Recession: Reducing Interest Rates Would Do Nothing To The Economy – CBN

Moses_TuleThe Central Bank of Nigeria (CBN) on Wednesday said reducing interest rates “will do virtually nothing” in taking Nigeria’s economy out of a recession.

The apex bank also maintained that there is no quick fix out of the recession Nigeria is currently in.

The Minister of Finance, Mrs Kemi Adeosun, had expressed hope that the Monetary Policy Committee (MPC) would lower key interest rates.

“We would love to see the MPC reduce interest rates because we think in terms of business activity that would deliver greater results to Nigeria”, she told Channels Television in an exclusive interview.

However, speaking on Sunrise Daily, the Director, Monetary Policy Department of CBN, Mr Moses Tule said the MPC had to look at the fundamentals before taking the decision to maintain the rates at 14 per cent.

Mr Tule said a country like Japan has been in recession for more than ten years despite having an interest rate of less than 2 per cent, adding that the Bank of England has also reduced its interest rate from 0.5 per cent to 0.25 per cent and “still nothing is happening, so the solution does not lie in the reduction of interest rates”, he said.

He also noted that despite the interest rate reduction in the past, the CBN has not seen “that response, in terms of growth in credit”.

He further noted that “we are not just in recession but we are in a stagflation, where growth has reduced precipitously to the negative and you have prices rising, so it is insufficient for the Monetary Policy Committee to just meet and say we are reducing interest rates to address a complex economic situation like stagflation”.

To get out of the economic quagmire Nigeria is in, Mr Tule said the “monetary policy, fiscal policy, trade policy, budget policy need to sit together in a retreat to fashion out comprehensively what the policy response is going to be.

“All the key policy parameters must be brought to the table to fashion out what the way forward is for the country”, he said, insisting that “you can’t clap with one hand”.

Mr Tule added that with the inflation rate at 18 per cent, a reduction in interest rate will lead to an increase in money supply which in turn means higher inflation, wondering “if the government has the resources to increase salaries when there is higher inflation.

“The current inflationary trend are not strictly monetary policy induced factors. Some are legacy factors that rose as a result of reforms, like in electricity tariff, petroleum pricing model and foreign exchange market”, he maintained.

Key Constraints To The Economy

Mr Tule, who maintained that the CBN is not averse to lower interest rates, however stressed the need for the government to correct the structural deficiencies inherent in Nigeria.

He added that an economy does not deliver low interest rates if it has key structural deficiencies like infrastructure, insisting that “these are key constraints to the economy.

“You cannot compare the infrastructural level to the structural deficiency in this economy with what you have in the UK, Japan or in the United States. If the UK went through a recession, which they are still going through and not completely out, Japan over the last ten years is being struggling with a recession, the European Union since 2007/2008 global financial crisis still going through a financial crisis and are not yet through despite putting all the policy arsenals, then for an economy like Nigeria, where there are key structural deficiencies, there is an urgent need to harmonize the policy reaction that would address this stagflation”, he maintained.

Mr Tule maintained that the issues are “deeper and comprehensive than the current solution kit that is on the table”, hinting that we are “misdiagnosing what the issues – stagnation or recession – are”.

The CBN had at the last MPC meeting in July raised the benchmark Monetary Policy Rate from 12 percent to 14 percent, while the Cash Reserve Ratio and Liquidity Ratio were both retained at 22.50 per cent and 30 per cent each.

Traders Close Shops in Kaduna Over Bomb Scare

Kaduna desertedThere was pandemonium in Kaduna metropolis on Monday following an alarm over a white bag abandoned near Kontagora road, which the traders suspected to be a bomb. 

The bomb scare on Monday afternoon forced traders to close their shops and started rushing home for safety.

Immediately the rumour filtered into the area, many people ran helter-skelter in order not to be caught in the web of any explosion.

However, a Police anti-bomb squad that arrived at the area promptly discovered that the bag contained some waste items and not bomb.

The alarm occurred barely one hour after news of a bomb explosion in Kano filtered into the city, a situation that promptly triggered fear of a coordinated attack by terrorists in the two cities.

A suicide bomb had gone off about 10AM on Monday, July 28 at the Nigerian National Petroleum Corporation (NNPC) Mega Filling Station at Hotoro area along Maiduguri Road, Kano.

The suicide bomber, suspected to be a female, had slipped into the crowd of citizens buying kerosene at the station before detonating the explosives. The suicide bomber and three others have been confirmed dead, eight persons are injured and rushed to the hospital.

3 Killed In Kano Suicide Attack

bomb-explosion1A suicide bomber and three others have been confirmed dead following a bomb explosion at the Nigerian National Petroleum Corporation (NNPC) Mega Filling Station, in Hotoro area, along Maiduguri Road, Kano.

The bomb went off about 10AM on Monday July 28.

The suicide bomber, suspected to be a female, had slipped into the crowd of citizens buying kerosene at the Station before detonating the explosives. The suicide bomber and three others have been confirmed dead, eight persons are injured and rushed to the hospital.

According to a statement by the Police Public Relations Officer, Frank Mba; “It is instructive to note that the Mega Station did not go ablaze due to the security barricade put in place by the Policemen on duty at the station. Such a situation would have clearly complicated the Emergency response.

“Security Forces have cordoned off the scene, and Police Bomb Disposal Experts are ‘sweeping’ the area.”

Citizens have been advised to stay off the scene, be vigilant and report any suspicious person(s) or activities to security forces.

He added that full scale investigation has commenced, as intensive patrol of the city was ongoing.

Nigeria Police Confirm Suicide Bomber, Four Others Killed In Kano Bomb

Police SUFive people, including a suspected suicide bomber, have been killed in a bomb explosion that rocked Kano on Sunday night, the Police have said.

The incident, which occurred at Gold Coast, Middle Road Junction, also destroyed vehicles that were passing when the suicide bomber’s car exploded.

Eyewitness accounts say that the blast was so powerful that all that remains of the car is its engine.

The Kano State Police Commissioner Adelere Shinaba said that apart from the suicide bomber, three men and a girl of about 12 years of age also died.

He also said that the car exploded along the road, meaning the bomber could not reach his destination before the explosion.

The explosion, which occurred at about 9:30 pm, took residents of the city unawares, causing a stampede around the area which resulted in multiple accidents on roads close to the scene of the blast.

The area had been cordoned off by security operatives and movement is restricted.

Bars and alcohol-sellers in the Sabon Gari area have been targeted on numerous other occasions.

In January 2012, about 150 people died there in a series of coordinated attacks by the Boko Haram.

MPC Meeting Will Not Change Nigeria’s Monetary Policy- Economist

vlcsnap-2014-05-19-13h42m01s239As the Monetary Policy Committee (MPC) meeting begins today, analysts expect the committee to review key developments in both the global and domestic economies up to April 2014, and the outlook for the rest of the year.

On Business Morning today, an economist, Dr Boniface Chizea says he is not expecting any major change on the monetary policy for now until the new Central Bank Governor, Godwin Emefiele, takes over on June 2.

According to him, the new CBN governor must ensure stability in the monetary policy rate which is currently high.

He is also of the opinion that the new CBN governor has an erroneous task of growing the economy which according to him can be done by stimulating the economy.