Economy
Why Interest Rate on Savings Deposit Was Cut to 1.25%—CBN
By Dipo Olowookere
On September 1, 2020, the Central Bank of Nigeria (CBN) in a circular signed by its Director of Banking Supervision, Mr Bello Hassan, said the interest rate on savings deposit in banks will be 1.25 per cent.
The rate was chopped to the level from the previous 3.9 per cent and this was greeted with criticisms from various sections, including the Nigerian Economic Summit Group (NESG), which questioned the rationale behind this policy.
The issue generated such reactions because it was at the same time the federal government approved the raising of electricity tariff in the country and a few days later, the pump price of fuel jumped to N160 per litre from N145 per litre.
One of the major reasons for the grumbling was that these policies were coming when residents of the country were just reopening their businesses. They have not been economically active for months because of the closure of their means of survival by the government due to the COVID-19 pandemic.
But the CBN, while reacting to the comments made by NESG, questioned the group’s credibility, especially under its current leadership, saying it “has fallen short of its own standards and become a shadow of its old self.”
The apex bank explained that it reduced the interest rate on savings deposit in the country for the good of the economy, noting that it noticed that some big companies, instead of expanding their operations so as to hire more workers, were putting the funds in the banks to generate more money.
Recently, the National Bureau of Statistics (NBS) said that over 27 million Nigerians were jobless in the country.
The apex bank said in order to address this unemployment issue, it had to discourage the dumping of funds in the banks to yield interest rather than pumping them into the economy to improve economic activities, which will then make the nation’s Gross Domestic Product (GDP) grow positively.
Business Post reports that at the second quarter of 2020, Nigeria recorded a negative GDP growth of 6.1 per cent and this was attributed to the global health crisis, which brought the economy almost to a standstill.
In the CBN’s response to NESG’s allegation of “price fixing” for savings deposit in the country, the banking industry watchdog said in an “ideal economic textbook/theory, saving should be equal to investment, we expected total deposits should closely mirror total loans.”
The central bank, in the response signed by its spokesman, Mr Isaac Okorafor, said it observed “an increasingly large gap between total deposits in the banking system and total credit to the economy” which necessitated the 1.25 per cent interest rate benchmark.
According to the bank, while total deposits stood at about N25 trillion in January 2020, total loans stood at N17 trillion and as of August 2020, the total deposits jumped to N29.7 trillion, while the total loans were only N19 trillion.
“Many rich cooperates have simply been content with saving their cash balances and collecting huge interest payments, rather than expanding their investment, which should lead to hiring more people and producing more goods.
“In other to forestall a continuation of this trend, the CBN had to act to discourage these practices for the good of the economy.
“In other words, the rationale for moving to reduce the saving rates by banks is actually to encourage more lending,” the CBN said in the statement.
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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