Interest rate increase may not reduce Nigeria's inflation — Fitch – Newstrends
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Interest rate increase may not reduce Nigeria’s inflation — Fitch

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The decision by the Central Bank of Nigeria to raise the main policy interest rate sharply in May is not a fundamental shift in the country’s unorthodox monetary policy, which will continue to impede efforts to rein in inflation, says Fitch Ratings.

“We believe Nigeria’s complex policy approach will be maintained at least until the next presidential election in February 2023.

“A significant strengthening of macroeconomic performance appears unlikely in the near term, despite the supportive effects of higher global oil prices for the economy”, Fitch Ratings noted.

It said the Russia-Ukraine war’s impact on global prices of food and energy had seen inflation accelerate in 2022.

Consumer prices rose 17.7% yoy in May, up from last year’s low of 15.4% in November.

Fitch now forecasts Nigeria’s inflation to average 17% in 2022, unchanged from the 2021 average. “In March 2022, we had predicted inflation this year would average 14.6%,” it said.

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It stated, “The authorities had planned to phase out fuel subsidies in 2022, but they are now unlikely to be removed before 2023.

“This helps to contain 2022 inflation, but the cost of the subsidy – borne by the Nigerian National Petroleum Corporation (NNPC) – has reduced NNPC transfers to government.

As a result, we forecast the general government deficit to narrow only moderately to 3.4% of GDP this year, from 4.2% in 2021.”

Fitch had expected at least one interest-rate hike in 2022, but the 150bp increase in the main policy rate to 13% on May 24 was larger than it had anticipated.

It said, “Further increases are possible, as officials with the CBN have indicated a preference for real interest rates to be less steeply negative.

“Moreover, we believe the CBN will use the Cash Reserve Ratio and the issuance of CBN special bills to tighten liquidity.

“The CBN is using these discretionary measures to inject or withdraw liquidity from the financial system, as well as influencing borrowing costs for specific sectors through various loan guarantees and direct support facilities.

“This has made monetary policy difficult to gauge and created a segmented interest- rate environment, impeding the transmission of monetary policy.”

The CBN adopted the Investor and Exporter (IEFX) window as the official exchange rate in May 2021.

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Tinubu orders creation of single-digit tax system

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Tinubu orders creation of single-digit tax system

President Bola Tinubu has directed a creation of a single-digit tax system with a maximum of nine taxes for a company or an individual.

Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, disclosed this in Abuja while speaking with the management team of Guinness Nigeria who paid him a visit.

A statement on Wednesday by Dare Adekanmbi, Special Adviser on Media to the FIRS chairman, quoted Adedeji as saying, “The President gave a directive that he wants a single-digit tax in the country, meaning that the maximum number of taxes we will have after the work of the Presidential Committee on Fiscal Policy and Tax Reforms will be nine taxes.”

The statement added that the plan was aimed at having a conducive environment “created for businesses to flourish and grow the economy.”

 

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Naira gains further against dollar

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Naira gains further against dollar

The Naira rose further in the official market on Tuesday, trading at N1,382.95 to the dollar.

According to data from the FMDQ’s official trading portal, the Naira rose by N25.09, or 1.78 percent, from the previous day’s rate of N1,408 versus the dollar.

On Tuesday, total turnover was $245.58 million, up from $222.15 million on Monday.

Meanwhile, at the Investor’s and Exporters (I&E) window, the Naira traded between N1,486 and N1,300 against the dollar.

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The News Agency of Nigeria (NAN) reports that the Central Bank of Nigeria (CBN) had, earlier on Tuesday at its 294th Monetary Policy Committee (MPC), raised Monetary Policy Rate (MPR) by 200 basis points from 22.75 per cent to 24.75 per cent.

CBN governor Yemi Cardoso said that was meant to tackle the nation’s rising inflation.

Naira gains further against dollar

(NAN)

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CBN jacks up interest rate amid soaring inflation

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CBN jacks up interest rate amid soaring inflation

The Central Bank of Nigeria (CBN) on Tuesday raised the interest rate from 22.75 per cent to 24.75 per cent amid soaring inflation.

Governor of the central bank, Olayemi Cardoso, made this known after the two-day Monetary Policy Committee (MPC) meeting held on Monday and Tuesday.

The country’s latest annual inflation rate jumped to 31.70 per cent from 29.90 per cent for last month, fueled by a continuous rise in food prices.

Cardoso disclosed that the MPC voted to adjust the asymmetric corridor around the MPR at +100 to -300 basis points.

He said the committee voted to retain the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and adjust the CRR of merchant banks from 10 per cent to 14 per cent.

The committee also voted to retain the liquidity at 30 per cent.

He said, “Members noted the continued rise in headline inflation driven largely by food prices, because of supply shortages, and high cost of Logistics and Distribution.

“The committee, therefore, was of the view that addressing food insecurity is key to containing current inflationary pressures.”

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