Business
Inflation, Interest Rates Fall
Indications emerged at the weekend that the current banking sector reforms and the relative stability in the prices of crude oil may have returned Nigeria to the path of economic stability with the remarkable reduction in inflation and interest rates.
The nation’s annual interest rates fell from 11 per cent in August to 10.4 per cent in September, thus raising the prospect of stability in the nation’s economy.
Data released by the National Bureau of Statistics at the weekend showed that the nation’s annual inflation dropped to 10.4 per cent on a 12-month basis in September from 11 per cent in August.
“The composite consumer price index or CPI rose 10.4 per cent year-on-year in September 2009 and it is slower than the 11 per cent increase recorded in the previous month,” the agency said in a report, giving no reason for the decrease.
“The monthly change of the CPI was 0.5 per cent increase in September 2009,” it added.
According to the bureau, the urban All Items Index rose by 0.2 per cent while the corresponding Rural Index increased by 0.7 per cent in September, when compared with the preceding month.
The bureau stated that the year-on-year average consumer price level as at September 2009 for urban and rural dwellers rose by 8.1 per cent and 11.5 per cent respectively.
Nigerian inflation had risen steadily since the second quarter of last year, standing at 9.7 per cent in May before soaring to 14 per cent in July owing to the effects of the global food crisis.
The Federal Government had managed to slow inflation for most of 2006 and 2007 through belt-tightening measures to achieve a single-digit rate.
Such measures included a stable exchange rate for the national currency, as well as fiscal discipline.
Checks also showed that the CBN intervention has also forced down interest rates which was pegged at 21 per cent earlier in the year. Interest rate now hovers between 18.85 and 19.89 per cent.
According to the latest figures posted on the Money Market Association site, Prime Lending rate stood at 18.85 while Normal lending was put at 19.85 per cent respectively.
In specific terms, the Nigerian Interbank Offer Rate (NIBOR) for call fell to 4.75 per cent by the end of last week from 10.37 per cent at which it closed the previous week ended October 9, 2009.
The 7-day NIBOR closed the week at 7.41 per cent from 12.50 per cent. The 90-day paper closed the week at 13 per cent from 16 per cent, while 180 day instrument dropped to 14.50 per cent as against 17.58 per cent the previous week.
Explaining the trading for last week, Head, Treasury Sales, Fidelity Bank Plc, Mr. Uvic Ogban said that the N200 billion bailout funds released to the second batch of troubled banks hit the system last week Thursday, thereby dragging down the rates.
“The market responded to the bailout fund. The other influence on the rates was the anticipation by dealers that the market will be awash with funds up till this week. The meeting of the Federation Account and Allocation Committee (FAAC) was held last week. It is expected that the fund will hit the system in the current week. In addition to the inflow expected from the economic stimulus package. Since the market respond to information, the foregoing will help sustain the low rates in the current week,” he said.
During an interactive session with journalists at the recently concluded World Bank/ International Monetary Fund (IMF) meetings in Istanbul, Turkey, CBN Governor, Lamido Sanusi, said the banking watchdog has been able to achieve macroeconomic stability, especially with both the exchange and interest rates.
He noted that when he became the CBN governor last June, inflation rate was 15 per cent but as at end of August, it had fallen to 11 per cent.
Sanusi said inflation was likely to go to nine per cent by the end of the year.
“When I became governor of Central Bank, inflation rate was 15 per cent. End of August, it was 11 per cent. The gap between the official rate and parallel rate was 25 per cent: as at today, it is 2.98 per cent. All short term money market rates today are lower than they were in December 2008.
“We’ve delivered macroeconomic stability. We’ve checked stable exchange rate-in fact, in the last one week; I have been fighting against the rapid appreciation of the naira because of return in confidence. It’s just that in the management of the macro economy, the CBN has been so successful and we’ve done all of these in the middle of all those financial turmoil.
“There’s been no spike on inter-bank rates. There’s been no spike on exchange rates. There’s been no capital flight and inflation has not gone up. Those are the facts the president mentioned in his Independence Day speech: Those achievements of his administration nobody talks about. Inflation is likely to go to nine per cent by the end of the year. Look at our exchange reserves, the foreign reserves- we stemmed the outflow: we were losing foreign reserves at the rate of $2 billion per month. In the last two months we have lost nothing,” he said.
Some Commercial drivers in Port Harcourt have said that the Federal Government’s N1,350 fuel discount is yet to reduce their daily operating cost.
A cross session of commercial drivers who spoke to The Tide correspondents in Port Harcourt said they are yet to feel the impact of the government discount, adding that most filling stations in the city are even selling above the pump price
A driver Jude Ogbo who operates the mile 1 Rumuokoro axis of Port Harcourt said plies the discount has not reflected in his daily fuel expenses.
“Since the discount was announced, many filling stations still sell at the old price. When you go there, you discover they sell you two litres at the price of one. For now, we have not seen any reduction,”_ he said.
Another commercial driver, Comrade Ishmael Uzeho who operates within the Port Harcourt metropolis, said the discount is not being implemented across the country.
“How has the discount affected us? I will say it has not. Many stations are not working. Only NNPC is working and that is just one person in the whole country. If government really wants to help, let the fuel price go down properly,”_ he said.
Uzeho added that if the price of fuel goes down, transport fares will also go down. He noted that his route fare has remained at N500.
On his part, Mr. Moses Dapa, Supervisor at Sam Jaja Foundation Transport Company, said the company has not increased its fares despite the high cost of fuel.
“We are still running normal price. We charge N2,000 and N5,000 depending on the destination. We will not increase our price. I don’t know about other parks, but for Sam Jaja, we are maintaining normal price,”_ Dapa said.
He appealed to passengers to understand that drivers are not using high fuel price as an excuse to charge excessive fares.
Other drivers who spoke said the federal government should monitor the NNPCL retail stations to ensure that the directive is implemented.
Recalled that The Federal Government in abid to reduce transportation cost in the country had announced a 30-day margin discount at NNPC Retail stations across the country from October 1 to 31,
However investigation revealed that the policy is yet to affect transportation cost in the country.
By; Stephens Sopakriba and Saint Davies
In a press statement released to The Tide’s source on Friday in Abuja, the group said Nigeria had a significant resource advantage due to its vast natural gas reserves.
“At a time when global energy markets face unprecedented volatility and rising operational costs, Nigeria stands on a massive resource advantage with its vast natural gas reserves,” the group said.
Highlighting this potential, Alfa Designs urged the nation to move past complaints over energy costs and aggressively embrace Compressed Natural Gas (CNG) as a sustainable engine for economic growth.
While federal policy adjustments have sought to cushion the impact of global energy shocks, industry experts emphasised that long-term relief hinges on a rapid, nationwide transition to gas.
“Transitioning away from expensive traditional petroleum products promises to ease the financial burden on ordinary citizens.
“It will also reposition Nigeria as an attractive industrial hub capable of drawing foreign direct investment and driving job creation,” it said.
To demonstrate the practical feasibility of this transition, the group said it recently partnered with a global Original Equipment Manufacturer (OEM) to lower the entry barriers for commercial drivers.
“By negotiating directly with the manufacturer, we reduced the total cost of acquiring and installing a CNG conversion kit for commercial tricycles (commonly known as Keke NAPEP) from up to N700,000 down to under N450,000.”
The group said this shift offers dramatic immediate financial benefits for local operators, with petrol currently selling at roughly N1,390 per liter.
It said that, in comparison, at a CNG equivalent price of about N98 per liter, a daily commercial driver using 10 liters of fuel reduces its daily energy expenditure from N13,900 to N3,980.
“This represents a daily net savings of N9,920, or more than 71 per cent.
“Over a standard 26-day working month, drivers save over N257,000, allowing them to fully recover the cost of the CNG conversion in less than 46 operational days.”
The company further stated that when scaled nationally, the economic implications are monumental.
“Nigeria consumes approximately 50 million liters of gasoline daily, costing roughly N69.5 billion per day.
“A nationwide 71 per cent reduction in fuel expenditure would generate daily national energy savings of N49.6 billion.
“On an annualised basis, this shift equates to approximately N18.1 trillion, or $13.5 billion, kept within the domestic economy.”
The group added that those recurring national savings would offer a vital mechanism to help address Nigeria’s estimated $2.3 trillion infrastructure deficit.
It said reinvesting those funds into the economy helps eliminate the 30 to 40 per cent operational overhead currently consumed by imported fossil fuels.
“The resulting boost to corporate margins expands the national tax base, generates reliable user-fee revenues to make major transit projects bankable, and creates a self-sustaining financial cycle,” it said.
