Connect with us

E-Financial

Nigeria Rate Cut on the Horizon as Global Monetary Easing Cycle Gains Momentum

Published

on

Kindly share this post

By Lukman Otunuga, Senior Research Analyst at FXTM

Unfavorable macroeconomic conditions across the globe have prompted major central banks to embark on a monetary easing cycle to counter a global slowdown.

There is widespread speculation that the US Federal Reserve intends to trim interest rates in order to prevent an economic deceleration in the world’s largest economy. The global financial markets have reacted positively to the idea, which theoretically makes access to funding for business activities easier, boosting investor sentiment and economic growth. The US central bank’s caution is influencing other central banks like the European Central Bank, Bank of England and Reserve Bank of Australia among many others. In Africa, the South African Reserve Bank has already cut interest rates while the Central Bank of Nigeria (CBN) is turning dovish amid deteriorating economic conditions in the wake of trade disputes.

However, in its July meeting, the CBN decided to keep its Monetary Policy Rate (MPR) unchanged at 13.5 percent to allow time for the full impact of other measures. So far, these include a firm bank directive from July requiring 60 percent of deposits to be available for lending to the real economy instead of buying government securities. These securities are high yield because of the current 13.5 percent MPR and understandably attractive to the banking sector seeking stable investments of their own. Making sure money is in circulation instead of being tied up in government bonds sounds like a rational way to keep the economy on the road to recovery.

After surprising markets with an unexpected rate cut in March, the central bank could cut interest rates again during the second half of 2019. However, reducing the MPR when the inflation rate is already at 11.22 percent risks further overheating prices. Like many other emerging economies, Nigeria may be exposed to the impacts of a global slowdown but its economy is very different to the US’ which is currently experiencing anemic price inflation. This may be why the CBN decided to prioritize reducing inflation to single digits and said it is in no hurry to reduce its key rate. In other effects, foreign investment in Nigeria is likely to see benefits from the CBN’s decision to hold rates at 13.5 percent. This is based on the argument that international investors may be looking for higher-yield securities than those in the mature markets, especially in the light of declining or negative interest rate environments in Europe and the US.

The global monetary easing bandwagon has affected the oil markets differently from global equities. Instead of being heartened by the prospect of better lending rates, investors are focusing on the weaker global outlook for growth and Oil demand. The fact that OPEC decided to maintain its supply cuts until 2020 on the basis of weaker demand for Oil only reinforces the impression that it would take a dramatic event to reignite supply-shortage fears. In addition, the US Oil industry is pumping output at record levels, meaning that OPEC supply cuts are effectively neutralized in terms of boosting Oil prices. These circumstances have pressured Oil price benchmarks, West Texas Intermediary (WTI) and Brent Crude. Oil prices depreciated during the course of July, pulled back by a reverse tide of lower growth expectations.

The third quarter holds the potential for the Central Bank of Nigeria to cut interest rates. A fragile economic recovery coupled with external risks in the form of trade tensions and Oil price volatility should encourage the CBN to re-join the global monetary easing bandwagon. Although a rate cut is in the pipeline, the level of inflation will determine how many times the CBN pulls the trigger on rate cuts. Signs of easing inflationary pressures during the third and fourth quarter of 2019 could offer enough breathing room for the CBN to cut rates to 13% by year end.


Kindly share this post

Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University.

Continue Reading
Comments

E-Financial

FG Sacked IST Members over Fraud- Ahmed

Published

on

Kindly share this post

Mrs Zainab Ahmed, minister of Finance Budget and National Planning, has said the Federal Government sacked some past members of the Investments and Securities Tribunal (IST) as they indulged in corruption.

FG Sacked IST Members over Fraud- Ahmed

Inaugurating the new members, the minister charged the new members to eschew corruption and be forthright.

Bar. Azi Amos Isaac was appointed as Chairman for a five year term and Bar. Nosa Smart Osemwengie, was re-appointed as member for a second term of four years.

“The problem with the tribunal has been infighting amongst members, lack of industrial harmony and series of complaints bordering on maladministration.

“This has been the bane of the tribunal and a source of embarrassment not only for the Ministry of Finance but for the government in general,” Ahmed said.

The new chairman, Azi, assured the finance minister that, “the teething issue of restiveness has been addressed since he assumed duty,” adding that, “The place is calm and the staff have become very supportive.”

Azi said since 2003, the tribunal has “given judgment in the value of assets worth over N844 billion and that from 2017 to date, they have given decisions in monetary value totalling over N28bn.

“It has not failed in its adjudicatory responsibility.

“It has carried out its assignment with candour and integrity and intends to improve on what has been on ground.”

 


Kindly share this post
Continue Reading

E-Financial

CBN Bans Customer-to-Customer Forex Transfer

Published

on

Kindly share this post

Central Bank of Nigeria (CBN) has banned transfer of foreign exchange (forex) from one customer to another.

CBN Bans Customer-to-Customer Forex Transfer

According to the apex bank, forex cash lodgements into domiciliary accounts can only be done by the account owners henceforth.

An internal memo available in the media space explains that the new guidelines are necessary to review the utilisation of inflows into customers domiciliary accounts.

The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.

“They can have unfettered access by telegraphic transfers up to a limit of $40,000 monthly for payment of medical bills, school fees, subscription to professional bodies subject to existing CBN guidelines.

“Transfers from one customer to another is prohibited. Transfer within related companies is allowed subject to a limit of $50,000 per month.”

It recommended that proceeds from non-oil exports should be sold to banks, used for repayment of dollar term loans, and self-utilisation for trade transactions for LC, bills and Form A.

Also oil export proceeds from E&P companies are to be used to pay contractors and service providers employed by the oil companies in addition to the recommended uses for non-oil FX proceeds.

Offshore forex inflows from other Nigerian banks and internal account to forex transfers sourced from offshore inflows are to be used for trade transactions subject to eligibility for E-Form M.

“Upon confirmation of the legitimacy of the inflows, customers can have unfettered access, subject to a maximum of $50,000,” the document read.

“Utilisation for trade transactions subject to processing of eligible trade transactions using E-Form M. Payment for services must be backed with demand note from offshore beneficiary and other regulatory documents.

“Related party transfers are allowed to the maximum of the inflow received. The transfer request should be backed by a signed instruction from the account holder.” Payment of government fees and levies are also allowed to the maritime, oil and gas, aviation. government parastatals and export processing zones.

 


Kindly share this post
Continue Reading

E-Financial

Stanbic IBTC, Standard Bank, Listed Among Top African Corporate Brands

Published

on

Kindly share this post

Stanbic IBTC Holdings PLC and its parent company, Standard Bank, have emerged amongst the top winners of the 2020 Tech Times’ Africa LinkedIn Corporate Brand Awards.

The Stanbic IBTC Group emerged the second position in the category, with total votes of 3,515, out of 24 firms nominated for the award. Standard Bank placed the fourth 2,494 votes.

Nominations for this award opened to the public on July 1, 2020 and closed on July 14.

Shortlisted nominees were announced on August 24 while voting commenced immediately and voting ended on September 8, 2020.

The Corporate Brand Awards was instituted by Tech Times’ Africa, an online platform for leading technology, innovation, and startup stories.

Expressing his delight on the awards, Dr Demola Sogunle, Chief Executive, Stanbic IBTC Holdings PLC, said that both Stanbic IBTC Holdings PLC and Standard Bank had been deliberate and consistent in making a remarkable impact in Africa’s financial sector.

“Our sincere appreciation goes to the organisers of the Africa Corporate Brands Awards and to every member of the public who voted. This is a reflection of the high level of trust and confidence that the public has reposed on us,” he added.

Dr Sogunle further said that Stanbic IBTC Holdings PLC would remain relentless in portraying the organisation as one of the most influential corporate brands in Africa.

He stated: “Stanbic IBTC Holdings PLC and Standard Bank have relentlessly contributed to driving the growth and development of the African financial ecosystem. These awards affirm our efforts, and we are encouraged to raise the bar continually.”

The Africa Corporate Brand Award is designed to identify and recognise outstanding companies. It also projects their achievements and impacts on African society and the world at large.


Kindly share this post
Continue Reading

Trending