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Private sector concerned as Nigeria’s central bank raises interest rate to 26.25%

Published

6 months ago

May 22, 2024

The decision of Nigeria’s central bank’s Monetary Policy Committee to raise the country’s benchmark interest rate has alarmed members of the organized private sector and economists alike, some of whom believe it will severely impair the ability of business operators to repay their debts.

The decision of the committee was declared by Olayemi Cardoso, the governor of the Central Bank of Nigeria and chairman of the MPC, after the latter’s 295th meeting on Tuesday.

The interest rate was increased by 150 basis points by the MPC, from 24.74% to 26.25%. The benchmark interest rate increased for the third time this year on Tuesday with the MPR boost.

The policymakers raised the MPR by 750 basis points since the MPC reconvened in February. In February, the MPR jumped from 18.55% to 22.75%, a 400 basis point rise. In March, it was raised by 200 basis points to 24.75%.

Cardoso said, “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation. Members observed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month measures of headline, food and core all declined significantly. This follows a decline (month-on-month) of headline and food measures in March 2024, suggesting that the recent tight monetary policy stance of the Bank is beginning to yield the desired outcomes.”

Cardoso added, “For the first time since October, we have seen a relatively significant moderation in the rate of increase and that is working. I believe very strongly that the tool that the central bank is using is working. I have said it before, there is no magic wand, these are things that need to take their own time. I’m confident and the figures show that we are beginning to get some relief and I believe in a couple of more months, we will see some positive reports on the effects of what the CBN is doing.”

Cardoso defended the decision to raise the MPR once more during a press conference on Tuesday following the MPC meeting. In the face of an uncertain economic environment, the MPC has remained hawkish in its approach to combating inflation.

Nigeria’s inflation rate increased to 33.69% in April. As compared to the headline inflation rate for March 2024, the National Bureau of Statistics reports that the headline inflation rate for April 2024 increased by 0.49 percentage points.

According to the NBS, the headline inflation rate increased by 11.47 percentage points year over year from the 22.22% rate reported in April 2023. In April 2024, food inflation was 40.53%. Cardoso stated that the MPC has connected the ongoing naira volatility to the principles of the free market.

“Members further observed the recent volatility in the foreign exchange market attributing this to seasonal demand, a reflection of the interplay between demand and supply of a freely functioning market system. The committee also noticed the marginal increase in the foreign reserve between March and April 2024,” he said.

Segun Kuti-George, National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, denounced the Interest Rate Increase by MPC. At a time when many firms were depending on loans to operate, Kuti-George argued it was callous to keep rising interest rates.

He said, “That is the only thing they know. The only thing they know is to increase the interest rate. As long as the industrial sector cannot access cheap funds, we are joking. We cannot be talking about economic development.”

In addition, Gabriel Idahosa, the president of the Lagos Chamber of Commerce and Industry, who disagreed with the rate hike, charged that the CBN was employing the incorrect measure to combat inflation.

Idahosa said, “The CBN is like a farmer that does not have any other tool. So, they are stuck with one tool. We just came out of a consultation session and this was the issue. The CBN is driving a metric that is not related to the problem.

“The problem is the cost of production. It has nothing to do with interest rates. It is not advisable to keep raising the interest rates, but they have run out of ideas and they don’t want to be seen to do nothing.”

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After decades of imports, Nigeria ends oil importation

Published

4 days ago

November 13, 2024

Ifeoluwa Dada

The Nigerian National Petroleum Company Limited (NNPC) has declared that it has finally stopped the long-standing practice of importing petroleum products after decades of doing so.

Nigeria’s national oil corporation stated that it now purchased from the 650,000 barrels per day Dangote Petroleum Refinery in Lagos, which is estimated to save the country up to $10 billion in hard currency each year.

This was revealed by Mr Mele Kyari, Group Chief Executive Officer of NNPC, in Lagos during his keynote address at the 42nd annual international conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE).

The statement coincided with the Independent Petroleum Marketers Association of Nigeria (IPMAN) announcing another positive development: the organisation had agreed to purchase goods directly from the $20 billion Dangote facility.

The oil dealers had fiercely protested the prior arrangement, which called for independent marketers to purchase from the NNPC rather than the Dangote Refinery.

However, Kyari also stated that all of the nation’s oil producers are required to send crude to the four NNPC refineries upon their return to the grid, citing the Domestic Crude Oil Obligation (DCOO) as outlined in the Petroleum Industry Act (PIA) 2021 as support.

He denied rumours that local refineries were being harmed by the national oil company’s refusal to supply them with crude oil.

As a proud co-owner of the Dangote Refinery, Kyari described NNPC as having recognised an opportunity in the $20 billion refinery as a clear market for at least 300,000 barrels per day of production, which would allow it to avoid being caught in the rapidly contracting crude oil market.

“Oil is found in very many unexpected locations across the world and people have choices. And therefore, we saw an opportunity to now supply to not just Dangote, but every refinery that operates in the country. So, it’s a well-informed business decision. Therefore, from day one, we knew that it was to our benefit to supply crude oil to domestic refineries.

“So, we don’t need to be persuaded. We don’t need anyone to talk to us. There is no need for any pressure from the streets for us to do this. We are already doing this”, Kyari stated.

Nigeria saw a decrease in petrol imports according to the National Bureau of Statistics, after President Bola Tinubu eliminated the gasoline subsidy in May 2023. Additionally, the report revealed that petroleum imports decreased by 13.77 percent year over year to 20.30 billion litres in 2023 from 23.54 billion litres in 2022.

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Nigeria signs deal for aircraft maintenance facility

Published

6 days ago

November 11, 2024

Ifeoluwa Dada

To build an aircraft maintenance, repair, and overhaul facility, the Nigerian government, acting through the Ministry of Aviation and Aerospace Development, has partnered with a private company in a public-private partnership.

Details of the agreement were given by a Ministry of Aviation representative, who spoke on condition of anonymity because they were not authorised to discuss the subject. The representative explained that the new facility would function as an Approved Maintenance Organisation under the Nigerian Civil Aviation Authority’s regulations.

The representative said, “AMO approved by the NCAA is meant to perform specific aircraft maintenance activities, which activities may include the inspection, overhaul, maintenance, repair, and/or alteration and release to service of aircraft or aeronautical products.”

Nigeria, which is the most populous country in Africa, is a major destination for more than 22 international airlines. Over 78 nations now have bilateral air services agreements with Nigeria.

According to the ministry source, this facility is the first of its kind in Nigeria and is intended to address the increasing maintenance requirements of domestic aircraft, which currently frequently necessitate costly and time-consuming journeys to foreign maintenance facilities.

The actual “date of commercial operations will be the date on which the NCAA grants the concessionaire approvals and licenses as required by the concessionaire in the agreement,” the ministry continued, adding that the exact start date for construction and ultimate operations is still unclear.

The source added that “all necessary activities are underway to make the contract effective.”

The official responded, “I don’t have those timelines,” when questioned about them. Before we discuss the actual building and management of the facilities, we are working quickly to complete a few tasks that will make the contract effective.

Festus Keyamo, the country’s minister of aviation and aerospace development, announced in August that he had finalised plans to start the bidding process for the construction of maintenance, repair, and overhaul facilities.

The minister stated that the action was a component of the government’s endeavour to improve the nation’s aviation infrastructure and lessen dependency on foreign MRO services. Due to the project’s high capital requirements, he also declared his intention to pursue a significant project using a Public-Private Partnership approach.

Nigeria’s economy and transportation sector both heavily rely on civil aviation. Nigeria boasts 23 operating domestic airlines, 20 airports, several regulated airstrips and heliports, 554 certified pilots, 913 qualified engineers, and 1700 cabin crew members.