A MUST READ: From the Central Bank of Nigeria. How the new Monetary Policy benefits Local entrepreneurs and Export.. The Opportunities and The Guarantee. READ ALL and Share! GEJs Economic foresight and agenda for a Nigeria without Oil is even more impressing from what is happening all over the Globe to Oil Producing Countries. Benefits ____________________________ These actions suggest that the CBN is nimble and responsive to both global and domestic economic realities as they unfold. And these are the hallmarks of a credible central bank. In particular, one must recall that the Bank’s major mandate is to ensure price stability and the developments in the FX Market were surely going to put undue pressure on domestic prices. Therefore: The MPC’s decision to tighten monetary policy would mitigate these developments while ensuring that inflationary pressure and inflation expectations are well anchored. The decision to raise the Monetary Policy Rate (MPR) is expected to increase capital inflows into the country, which should improve accretion to reserves. The increased Cash Reserve Requirement (CRR) will reduce the amount of excess liquidity available to banks for speculative and arbitrage activities and moderate the pressure in the foreign exchange market. Shifting the mid-point of the official exchange rate from ₦155/US$ to ₦168/US$ realigns it with the rates in the other segments, reduces the extant premium and discourages arbitrage tendencies in the market. The lower value of the naira would also make Nigerian exports cheaper, which should encourage other countries to buy more Nigerian goods. The new value of the naira also provides a critical opportunity for entrepreneurs to take steps toward replacing costly imports with cheaper locally made goods and services. In sum therefore, the actions of the CBN suggests that there is cause for concern but no need for panic. This firm conviction stems from: The resilience of the Nigerian economy as described above; The key causal factors of the FX pressure we are facing are global; and We have enough reserves to meet legitimate, transactions-based FX obligations. What is the CBN Doing to Boost Benefits? ____________________________ Both the Monetary and Fiscal Authorities have long argued that Nigeria needs to move quickly away from its significant dependence on oil for budget financing, FX inflows and reserve accretion. The CBN believes that Nigerian businesspeople and entrepreneurs are willing and able to take investment risks and produce most goods and services here in Nigeria. Yet, several surveys have concluded that infrastructural deficits (including lack of Power), and access to, and cost of, financing have been serious impediments to short term survival and long term growth of Nigerian businesses. In response to these twin problems, the CBN has been collaborating with the Ministry of Petroleum and Power, the Nigerian National Petroleum Corporation (NNPC) as well as the Nigerian Electricity Regulatory Agency (NERC) and other stakeholders in the Power Sector, to pay-off the back-log of legacy debts in the Power value chain in order to ensure that the Transitional Electricity Market (TEM) takes-off smoothly as soon as possible. It is important to note that agreements have now been signed with all stakeholders in the value chain. In return for paying off these debts, the CBN has received the following commitment from critical stakeholders: The Ministry of Petroleum Resources and NNPC would address key infrastructure issues; An approval of increase in controlled gas price to $2.50 and $0.8 for transportation by NERC; Major gas suppliers, including all the international oil companies, would significantly increase supplies to power plants; and Generation and Distribution Companies would allocate the new resources exclusively for capital-related expenditure including replacing obsolete equipment and improving capacity for better revenue collection. The CBN believes that these efforts would significantly assist in solving the problems identified in the Power sector. Against the backdrop of this progress, the Bank is also collaborating with the Ministry of Agriculture and Rural Development, the Ministry of Industry, Trade, and Investment, the Directorate of the National Youth Service Programme, and other stakeholders to launch an innovative scheme that would harness the ingenuity and energy of NYSC members to produce targeted crops around clusters of existing value-adding industries (like Rice Mills). Produce from such efforts would be stored around the country at storage facilities owned by the Ministry of Agriculture while the CBN would assist in ramping up new ones. The Commodity Exchange being mid-wived by the Ministry of Industry, Trade, and Investment would then guarantee the prices of such produce, while the CBN would catalyze efforts aimed at securing off-takers of these products. On the issue of cost and access to financing, the Bank has also made available several special funds targeted at sectors that it believes can create jobs on a mass scale and improve the country’s chances of achieving much-needed inclusive growth. As the country witnessed on 19th August 2014, the President personally launched the flag-off of disbursements of the CBN’s N220 billion fund specifically targeted for Micro, Small, and Medium-scale enterprises across Nigeria. This fund is meant to provide financing at no more than 9 percent to recipients; an interest rate that is significantly less than what is obtainable in the open market. It is heart-warming to note that some State Governments (like Delta State) have even gone a step more to agree to pay-off the interest rates of these loans so that recipients only have to pay back the capital, without worrying about associated interest payments. Similarly, the Bank has launched other funds like the Commercial Agriculture Credit Scheme (CACS), which has, between 2009 and 2013, disbursed a total of about N16.2 billion to 12 rice producers who have managed to meet about 10 percent of national consumption. The CBN believes that we can scale up this amount to enable these producers meet a much more higher share of our national consumption, thereby, reducing our import needs for importation of commodities such as rice. Towards this end, 60 percent of the Commercial Agricultural Credit Scheme will now be targeted at the identified commodities, while the loan limit under the Agricultural Credit Guarantee Scheme has been increased to N50million to expand the resources available to small agricultural projects. Over the coming weeks, the CBN will continue to explore all possibilities and opportunities for scaling up its efforts to ensure that the country fully benefits from current economic developments. - See more at: reubenabati.ng/2014-11-29-Context-Rationale-and-Benefits-of-the-Decisions-of-the-November-2014-Monetary-Policy-Committee-Meeting.html#sthash.XgwGMVLO.dpuf
Posted on: Sat, 29 Nov 2014 12:12:01 +0000
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