Economy
Interest Rate Hike: Nigerians Will Start Paying Higher Prices, Manufacturers Warn
By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has said the recent increase of the Monetary Policy Rate by the Central Bank of Nigeria (CBN) will worsen the imminent recession in the manufacturing sector and negatively impact its operations in many ways.
MAN, in a statement on Thursday, said the MPR hike would also increase the cost of borrowing, which would further discourage investments in the sector.
It also said this would lead to a high cost of production which would lead to higher commodity prices and inventory of unsold manufactured products.
The statement read in part, “It is evident that the continuous and consistent increase in MPR is not yielding the desired growth in the economy. The Nigerian economy remains fragile and bedevilled with numerous challenges that inhibit growth.
“Therefore, the monetary authority needs to pay closer attention to rethink the policy mix, bearing in mind the parlous state of the economy, especially the effect of a high MPR on the manufacturing sector and the economy.
“The increase in MPR from 18 per cent to 18.5 per cent will certainly lead to an increase in lending rates and worsen the uncompetitiveness of the manufacturing sector. The Association has been clamouring for single-digit lending rates to allow manufacturers access to needed funds to boost the performance of the sector.
“This increase, like the previous ones, is evidence that the CBN is either unperturbed about the plight of the productive sector or is unable to fathom out a more creative policy mix that would reflate the sector.”
The CBN further increased the interest rate by 0.5 per cent to 18.50 per cent from 18 per cent in March at the 291st Monetary Policy Committee meeting.
The Governor of the apex bank, Mr Godwin Emefiele, stated that its investigation and research found that the country’s interest would have been higher but for its intervention by raising interest rates.
According to Mr Emefiele, Nigeria’s April inflation rate of 22.22 per cent would have been 30.48 per cent if the MPC had not raised the interest rate.
MAN had already announced that the manufacturing sector was in acute recession and was faced with a quadruple whammy of the sustained scarcity of naira, limited access to foreign exchange, high inflation, and a struggling economy.
These challenges have significantly impacted the industry, with the brewing sector suffering a massive decline of -169 per cent in profit before tax in the first quarter of 2023, a threat that could see it scale down its operations.
Also, the industry turnover for non-alcoholic beverages and tobacco declined by -15 per cent, while gross profit and profit before tax declined by -31 per cent and -96 per cent within the same period, respectively.
“The Naira scarcity and limited access to foreign exchange have exacerbated the continuing impact of systemic challenges such as high cost of operations, the multiplicity of taxes, limited electric power supply and infrastructural challenges.
“For instance, the Nigerian manufacturing sector recorded a 36 per cent downturn in profit margins from 2021 to 2022 and over 400 per cent increase in energy costs, further constraining the growth of the sector,” the association warned earlier this month.
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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