Economy
Udemezue Gives CBN Tricks to Tackle Nigeria’s High Inflation
By Ahmed Rahma
The Chief Executive Officer (CEO) of Flame Academy & Consulting Limited, Mr Orji Chigozie Udemezue, has advised the Central Bank of Nigeria (CBN) to apply contractionary measures to curb inflation in the country.
According to the National Bureau of Statistics (NBS), inflation in Nigeria rose in December 2020 by 15.75 per cent and for Mr Udemezue, this is very high.
To control this, the economist has told the central bank to reduce government spending by stabilising price, which according to him, is the main duty of central banks across the globe.
Mr Udemezue, while speaking on Channels Business Morning, added that when CBN raises rate, there will be so much rush for money market instruments as banks would not be able to carry out their primary function of lending money to customers because people will not be able to borrow at a higher rate, allowing the apex bank to mop up the excess liquidity in circulation, which will slow down inflation pressure.
“Prices are still going up. Theoretically, we see that inflation today is about 15.75 per cent but actually in the market, most prices have gone more than 50 per cent on the things we buy.
“[The] duty of the central bank is to maintain price stability, that’s everywhere in the world and to do that, looking at the way things are now, we expect that the central bank should be trying to curb inflation by doing what they call monetary policy contraction, trying to apply contractionary measures i.e trying to raise rate. When they raise the rate for example, what will happen is that there is so much rush for money market instruments, banks will not be able to lend out more money and people will not be able to borrow at a higher rate and, therefore, you mopped up the money in circulation and then slow down inflation pressure,” he said.
Commenting on the fact that MPC was confronted with a policy dilemma at the last meeting, he said, “well, it is just the option of sit down dey look, let’s just watch as things go, because the whole essence of monetary policy obviously is to manage the quantity of money in supply in the economy.
“The argument theoretically is that when there is so much money in circulation, there is a lot of money pursuing a few goods, therefore, driving prices up.
“So, the primary duty of central banks all over the world is to maintain monetary stability, ensuring that price increase in the economy does not go at hyper rate i.e. saying inflation like in Nigeria having double-digit and beyond, that’s what damages productivity.
“So, you find that the Central Bank of Nigeria is in a very big dilemma. Ordinarily, if you look at their objective of maintaining price stability, we are losing it.”
Expressing his belief on the measures, he said, “You know, that’s what we should be looking at right now. If they do that, trust me, it is going to be very counterproductive because already, the economy is in deep trouble with COVID-19 and all of that.
“So, at this point, no reasonable central bank will be looking at an increase in rate instead everywhere in the world, we are looking at monetary easing or what they call expansionary monetary policy, whereby rates are brought down to enable the real sense of economy to enable to borrow at a reasonable rate, drive production and be able to reverse as it is now and economy in recession.”
According to him while answering the question of what is driving inflation in Nigeria, the pressure on foreign exchange (FX) is the major cause and the fact that the country depends too much on foreign goods.
“[The] Nigerian economy is a very peculiar economy, many times it tends to work out most established economic theories and even practices.
“Elsewhere in the world, there are no major issues about inflation because domestic demand is at its lowest level, travels are restricted, the COVID-19 lockdown has left people with no jobs.
“Theoretically, people don’t have money to spend.
“Most economy especially western economies, you find that aggregate demand is actually on a decline and, therefore, purchases are not going up as it should be. So, inflation is actually low in those places unlike in Nigeria, the argument is different.
“The factors driving inflation in Nigeria is not demand-pull, it is not about you and I having so much money in our pocket, having greater command for commodities.
“So, what happens here is inflation flows really from FX pressure. We are not self-sustaining and we import practically everything we use. So, the pressure on our FX, input costs is huge.
“Our local manufacturers have to import there input materials which are now at the all-time rate and then the finished goods we also import that we use in domestic things like the furniture and office equipment are also coming at a much higher rate because of the devaluation and depreciation of our currency.
“What is causing this depreciation? Until we address the issue of continuous depreciation of our currency, inflation can never be dealt with.
‘That is why even at the time when all of us are not demanding much when domestic demand is so low, we still see inflation climbing up the roof particularly food inflation and similar factors.
By Adedapo Adesanya
NASD Over-the-Counter (OTC) Securities Exchange remained in the negative territory after it further depreciated by 0.64 per cent on Friday, July 24, despite recording four price gainers.
The NASD Security Index (NSI) dropped 27.4 points at the close of business to settle at 4,294.75 points versus the previous day’s 4,383.48 points, while the market capitalisation gave up N16.49 billion to end at N2.577 trillion, in contrast to the N2.594 trillion it ended a day earlier.
The bourse was down during the session amid heavy sell-offs, with the volume of transactions skyrocketing by 693.9 per cent to 2.99 million units from Thursday’s 377,635 units.
Equally, the value of trades went up by 71.6 per cent to N69.4 million from N40.4 million, and the number of deals increased by 41.0 per cent to 55 deals from the preceding day’s 39 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 75.6 million units traded for N5.4 billion.
GNI Plc was also the most active stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
The market ended the session with four price gainers and two price losers, led by FrieslandCampina Wamco Nigeria Plc, which lost N7.44 to trade at N136.19 per share compared with the previous day’s N143.63 per share, and CSCS Plc, which declined by N1.64 to N93.63 per unit from N95.27 per unit.
But MRS Oil gained N13.50 to sell at N148.50 per share versus N135.00 per share, Afriland Properties Plc advanced by 56 Kobo to N17.41 per unit from N16.85 per unit, UBN Property Plc surged by 18 Kobo to N1.93 per share from N1.75 per share, and Food Concepts Plc climbed by 1 Kobo to N2.50 per unit from N2.49 per unit.
By Dipo Olowookere
Nigeria’s stock exchange succumbed to profit-taking on Friday, losing 0.19 per cent when the closing gong was hit at 4 pm.
Shares in the banking and energy sectors influenced the decline suffered by the Nigerian Exchange (NGX) Limited during the session, as they respectively closed lower by 0.40 per cent and 0.04 per cent.
The industrial goods index was flat yesterday, while the insurance counter gained 0.68 per cent and the consumer goods space chalked up 0.25 per cent. The gains by these two segments could not keep Customs Street in the green territory at the close of business.
As a result, the All-Share Index (ASI) retreated by 474.00 points to 247,357.40 points from 247,831.40 points, and the market capitalisation decreased by N306 billion to N159.588 trillion from N159.894 trillion.
Presco dropped 10.00 per cent during the trading day to close at N2,070.00, Thomas Wyatt crumbled by 9.93 per cent to N3.63, Trans-Nationwide Express plunged by 8.44 per cent to N2.82, Royal Exchange slipped by 7.86 per cent to N1.29, and LivingTrust Mortgage Bank shrank by 7.32 per cent to N3.80.
On the flip side, C&I Leasing improved by 9.48 per cent to N6.35, Cornerstone Insurance rose by 9.09 per cent to N6.00, RT Briscoe jumped by 8.61 per cent to N13.25, Honeywell Flour expanded by 7.38 per cent to N17.45, and Africa Prudential increased by 6.98 per cent to N13.80.
Despite the poor performance, the local bourse recorded a positive market breadth index after finishing with 35 price gainers and 25 price losers, representing strong investor sentiment.
It was a relatively quiet market on Friday, as the activity level dropped, with the trading volume down by 27.72 per cent to 565.5 million units from 782.4 million units, and the trading value contracted by 46.89 per cent to N29.9 billion from N56.3 billion, while the number of deals executed by investors soared by 16.03 per cent to 53,688 deals from 46,273 deals.
Access Holdings was the busiest stock for the session, with a turnover of 128.0 million units sold for N3.8 billion, First Holdco transacted 35.4 million units worth N4.3 billion, Chams exchanged 34.8 million units valued at N154.3 million, Zenith Bank traded 30.4 million units for N3.9 billion, and UBA sold 30.4 million units worth N1.5 billion.
By Adedapo Adesanya
The Naira marked a whole week of appreciation against the United States Dollar on Friday, July 24, further gaining N5.67 or 0.41 per cent to close at N1,362.09/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) compared with N1,367.76/$1 it ended on Thursday.
Equally, the local currency appreciated against the Pound Sterling in the official FX market yesterday by N10.83 to trade at N1,813.62/£1 versus the preceding day’s N1,824.45/£1, and improved against the Euro by N7.68 to settle at N1,549.10/€1, in contrast to the N1,556.78/€1 it was exchanged a day earlier.
However, at the parallel market and GTBank forex counter, the Nigerian currency remained unchanged against the greenback during the session at N1,400/$1 and N1,379/$1, respectively.
The Central Bank of Nigeria (CBN) buffer has been strengthened with sustained foreign portfolio inflows and robust foreign reserves, which stand above $52 billion.
The apex bank’s policy signals that the Naira will be stronger in the near term, with Nigeria clearing hurdles with FX reforms and settlement of all backlogs.
However, some traders expect that pressure may come due to foreign-currency buying from fuel importers as they make Dollar purchases to build inventories.
Meanwhile, Bitcoin (BTC), in the digital currency landscape, trimmed recent gains as it fell by 2.3 per cent to $63,787.73.
The weak action in the AI momentum trade is feeding through to crypto as well.
Further, Cardano (ADA) dropped 3.7 per cent to close at $0.1615, Solana (SOL) dipped by 2.8 per cent to $73.71, Ripple (XRP) crashed by 2.3 per cent to $1.08, Ethereum (ETH) slid by 1.9 per cent to $1,851.58, Dogecoin (DOGE) retreated by 0.8 per cent to $0.0694, Binance Coin (BNB) contracted by 0.7 per cent to $564.18, and TRON (TRX) lost 0.5 per cent to trade at $0.3292, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
