WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2010-09-22 Time: 09:00:02 Posted By: News Poster
By Ayodele Aninu And James Emejo
Lagos – The Central Bank of Nigeria (CBN) surprisingly increased its benchmark interest rate (Monetary Policy Rate) by 25 basis points – thus switching its attention from boosting growth to fighting inflation.
The increase in MPR means depositors will get higher interest on their deposits, which the banks will pass on to borrowers by raising lending rates, while yields on bonds will also rise.
News about the raising of the MPR to 6.25 per cent, which many analysts had predicted would remain unchanged, came just as the apex bank said it had revoked the operating licences of 200 microfinance banks.
CBN Governor, Sanusi Lamido Sanusi, who made this known to journalists in Abuja yesterday shortly after the 72nd Monetary Policy Committee Meeting, also described recent comments made by his predecessor, Prof. Chukwuma Soludo, on the state of the Nigerian economy as “alarmist”.
He also said that funds from the apex bank (about N200 billion) and those from the National Pension Commission (N400 billion) totalling N600 billion would be made available to the power sector to create 6000 megawatts of electricity.
The MPR, which has remained unchanged since June 2008, is the nominal anchor of all interest rates in the economy. It is the rate at which the CBN gives loans to banks and, as such, directly influences the level and direction of change in interest rates.
Sanusi also announced that the main lending rate to commercial banks was increased to 8.25 per cent from 8 per cent, while the borrowing rate was raised to 3.25 per cent from 1 per cent.
Justifying why the CBN had to take precautionary steps to cage inflation, Sanusi listed several factors that are likely to spike inflation to include implementation of the new salary structure in the civil service, expected fiscal injections arising from electioneering expenses and the injections relating to Asset Management Corporation of Nigeria (AMCON) purchase of non-performing loans of banks.
Others are spill-over effects of the rising food prices from famine in neighbouring Niger Republic and floods in Asia, deregulation of energy prices as well as the expected increase in household spending toward year-end festivities.
“These might further fuel inflation in double digits. It is wise to begin to take precautionary steps to moderate those pressures and that is what has informed the decisions taken today,” Sanusi said.
The CBN governor tended to put economic growth in the Nigerian economy ahead of keeping a cap on price rises, particularly after the crisis in the banking sector last year.
But the CBN governor said the banking sector reforms introduced since the bailout of nine banks a year ago, meant there was now flexibility for monetary tightening by raising the MPR to 6.25 per cent from 6.0 per cent
“The committee is satisfied that sufficient progress has been made in banking sector reforms to mitigate the risk of monetary tightening to financial institutions,” Sanusi said.
Inflation stepped up to 13.7 per cent year-on-year last August from 13 per cent the previous month (July).
In spite of the CBN’s low benchmark rate over the last year, banks have been reluctant to lower commercial lending costs and this has hampered growth.
Sanusi said the CBN supports deregulation of the fuel industry and that the apex bank “will continue to monitor price developments with a view to taking appropriate policy measures to stem any inflationary threat”.
He said the Nigerian economy was expected to grow 7.78 per cent in 2010, up from 6.96 per cent last year, driven by non-oil industries, such as agriculture.
Growth is expected to reach 7.72 per cent in the third quarter and 8.19 per cent in the fourth quarter, compared with 7.69 per cent in the three months through June, he said.
Foreign exchange reserves stood at $36.6 billion as at September 13, he said, acknowledging that credit to the private sector had been on the decline but that the MPC believes that “further efforts were needed to restore confidence to the credit market and to unlock the flow of credit to the economy”.
He also noted that developments in the money market indicated that retail lending rates were still relatively high while average savings dropped to 1.41 per cent in August 2010 from 1.62 per cent in July, same for consolidated deposits, which declined to 2.27 per cent in August 2010 from 2.40 per cent in July.
Sanusi, however, observed that average maximum lending rate rose to 22.31 per cent in August 2010 from 22.27 per cent in July.
On why the licences of 200 microfinance banks had to be revoked, Sanusi said that these institutions had the same problem like that of the banking system.
“It’s not enough to set up a bank in a village; you need to have an integrated rural development policy; there has to be a business that you lend to,” he stressed.
He said the CBN would soon make public the full list of the microfinance banks that were affected and the different regulatory actions that had been agreed by the committee of governors.
On comments by Soludo that the Nigerian economy was going down, Sanusi said his predecessor was only being alarmist.
“I wish he had been specific about what we need to do to avoid the crisis and given recommendations on what we need to do but I think some of those remarks were alarmist and did not take full cognisance of the situation.
“We are in the middle of a global financial crisis and the banking system has lost 66 per cent of its capital. While I will not like to take issues with Governor Soludo as a person, the reality is that if we had acted in 2007 or 2008 when the warning signal became clear that the banking system was facing a crisis due to over-exposure to the capital market, we would not have been dealing with the crisis we have this moment,” he said.
Sanusi said because of these developments and coupled with the high rates banks were lending, he supported the National Economic Council meeting that the Excess Crude Account be drawn down in order to augment government spending.
“Now, if credit is not flowing to the economy and government is not spending – you have a full-blown recession. We make all these noise about the excess crude account. Was the excess crude account not created for the rainy day? And when oil price crashed from $147 to $40 and output crashes from 2.3 million barrels per day to less than 1 million barrels per day – it is not just raining, it is pouring. Now, you needed to have counter fiscal measures and therefore the excess crude account was used.
“In the CBN, Governor Soludo himself pursued counter fiscal policy measures: he reduced liquidity ratios from 40 to 35 per cent; he reduced cash reserve requirement from 42 per cent and these were appropriate policy responses in a time of crisis,” he said.
Elaborating on the funds that would be made available to the power sector through its intervention fund and the expected N400 billion billed to be “unlocked” from the pension funds, Sanusi said what the CBN had done is to provide the fund that is eligible for commercially viable power plants to borrow.
“We could give them long-term money at single digit rate of interest and our decisions with PENCOM are aimed at unlocking about N400 billion from the pensions funds and making money available to power. You need to understand that if we go back to the ancient financial crisis – at the heart of that crisis was an excessive dependence on foreign debts.
“As we do the power reforms, if we allow the power companies to simply borrow money from abroad, they are exposed to interest rates and exchange rate risk. Now if we’ve got N2 trillion in pensions and all that money is going to short-term instruments; we are trying to work out a process that would allow that money to be available to power, so that power projects can have 20-year money that is in naira, which has no exchange rate risk.
“We are also trying to mitigate the interest rate risk by giving some form of interest support or subsidy. We can get 20-year money at single-digit interest rate to the power projects and that is important for the kind of reforms that are being carried out now,” he explained.
Original Source: 
Original date published: 21 September 2010
Source: http://allafrica.com/stories/201009220145.html?viewall=1