By Emma Ujah, Abuja Bureau Chief
ABUJA — The Central Bank, CBN, has expressed concern over the anticipated inflationary effects of the proposed deregulation of the downstream sub-sector of the nation’s oil industry.
Briefing the press on the outcome of the 66th Monetary Policy Committee (MPC) meeting in Abuja yesterday, the CBN governor, Mr. Lamido Sanusi, said various monetary and fiscal measures had reduced the average headline inflation to 10.4 per cent in September, lower than the 12.6 per cent in the preceding month but that this trend could be impacted upon negatively by deregulation.
His words: “the committee observed that while inflation has decelerated, it is important to recognise that seasonal factors and the planned deregulation of the prices of petroleum products pose a major risk to inflation outlook in the near to medium term.
“It is this context that heightens the criticality of the policy dilemma now being faced by the CBN.
“Providing further impetus to the current accommodative monetary policy could be inflationary in the short to medium term whereas the gap between the likely output growth and the trend rate of growth as well as the fragility of economic recovery in many of the systematically important countries point to the need for maintaining monetary accommodation along with reasonable fiscal impetus.”
Interest rate remains at 6%
The governor added that after a comprehensive review of the economy, in general, and the banking sector in particular, it was decided that the Monetary Policy Rate, MPR, should remain at 6 per cent.
He however announced an asymmetrical corridor of interest rates around the MPR, saying, “the rate on the standing lending facility will remain at 200 basis points above the MPR, while the rate on the standing deposit facility will be 400 basis points below the MPR”.
Sanusi said part of his administration’s strategy to strengthen the sector was the steps taken to establish the Asset Management Company, AMC, which Bill, he said, was already with the Minister of Justice and Attorney General. The Bill, he added, could reach the National Assembly next week.
“Purchase of loans by banks under the AMC will be based on terms aimed at strengthening the balance sheets with a focus on asset quality, improving liquidity and capital adequacy, as well as, on reducing debt overhang relating to the stock market in order to stimulate activity in the capital market”, he explained.
Other decisions announced yesterday were to lift the temporary ban placed by the CBN on the use of Bankers’ Acceptances and Commercial Papers, with effect from the 16th of this month.
The 1 per cent general provision on performing loans contained in the existing prudential guidelines has also been waived to stimulate credit growth and strengthen banks’ balance sheets.
Sanusi disclosed that the nation’s foreign reserves stood at $43.05 billion at the end of September, which represented about $1.6 billion over the figure as at August this year.
On the raging debate over the possibility of prescribing a tenure for bank Managing Directors, the CBN boss said final decisions on guidelines for the management of banks were yet to be reached and that all stakeholders would be allowed to make input at the end of the current reforms.
He reiterated that he was not interested in taking over banks as some people had alleged, saying “we are not interested in owning the banks and we are not interested in punishing shareholders who are not involved in the mismanagement of the institutions.”
The CBN boss stressed that some of the banks’ MDs and Executive Directors who were making wild accusations on the reforms were not genuine shareholders as they bought the shares with money taken from balance sheets of the institutions and that such shares should be cancelled.
Said he: “we have dwelt within our primary focus; protect depositors’ money. We are now at the stage where we are trying to protect shareholders and maximise their values.
“Look, some of the people who claimed to be shareholders in the banks were not shareholders. They took money from the banks’ balance sheets, bought shares. They did not pay a single kobo for those shares.”
Firstly, i would like to thank Mssrs. President and CBN governor for a job well done.Then, i want the President to remember that he is acting as our representative and as such his actions should be according to what we want.Moreover Nigeria is operating a democratic system and as such, public opinion must be considered as important.It is obvious that the proposed diregulation will among other things cause inflation rate to increase, standard of living to reduce and exploitation by the oil merchants.
We need refinery in this nation, we need to put our refinery to work or what else do we need, we have the land and the resources both human and non human but we lack only one thing……WILL POWER
This nation can succeed if we manage our resources very well and we do what we are supposeto do in time
Sanusi is now making a lot of sense to me. It appears he and his team have given a lot of thought to several issues. The will to support and implement the policy guideline herein to stem inflation and restore investor confidence is required. Let’s see the country grow with minimal socio-economic upheavals. The faith in democracy needs to grow and Sanusi has much to do about building the credibility of Yar’Adua’s administration. The macro- and micro-economic failures and policy instability of 1980s and 1990s should never repeat itself, because we have learnt from history.
it is sympathetic. Nigeria seems to be the only country where policies are made for the interest of Government rather than the interest of the citizens.
In countries with healthy presidents, they obey the law bcos the govt makes policies that will favour the populace.
I can tell you that untill the govt starts making policies aimed at directly improving the lives of Nigerians, the nation will remain in chaos
Central bank should work hard to manage the challenge that may arise from deregulation. Our experts on micro & macro economic should also assist. The truth is that we can not run away from deregulation. God has given us oil & gas lets utilise it well to create wealth for this nation.Our downstream oil sector need to be opened up to attract investors. The countries that do not have petroleum has not perished. Ofcourse there will not perish. NIGERIA THE WORLD IS PATIENTLY WAITING FOR YOU TO COME ALIVE. President Yaradua do not go back. Move FORWARD.
Thank God for the present CBN Governor if not for divine rescue embarked by him where would we have been today! We as a nation should stop further deception, instead of deregulation of the downstream sub-sector of the nation’s oil industry why not the present Yar’A Dua’s government face the issues holding this nation in bondage head-on-collision by building a new oil refinery on concrete terms to increase supply for local consumption and exportation rather than produce crude-oil for export and then pay a higher amount to re-import what has been exported simply because we lack refining capacity. Are we really sincere to ourselves in that direction? Take a look at Saudi Arabia that has oil like Nigeria as their major natural product that country is never bordered about deregulation of downstream sub-sector of her nation’s oil industry to regulate consumption rate…Nigeria needs to emulate the good gestures of that country we once tended and stop belabouring the deregulation as the only means of driving her economy forward. We have the power to do this thing without stress but the will power is what we should be praying for that God give our leaders. How long shall we groped in darkness of self-imposed obscurity. I agree with those asking Mr Present for a clean bill of medical/health fitness! Infact, its too late to ask for it now bcos the deed has already been done, what we should be concerned with is that Nigerians should resist any attempted attempts to imposed on them anyone who has no medical, moral, and legal fitness coupled with the people’s mandate to rule over them! Have you ever seen a Physician asking his patient to recommend medication for him??? Let us begin to conscientize the masses now before we are all drawn into another years of darkness in governance. Kudos to Mr CBN Governor with the Lion’s heart to stand in the face of oppositions.
Sanusi is a communist.
Who says that commodity trade (including petroleum products) should not be driven by market forces.? Then you would have to rob peter to pay paul.
So to keep the impression that every thing is under control we:
1. Spent a huge part of our foreign reserve to sustain the Naira.
2. Print more money (like Idi Amin Uganda) to subsidise failing banks.
3. Spend 4 times the amount on Capital projects in subsidising Petroleum products.
4. Mop up liquidity which he call excess in the face of depression, when other countries are putting in bail-outs funds into their economy.
5. Take over ownership companies (in this case banks) registered under CAC because they are being owed and convert them to public companies, even after recoveing their debts which should shore up their liquidity.
Some level of socialism is acceptable, but downright Communism must be abhored. It is pathetic that our CBN governor is clueless in creating tempering and moderating policies that jive with current realities. Somebody should send him to Harvard Business School for brush-up/ refresher courses.
I have been watching with great astonishment the display of guts by this ‘dont give a damn’ sanitary sanusi whose doggedness is a good omen for the entire nation .
Starting from the clever response and answers to questions thrown to him during the interview at the house of assembly where the 7-point agenda was intelligently faulted, debunking the all-accepted ‘high capital base being equal to strength of banks’, and now standing as a true nigerian in the the midst of expatriats(governments) to rubbish the deregulation policy which has been chorused as the way to streangthen the sector, Sanusi has shown that he is man enough to speak directly from his conscience even if it far different from the policy of those who mistakingly or by divine orchestration brought him into office.
I SALUTE HIS COURAGE.
Government should not only insists on no going back on deregulation but also have it at the back of their mind the likely effects of deregulation to the Nigerians and how to subsidize it . And one of the effect is INFLATION.
We should now start asking if President Yar’Adua is up to the task of being an effective President Nigeria with all that is happening around us? It is time now for the Senate, the house of representatives and the cabinet, to ask that the President gives Nigeria a clean bill of health as regards his mental and fisical fitness to be an effective President. They should bring in very emminent and impartial medical examiners, to do this and report their findings to the them and the nation. Nigeria can not and must not continue like we are doing, just coasting around. They have a legal and constitutional power and responsibilty to the Nation to do this. They must not pussy foot any futher with this as allowing the statisquo ante to continue is not and will not be option. Time is running out and very fast too.