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MPC Meeting: Considerations and Policy Options



MPC Meeting

MPC Meeting: Considerations and Policy Options

By FSDH Research

Is Expansionary Monetary Policy Appropriate?

We expect the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to hold rates at the current levels when it meets on January 23-24, 2017. Although the inflationary pressure and weak exchange rate justify a rate hike, it may be a difficult policy given the need to implement policies to boost growth in the economy.

The CBN will continue to use the Open Market Operations (OMO) to manage liquidity to achieve the desired goals in the short-term. At its November 2016 meeting, the MPC maintained the Monetary Policy Rate (MPR) at 14%, with the asymmetric corridor at +200 basis points and -700 basis points; retained the Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) at 22.50% and 30% respectively.

The International Monetary Fund (IMF) stated that economic activity is projected to improve in 2017 especially in emerging market economies. This is contained in its latest World Economic Outlook (WEO) Update for January 2017. The IMF projects global growth at 3.4% in 2017, from an estimated growth of 3.16% in 2016. Advanced economies are projected to grow by 1.9% in 2017, from 1.6% in 2016, led by growth in the United States (U.S). The IMF projects a growth of 4.5% for the Emerging Markets and Developing Economies from an estimate of 4.1% in 2016, as policy stimulus and improvements in commodity prices aid growth.

The new administration in the U.S. led by Mr. Donald Trump has promised to embark on expansionary fiscal policy to build infrastructure and lower taxes. This policy may drive inflation rate in the U.S beyond the 2% target set by the Federal Open Market Committee (FOMC) of the U.S Federal Reserve (The Fed).

The FOMC may respond by a rate hike faster than earlier anticipated. Consequently, global yields may rise with a possible capital flight from other countries into the U.S. The appropriate monetary mitigant in Nigeria under this situation is a tight monetary policy.

The IMF estimates Gross Domestic Product (GDP) contraction in Nigeria in 2016 at 1.5%, but to grow by 0.8% in 2017. The Nigerian economy has been plagued with a number of macroeconomic issues, as well as insecurity in certain parts of the country that are now experiencing some relief. There is still foreign exchange shortages as a result of lower export revenue linked to the drop in oil price and production. There is an improvement in Nigeria’s economic outlook because of the increase in oil output and the impact of the supply cut by the Organization for Petroleum Exporting Countries (OPEC). In the short-term, a hold decision will be appropriate.

The inflationary pressure still persists in Nigeria, as we expect the January 2017 inflation rate to increase further from the December 2016 figure. The inflation rate increased in December 2016 to 18.55%, from 18.48% in November 2016. The inflation rate in the medium term would be driven by the base effect from previous higher prices, expected good food crop harvest and, possible increase in electricity tariff and pump price of Premium Motor Spirit (PMS). Given the outlook of inflation rate between now and the next MPC meeting, a rate cut will be counter-productive.

The decision of the OPEC and some non-OPEC countries for coordinated cuts in oil output agreed in

November 2016 has led to a significant boost to oil prices. The average price of Bonny Light was $54.21/b in December 2016, up by 19.27% from $45.45/b in November 2016.

The price of Bonny Light crude oil also increased by 17.44% to US$55.09b as at January 17, 2017 from US$46.91/b on November 22, 2016. The secondary data from the OPEC shows that Nigeria’s oil output decreased by 7.23% to 1.54mbd in December 2016, from 1.66mbd as at November 2016. The ongoing talks in the Niger Delta region and the provision for the amnesty programme in Budget 2017 could restore oil output.

The external reserves increased consistently after the last MPC meeting in November 2016. The 30-day moving average external reserves increased by 11.51% from $24.50bn as at November 22, 2016 to $27.32bn as at January 17, 2017. The increase in oil production from September 2016 up till November 2016 boosted the external reserves. The support from the African Development Bank (AfDB) contributed to the external reserves. A rate cut may lead to capital flight. Thus, we expect the MPC to hold rates while it awaits complementary fiscal policy support.

The Naira depreciated at the inter-bank and parallel markets between the last MPC Meeting and January 17, 2017. It recorded a marginal depreciation of 0.08% at the inter-bank market to close at $1/N305.25 on January 17, 2017 from $1/N305 on November 22, 2016. The premium between the inter-bank and parallel markets averaged about N181 after the last MPC meeting in November 2016. The parallel market rate also depreciated by 6.12% to $1/N498.50 on January 17, 2017 from $1/N468 on November 22, 2016. A rate cut may lead to further depreciation in the value of the Naira.

The average yields on the 182-day and 364-day Nigerian Government Treasury Bills (NTBs) increased to 19.17% and 22.98% in December 2016, compared with 19.11% and 22.85% respectively in November 2016.

The 91-day

NTB closed unchanged at 14.50% in December 2016. The yields on the NTBs sold on January 04, 2017 were at 14.51%, 19.17% and 22.98% on the 91-day, 182-day and 364-day NTBs, respectively. However, the average yield on the 16% June 2019; 16.39% FGN Bond January 2022 and 10% July 2030 increased to 15.65%, 15.71% and 15.86% in December 2016 from 14.99%, 15.26% and 15.61% in November 2016. They stood at 16.37%, 16.10% and 16.30% as at January 18, 2017. The increase in yields reflects the current rising inflation rate and weak exchange rate.

The monetary aggregates and credits to the private sector grew in the first ten months of the year, and above the target rates for 2016. The growth in credit was mainly from the impact of devaluation of the Naira. The broad money supply (M2) increased by 11.21% to N22.28trn in October 2016, from N20.03trn in December 2015; an annualized growth of 13.45%. The provisional growth benchmark for 2016 is 10.98%.

The narrow money (M1) grew by 16.94% to N10.02trn in October 2016, from the end-December 2015 figure. Net Domestic Credit (NDC) also grew by 23.89% in the same period; an annualized growth of 28.67%. The provisional benchmark growth for 2016 is 17.94%. The credit to government increased by 280.06% during the period.

Similarly, credits to the private sector grew by 23.24% for October 2016, compared with December 2015; an annualized growth of 27.89%. The benchmark growth for 2016 is 13.28%.

Looking at the economic developments in the country and the impact of the external developments on the Nigerian economy, we expect the MPC to hold rates at the current levels. If the peace in the Niger Delta region is maintained, oil output may increase. This will increase exports and inflow of foreign exchange.

The need for the Federal Government Nigeria (FGN) to borrow aggressively may reduce and interest rate and inflation rate may drop. All these may take a couple of months to happen.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via


In 22nd Trading Week of 2023, NASD Swells by N20.35bn



NASD OTC securities exchange

By Adedapo Adesanya

The National Association of Securities Dealers (NASD) Over-the-Counter (OTC) Securities Exchange returned to positive territory, as it was pregnant by 2.1 per cent in the 22nd trading week of 2023.

This pregnancy gave rise to the increase in the market capitalisation of the exchange by N20.35 billion in the four-day trading week to N1.022 trillion from the N1.001 trillion it finished in Week 21.

In the same vein, the NASD Unlisted Securities Index (NSI) added 15.09 points to wrap the week at 739.21 points compared with 724.12 points recorded a week earlier.

The growth was supported by the market breadth index, which produced seven price gainers and one single price loser in the week under review.

FrieslandCampina Wamco Nigeria Plc jumped by 7.1 per cent to end the week at N75.00 per unit, in contrast to the previous week’s N70.00 per unit, Niger Delta Exploration and Production (NDEP) Plc gained 6.1 per cent to close at N245.00 per share versus the previous week’s N231.00 per share, and Central Securities Clearing System (CSCS) recorded an 8.6 per cent growth to end at N15.20 per share versus N14.00 per share.

Further, 11 Plc rose by 3.8 per cent to N119.40 per unit from N115.00 per unit, NASD Plc improved by 9.9 per cent to N15.50 per share from N14.10 per share, Acorn Petroleum Plc grew by 7.1 per cent to 15 Kobo from 14 Kobo, while Nipco Plc added 2.9 per cent to trade at N72.00 per unit compared with the earlier week’s N70.00 per unit.

However, the share price of UBN Property Plc depreciated by 2.1 per cent to close at 92 Kobo per unit, in contrast to the preceding week’s 94 Kobo per unit.

In the week under review, there was a 1760.9 per cent increase in the trading value to N482.4 million from N25.9 million, the trading volume rose by 1,317.5 per cent to 10.4 million units from 730,759 units, and the number of deals declined by 6.94 per cent to 67 deals from 72 deals.

UBN Property Plc was the most traded stock by volume with 5.00 million units, FrieslandCampina sold 2.38 million units, Acorn Petroleum Plc recorded 1.13 million units, NDEP Plc traded 820,000 units and VFD Group Plc transacted 380,000 units.

In terms of value, NDEP Plc led with N202 million, FrieslandCampina posted N167 million, VFD Group Plc traded N87 million, 11 Plc reported 10 million, and Nipco Plc traded N5.05 million.

In the year so far, unlisted securities investors have bought and sold 1.70 billion units of stocks valued at N5.53 billion in 1,327 deals, according to data obtained by Business Post.

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Outspan Educates Farmers on Sustainable Dairy Farming Practices



sustainable dairy farming practices

By Aduragbemi Omiyale

The threats posed by climate change on the globe, especially food security, have necessitated the need for sustainable farming practices. To commemorate 2023 World Milk Day, some farmers in Kano State were gathered by Outspan Nigeria Limited, a subsidiary of Olam food ingredients (ofi), to educate them on remaining in business for a long time without affecting the environment.

Under this year’s theme of Sustainable Dairy: Good for Planet, Good for You, the day was an opportunity to engage and celebrate the local dairy community as part of Outspan’s broader efforts to promote sustainable dairy farming practices, wider milk consumption, and education for farmers’ children.

“Sustainability is critical to ofi’s value proposition to offer good ingredients for consumers, farmers, and the world.

“Maintaining proper care of cattle herds, natural resources, and land is critical to addressing climate change. This is why we organized a lecture on sustainable dairy farming practices for dairy farmers,” the Regional Manager for ofi’s dairy business in Nigeria, Mr Manish Khede, said.

He added that the business also prioritizes the education of the farmers’ children as this will help to provide them with a buffer for the future. He pointed to the educational materials comprising textbooks and school bags being donated to the children as the business’ way of aiding the children’s learning.

Regarding milk consumption, Mr Khede said, “According to Healthline, a global health information platform, milk is a good source of vital nutrients such as calcium, vitamin D and protein.

“We believe that promoting access to and consumption of fresh and safe milk in Kano State can contribute to healthier communities and productivity too.”

On his part, the Vice President of ofi’s dairy business in Nigeria, Mr Praveen Paulsamy, said, “We are committed to the Federal Government’s economic development agenda. Hence, we’re looking to continue our investment in developing the local dairy value chain to remove the hurdles impeding growth along the chain and the dairy farming communities.”

Business Post reports that the event also had representatives of the Central Bank of Nigeria (CBN), members of the Kano Dairy Cooperative, local chiefs, and key officials from state and federal ministries of agriculture in Kwanar Dawakin Kudu LGA of Kano State.

While addressing the participants, a representative of the Branch Controller of the CBN in Kano, Mr Lawan Ahmed, said, “The milk industry provides valuable nutrients that support healthy physiological growth among the populace. The players in the industry deserve to be celebrated.”

The Director of Livestock and Poultry Service in the Ministry of Agriculture and Natural Resources, Kano, Mr Garzali Muhammed, stated that, “Outspan has been instrumental in enhancing the productivity of the members of Kano Dairy Cooperative. The various backward integration investments embarked upon by the business have positively impacted the productivity rate and income levels of the dairy farming community in the state.”

In his remarks, the Chairman of Kano Dairy Cooperative, Mr Usman Abdullahi, thanked Outspan for “raising the level of milk production in Nigeria.”

It was learned that Outspan donated educational materials such as school bags and textbooks to the dairy farmers’ children, encouraged wider milk consumption, and improved public health.

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SEC Pledges to Create More Wealth for Investors



more wealth for investors Naira

By Aduragbemi Omiyale

Efforts would be made to create more wealth for investors and Nigerians and stimulate economic growth, the Securities and Exchange Commission (SEC) promised.

At a meeting over the weekend, the Director-General of SEC, Mr Lamido Yuguda, said this would be achieved by deepening and diversifying the capital market.

He said when capital markets are developed, the entire engine of saving and investing and allocating resources to the projects with the highest expected returns is made easy.

“And if you do that effectively, you will see that you will create more jobs in the economy, create more revenue for the government and make life easier for all investors.

“When that happens, you have a lot of interested parties that want to put in their money to help the market develop,” he said.

The DG said in a bid to develop the market; the agency saw the need to have a forum where it could interface with issuers in a bid to discourage delisting.

“When issuers delist, they do because of certain issues. So, we decided to engage Nigeria Employers Consultative Association (NECA) and set up the Securities Issuers Forum. This was done to sit and discuss the issues and find solutions to them,” the SEC chief stated.

Mr Yuguda said that SEC was working hard to look at the various issues and ensure that the problem of delisting by companies is brought under check.

The SEC DG disclosed that the commission has put in place various other incentives to encourage companies to list, as listing provides enormous benefits to companies and investors.

“Listing enhances higher investor protection. This collaboration with NECA has been very fruitful, and that has given confidence to many of the players. We have started getting interest from the big players,” he noted.

He stated that some strategic listings have recently happened in the market, and the organisation was encouraging the diversification of the equity market by listing companies within power generation, telecommunications and foods.

He said, “We have had some strategic listings like the IPO of MTN, BUA Foods etc. and asset class creation or new products like derivatives have further helped diversify the listings from the huge leaning on the financial sector (banks and insurance) several years back.

“The problem with this market is when the big players do not list. So we started getting interest from the big players like MTN. And they decided to come in a very imaginative way.  They decided to make the offer electronically so that people with telephones could subscribe without going through an intermediary,” Mr Yuguda said, assuring that the commission would continue collaborating with various market stakeholders to support impactful innovation in the capital market.

“For example, our keen support of the innovation by the Issuing House to the MTN IPO in 2022, Chapel Hill Advisory, further promoted the benefits of electronic-IPO (e-IPO), which made it possible for over 100,000 new accounts to be opened on the CSCS, most of which belong to youths and women- key subsets of our demography which is considered critical to sustainable growth.

“Information Technology and FinTech is fast becoming Nigeria’s new oil, and we continue to support the participation of fintechs in helping the capital market attract the youth and to help ease onboarding and ‘democratise’ access to wealth management services,” he added.

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