous quarter.

Nevertheless, the Consumer Price Index (CPI), which measures inflation increased by 17.33 per cent (year-on-year) in February 2021, compared to16.47 per cent in the preceding month, according to recent data released by the National Bureau of Statistics (NBS). The composite food index had risen by 21.79 per cent in February compared to 20.57 per cent in January. Also, Nigeria’s unemployment rate rose to 33.3 per cent in the fourth quarter of 2020 (Q4 2020) compared to 27.1 per cent in Q2, according to a recent report released by the NBS. That implied that 23.18 million of the country’s labour force either did nothing or worked for less than 20 hours a week, making them unemployed by the country’s definition of unemployment.

-THISDAY

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Nigeria’s inflation records first drop in 20 months, now 18.12%

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Nigeria’s inflation rate dropped to 18.12 per cent in April this year from 18.17 per cent recorded in March, the first decline in headline inflation in 20 months.
This is contained in the latest consumer price index report just released by the National Bureau of Statistics.
The last time the consumer price index which measures the rate of change in the price of goods and services dropped was in 2019 when it slowed from 11.08 per cent in July to 11.02 in August.
The NBS, which announced this on Monday, stated that the food inflation also reduced to 22.75 per cent in April from 22.95 in March.
“The urban inflation rate increased by 18.68 per cent (year-on-year) in April 2021, down by 0.61 the rate recorded in March 2021(1.60), while the rural index also rose by 0.95 per cent in April, down by 0.57, the rate recorded in March 2021 (1.52 per cent),” the report said.
It also stated, “The rise in food index was caused by increase in prices of Coffee, tea, coca, bread and cereals, soft drinks, milk, cheese and eggs, vegetables, meat, oils and fish and potato, yam and other tubers.
“On a month-on-month basis, the food sub index increased by 0.99 percent in April 2021, down by 0.91 percent points from 1.90 percent recorded in March 2021.”
The report noted that food inflation on a year-on-year basis in April was highest in Kogi at (30.52 per cent), Ebonyi (28.07 per cent), Sokoto (26.09 per cent), while Abuja (18.63 per cent), Akwa-Ibom (18.51 per cent), and Bauch (17.64 per cent) recorded the slowest rise in year-on-year inflation.
“On a month-on-month basis, however, April 2021 was highest in Kebbi (2.46 per cent), Ekiti (2.42 per cent), and Kano (2.17 percent) while Abuja (0.05 per cent) recorded the slowest rise in the month-on-month food inflation with Rivers and Ogun recording price deflation or negative inflation.”

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FG to launch maritime security strategy next month

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The Federal Government will launch a maritime security strategy next month to address challenges in the sector, Minister of Transportation, Rotimi Amaechi has said.
He stated this in Abuja on Monday while playing host to the Belgium Ambassador to Nigeria, Daniel Bertrand, who paid him a courtesy visit in his office.
Amaechi said, “The crisis in the maritime sector is insecurity and it is more complex than the world knows, but the Federal Government has come up with a solution and it is ready to take off. The Navy, Police, Army and State Security Service are involved.”
A statement by Anastasia Ogbonna, Acting Director (Press and Public Relations), Ministry of Transportation, quoted the minister as saying that if successful, maritime insecurity would be addressed while noting that countries in the Gulf of Guinea may elect to adopt it.
He said, “Sixty-five per cent or 75 per cent of crime comes from our waters and if we are able to eliminate it, then we will be making a lot of progress.
“If you are on air, you will see what is happening in the water. If you are inside the waters, you will be able to respond. A helicopter has the capacity to drop in the naval men when they see anything suspicious.”
He added that the partner would be willing to compare notes with anyone who wanted information for the purpose of securing the Gulf of Guinea.
Ambassador Bertrand had earlier presented a letter to the minister requesting the support of the Nigerian government for the Belgium candidate for the position at the International Maritime Organization.
He also promised his country’s readiness to support the implementation of maritime security in the Gulf of Guinea.

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Limit your speed to 30km/h, FRSC tells all motorists

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FRSC Corps Marshal, Boboye Oyeyemi

As Nigeria joins the rest of the world to mark the 6th United Nations Global Road Safety Week, the Federal Road Safety Corps has asked motorists to limit their speed to 30 kilometres per hour in urban or built-up areas for all categories of vehicles.
The global safety week will be celebrated between Monday May 17 and Sunday May 23, 2021.
The Bauchi Sector Commander, FRSC, Mr Yusuf Abdullahi, made the recommendation on Monday in a statement issued by the FRSC Public Relations Officer in the state, Mr Rilwanu Suleimanu.
The corps said speeding was responsible for about 30 per cent of crashes in Nigeria.
Abdullahi explained that the corps would be using the 6th United Nations Global Road Safety Week to carry out an advocacy programme where people would be educated on the issue.
He said, “The 6th UN Global Road Safety Week will focus on the issue of speed.
“The week advocates for safer streets motoring by making 30 km/h speed limits, the norm for cities worldwide in places where people mix with traffic.
“The week is concerned about policy commitments at national and local levels to deliver the 30 km/h speed limits in urban areas and to generate local support for such low speed measures in order to create safe, healthy traffic flow within Urban cities globally.
“As a lead agency in road safety management and administration in Nigeria, the FRSC is hosting the event and embarking on nationwide advocacy to replicate this global activity in selected Nigerian Cities.
“Pursuant to this, the Bauchi State command of the FRSC organises public education campaign programmes to inculcate the norm of 30km/hr speed limits among road users.”
He called on the general motoring public to always adhere to the maximum legal speed limit while in the city or in built up areas so as to prevent crashes, its attendant injuries as well as its fatalities.
Abdullahi, who further stressed the need to avoid speeding, considered among the critical traffic violations with high risk factor, said speeding would lead to increase in crash severity, resulting in more fatalities or injuries.
The sector commander explained that more damage would be caused to vehicles involved in speeding when they crashed, thereby increasing the likelihood of such vehicles not drivable thereafter.
“Speeding also leads to extra fuel consumption and frequent replacement of auto parts, among others,” he said.
The public advocacy programme would include media charts, roadshows, visits to hospitals, and advocacy visits to stakeholders, including policymakers and others.

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