Economy
Kenya Retains Interest Rates At 10% To Boost Economy
By Modupe Gbadeyanka
The Central Bank of Kenya (CBK) has announced that it is retaining its Central Bank Rate (CBR) at 10 percent.
This decision was reached after the Monetary Policy Committee (MPC) meeting held on Monday, November 28, 2016, to review the outcome of its previous policy decisions and the recent economic developments.
Business Post gathered that the MPC meeting took place against the backdrop of increased uncertainties in the domestic and global economies.
It explained that it retained the rates due to the prevailing domestic and global economic uncertainties and the need for more conclusive information on these developments.
According to Chairman of the MPC, Dr Patrick Njoroge, it was noted that the country’s month-on-month overall Consumer Price Index (CPI) inflation rose to 6.5 percent in October 2016 from 6.3 percent in September.
This, it was learnt, was caused largely due to changes in the prices of food items such as tomatoes and sugar.
However, the overall inflation remained within the government target range.
Also, the month-on-month non-food-non-fuel (NFNF) increased to 5.4 percent in October from 5.1 percent in September, reflecting increases in the prices of items in the clothing and footwear CPI category and the impact of the excise tax introduced in December 2015.
The 3 month annualized NFNF inflation rose slightly in October, an indication of mild demand pressures in the economy.
The MPC further observed that the foreign exchange market has been relatively stable despite the volatility in the global financial market following the US elections and the seasonal increase in demand for foreign exchange by corporate to finance dividend payments.
It said the foreign exchange market continues to be supported by the narrowing of the current account deficit mainly due to lower imported petroleum prices, lower imports of machinery and equipment, and resilient diaspora remittances. Tourism earnings and export receipts from tea and horticulture have stabilized.
The MPC said the CBK’s foreign exchange reserves which currently stand at $7,305 million (4.8 months of import cover) together with the Precautionary Arrangements with the international Monetary Fund (equivalent to $1.5 billion) have continued to provide adequate buffers against short-term shocks.
But the CBK said it was working closely with the National Treasury to ensure coordination of monetary and fiscal policies. Execution of the government’s domestic borrowing plan for FY2016/17 continues to support stability in the market.
It was disclosed that banking system liquidity and its distribution have stabilized. The average commercial banks’ liquidity ratio increased to 43.6 percent in October from 41.9 percent in August 2016 and the average capital adequacy ratio stood at 19.1 percent in October.
The CBK continues to closely monitor credit and liquidity risks in the sector. Continued interest of foreign banks to enter the local market indicates confidence in the banking sector.
Following the introduction of interest rate caps on back lending and deposits, the Committee noted that the available data were inadequate to facilitate a conclusive analysis of their impact on monetary policy and the overall economy. The CBK will continue to closely monitor developments in this respect.
The MPC also observed that private sector credit growth had stabilized at 4.6 percent in October. The slower growth witnessed over the last several months was found to be largely an outcome of structural factors in the banking sector rather than monetary policy.
However, there is no evidence that this is having a negative impact on economic growth.
The performance of the economy in the second quarter of 2016 was strong, growing by 6.2 percent compared to 5.9 percent in a similar period of 2015.
The MPC Market Perception Survey conducted in November 2016 showed mixed expectations. While the non-bank private sector remains optimistic for higher growth in 2016, banks were cautious as they continue to monitor the potential impact of the capping of interest rates.
Also, global growth prospects remain fragile on account of uncertainties in part due to the impact of Brexit and political developments in the U.S. Uncertainty relating to the tightening of US monetary policy and its implications for global capital flows remain a concern.
The Committee concluded that inflationary pressures were mild and inflation will remain within the Government target range in the short term.
By Adedapo Adesanya
Crude production under the collective Organisation of the Petroleum Exporting Countries (OPEC ) fell in May to its lowest level in at least 37 years as the blockade of Iran by the United States and disruptions in the Persian Gulf, continued to limit output.
According to a Bloomberg survey released on Friday, output from the organisation’s 11 current members, including Nigeria, dropped by 1.22 million barrels per day to 16.33 million barrels per day last month.
Iran accounted for more than half of the decline. The data excludes the United Arab Emirates (UAE), which departed the cartel last month after six decades of membership.
War between a US-Israeli alliance and Iran has reduced oil supplies from the Middle East, largely closing the Strait of Hormuz waterway. Saudi Arabia, Iraq, the UAE and Kuwait have been forced to cut crude production. Iranian shipments face additional pressure following a US blockade of its ports imposed in mid-April.
Iranian output fell by 710,000 barrels per day to a five-year low of 2.34 million barrels per day in May, the survey showed. Central Command reported that US forces have redirected 127 commercial vessels to enforce the blockade of all maritime traffic entering and exiting Iranian ports.
Kuwait recorded the second-largest decline last month, with production falling by 310,000 barrels per day to 490,000 barrels per day, less than one-fifth of pre-war levels. Saudi Arabia, the group’s leader, saw output decrease by 240,000 barrels per day to 6.57 million barrels per day.
The production reductions have not prevented OPEC and its allies from raising quotas over recent months, continuing a year-long process of restoring output halted several years ago.
This comes ahead of a meeting scheduled to be held on Sunday, June 7, where a sub-group of seven members is expected to increase targets by 188,000 barrels again in July. The session is one of four online meetings OPEC and its partners plan to hold that day.
Delegates indicated the alliance has plans for two additional monthly quota increases in August and September. UAE output rose by 300,000 barrels per day to 2.44 million barrels per day in May, according to the survey.
By Aduragbemi Omiyale
The 2025 third quarter Budget Implementation Report from the Budget Office of the Federation has shown that the federal government exceeded the funds allocation for repayment of debts for the first nine months of the fiscal year by about 18 per cent.
In a report by Punch, the sum of N10.74 trillion was budgeted for debt servicing between January and September 2025, but the government used N12.63 trillion for the purpose, N1.90 trillion or 17.65 per cent more than the allocation for the year.
The funds were spent on domestic debts, foreign debts and sinking fund by the central government in nine months.
Business Post reports that for the whole year, the amount approved by the National Assembly and signed by President Bola Tinubu for debt repayments was N14.31 trillion.
Looking at the nine-month figures, domestic debt service gulped N6.23 trillion, exceeding its N5.39 trillion provision, while foreign debt service was N6.30 trillion versus the budget provision of N5.06 trillion.
According to the report, the figures indicated that 67.2 per cent of the federal government’s retained revenue of N18.63 trillion was spent on debt service in the first nine months of 2025. When the sinking fund is included, debt-related payments consumed about 67.8 per cent of revenue.
It was also observed that aggregate federal government revenue underperformed the budget by N12.03 trillion or 39.24 per cent, as actual revenue of N18.63 trillion fell short of the N30.67 trillion projected for the first three quarters.
In the third quarter alone, the government generated N7.70 trillion versus the quarterly target of N10.22 trillion as a result of persistent oil revenue shortfalls, despite stronger non-oil collections.
The debt burden also crowded out capital spending, as total capital expenditure was N3.10 trillion in the first nine months compared with the N17.58 trillion budgeted for the period, indicating that actual debt-related payments were more than four times capital expenditure.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a loss of 1.13 per cent on Thursday, June 4, shrinking the market capitalisation by N30.03 billion to N2.630 trillion from N2.660 trillion on Wednesday.
Similarly, this brought down the NASD Unlisted Security Index (NSI) by 50.19 points to 4,396.08 points from the 4,446.27 points recorded a day earlier.
The loss was influenced by the overpowering of the bulls by the bears, after the bourse closed with two price gainers and three price losers, led by FrieslandCampina Wamco Nigeria Plc, which slumped by N20.03 to sell at N190.38 per unit compared with midweek’s N210.41 per unit. Food Concepts Plc declined by 25 Kobo to trade at N2.50 per share versus the previous day’s N3.00 per share, and Acorn Petroleum Plc crumbled by 2 Kobo to end at N1.32 per unit, in contrast to the preceding session’s N1.34 per unit.
For the gainers, Central Securities Clearing System (CSCS) Plc added N2.93 to close at N78.34 per share compared with the previous price of N75.41 per share, and Afriland Properties Plc gained 80 Kobo to settle at N16.80 per unit versus N16.00 per unit.
There was a slip in the volume of transactions yesterday by 46.8 per cent to 280,714 units from 527,221 units, as the value of trades dropped 66.5 per cent to N21.8 million from the preceding session’s N64.2 million, and the number of deals fell by 8.7 per cent to 42 deals from 46 deals.
Great Nigeria Insurance (GNI) Plc ended the session as the most traded stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 billion.
GNI Plc also finished the day as the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
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