By Emma Ujah & Oscarline Onwuemenyi
ABUJAâ€”GOVERNOR of the Central Bank of Nigeria, Dr. Sanusi Lamido Sanusi, has urged the Federal Government to carry through its planned deregulation of the downstream oil sector to forestall further inflationary pressure on the economy.
Sanusi who stated this while briefing the press on the communiquÃ© of the 213th Monetary Policy Committee, MPC, meeting yesterday in Abuja, noted that â€œthe mere talk and rumours of deregulationâ€ was worsening the state of inflation on the economy and it was time government carried through the reforms to bring an end to the uncertainty in the economy.
He said: â€œOn the question of deregulation, our position has always been clear: you do not announce deregulation and then you donâ€™t do it. Because what is happening now is that everybody is paying a black market rate.
â€œOur position at the Central Bank has been that we should simply implement the policy (deregulation); stop the subsidies and ensure there are sufficient petroleum products and transportation bottlenecks are unlocked, and that is better for inflation, better for our economy than the state of uncertainty in which we currently are.â€
He noted: â€œA lot of what you have seen in inflationary pressure reflects the fact that people have already factored in the expected new prices of petroleum products, and if you actually deregulate you will find that increases in prices will not be anything significant.
â€œWe are in a situation in which Nigerians are paying the black market rate for petroleum products where they find the product; they are paying the inflationary cost of deregulation when it has not been done.â€
Sanusi further stated that, â€œNigerians are paying through the back door because money that is supposed to be used by their government for their benefit is paid to people who are not delivering petroleum prices at the real prices.â€
Stressing that the country was not benefiting from the status quo, Sanusi said, â€œin the past four years, government has spent over N1 trillion subsidizing petroleum products, which is fine if the subsidy actually gets to Nigerians, but how many Nigerians actually get the petroleum products at the subsidized rate?â€
Meanwhile, the Monetary Policy Rate, MPR, remains the same at six per cent with the asymmetric corridor of interest rates remaining at 200 basis points above the MPR and 400 basis points below the MPR. Sanusi also announced an extension of its guarantee on all inter-bank transactions up till December 31, 2010 but with a proviso that it could use its discretion to terminate the guarantee on a case-by-case basis, as part of the ongoing reform process.
He noted that growth in both monetary and credit aggregates has remained weak since the beginning of 2009, adding that any attempt at this time to tighten monetary policy would exacerbate the problem and further constrain credit availability to the real economy.
The CBN governor said that as part of the efforts to bring lending rates down, and provide alternative sources of long-term funds to finance development projects and deepen the capital market in line with CBNâ€™s developmental mandate, the MPC deliberated on the possibility of granting liquidity status to bonds issued by state governments that meet certain eligibility criteria.
On the international economic scene, the committee noted that the rebound in the global economic activity which started in the second half of 2009 has continued. The rebound was driven largely by the unprecedented amount of fiscal stimuli undertaken in both the developed and emerging market economies in the wake of the global financial crises.
The key concerns, however, he said, remain the strength and sustainability of the recovery process which is proceeding at varying speeds across the different regions. The governor said overall Gross Domestic Product, GDP, growth for 2010 was put at 6.90 per cent which was significantly higher than the 5.98 per cent recorded in 2008.
External Reserve fell to $42.47 billion at the end of last year, down from the level of US$53.00 billion recorded at end of December 2008.
Okays N500bn for electricity
The CBN has also provided aN500 billion facility in a quantitative easing policy investments in the troubled power sector of the economy.
This would come through investment in debentures issued by the Bank of Industry (BOI) which would administer fund in collaboration with banks in the country.
The facility would be specifically invested in emergency power projects dedicated to industrial clusters.
The funds are to be channeled through the Bank of Industry for on-lending to the DMBs at a maximum interest rate of 1.0 per cent for disbursement of loans with a tenor of 10 â€“ 15 years at concessionary interest rate of not more than 7.0 per cent.
According to Mallam Sanusi, part of the money would be made available to banks for the purpose of refinancing/ restructuring existing portfolios to manufacturers.