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Nigeria's inflation drops to 9.4% in the third quarter of 2011

A good and encouraging record trickled from National Bureau of Statistics that inflation rate receded to 9.4%  in July, the lowest so far in three years. This is a significant improvement from persistent inflation that was surging upward that compelled the Central bank of Nigeria (CBN) to aggressively tighten monetary policy. As of June the inflation rate stood at 10.2% and this made the Sanusi's CBN to raise the interest rate to 8.75%. There is no doubt that the monetary policy of restraining and mopping up liquidity at the monetary base aided to slow down the rising inflation.

The governor of Central Bank of Nigeria, Sanusi Lamido has promised earlier to hold down inflation rate at less than 10%, but for a while it appears futile. Therefore the apex bank of the land, CBN gets into muscular mood by increasing the interest rate at numerous times to rein in the run away inflationary trends. Many observers of Nigerian economy and market including investors were little skeptical about the usage of the aggressive tightening of the monetary policy to achieved the targeted goal.

Financial writer at Thisday, Obinna chima observed that, "The CBN had always expressed disdain for double-digits inflation rate in the country. This has seen the apex bank’s Monetary Policy Committee (MPC), adjusting various monetary policy instruments to achieve that ambition. The MPC which has operational independence in setting of interest rates in the country had increased the benchmark interest rate – the Monetary Policy Rate (MPR) four times since this year. The benchmark interest was raised from 6.5 per cent in January to 7.5 per cent in March, 8 per cent in May and to 8.75 per cent at the July meeting. Other monetary policy tools such as Cash Reserve Requirements (CRR) had also been reviewed upward."

In reality the issue of taming inflation in Nigeria must go beyond monetary policy but should involves the presidency's fiscal policy to help in the struggle to control inflation. Central Bank of Nigeria should be probably elated with the recent development as inflation now stood below 10% but the struggle is not yet over. The increasing of interest rate to dry up the market excessive liquidity in order to achieve the desired goal of restraining inflation may have a reverse effect at some point. As the interest rate increases it will dampened economic growth by making the availability of credits and loans to tighten. The scenario may once again usher in credit crunch and the financial flow of liquidity in the capital market. This is not the result that CBN is trying to achieve, that it is why a comprehensive outlook is needed to continuous wrestle down inflationary trends.

The economy is cruising at 7.9 - 8 % and that is phenomenal by any standard. The growth must be jealously protected from the rising inflation that can quickly dent the economic growth and reverse the trend. The injections of surplus money into the circulation by the bailing out of the failed banks have in the past contributed to inflation. The continuous and excessive borrowing by Nigerian government by selling of the bonds must be done in way that too much money will not overheat the economy. Nothing is wrong with a country selling bonds and T-bills to investors but the raised funds must be diligently funneled into the economy by the way of investments.

Another methodogy that can be used to checkmate inflation is for Nigeria to live within its means. By this a planned budget must be sensible and it must be successfully implemented. When a government dabbles into excessive spending that will increase its current expenditure and in the long run have untold consequences. The ramifications may come in the retarding of the economic activities and the surging of inflation rate due to excessive liquidity in the market. When Nigeria lives within its means, there will be no need to aggressively raise the interest rate to combat inflation.

When the interest rate was raised to 8.75% at end of CBN's Monetary Policy Committee (MPC) session, it issued a statement that, "The Committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices. Significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalizing intervened banks to the tune of N1.6 trillion will both add to inflationary pressures." That is supposely the case but it is not the whole story; the excessive government spending and borrowing played a role to the state of inflation.

Investment in this case means to put money and resources on things that will enable the creation of wealth possible. Investments should go into the provision of infrastructures and social amenities that are needed by the citizens and capitalist for further creation of wealth and upliftment of the wellbeing of the society. The Nigerian government should do its best possible to provide electricity, good roads and security. The security in this case becomes imperative for the protection of life and property, which is the most important function of a given government.

But there are also coming attractions to the economy according Samir Gadio, an emerging markets strategist at Standard Bank Group Ltd that makes outlook on inflation “uncertain.”  Those coming attractions include the doubling of "the monthly minimum wage to 18,000 naira ($116) and to deregulate fuel prices, central bank Governor Lamido Sanusi said last month. Core inflation, which excludes food, will probably accelerate in the second half of the year." These activities have the propensity to increase inflation.

Nigeria must look into the cutting down of importation of food commodities especially rice that can be grown in Nigeria. The less reliance on importation, less spending and less borrowing can bode well for a sound economic standing devoid of higher inflation.







Saturday, 18 June 2011 14:08

Nigeria's Inflation Rises to 12.4%

The Rising Inflation Rate contradicts CBN policy and its measures

The report coming from National Bureau of Statistics (NBS) is not a good news for Central Bank of Nigeria (CBN) because the inflation rate was reported at 12.4 percent. The recent numbers from NBS have shown that inflationary trends are not cooling down but rather are surging. The composite Consumer Price Index (CPI) stood at 12.4 percent; CPI is used to measure inflation level in the country. This is disappointing phenomena because it does not bold well neither it is conducive for economic growth. While inflation rate of month of April was 11.3 percent, the increasing rate of April has shown that CBN may be losing the battle at arresting the inflationary enemy as they promised.

The tightening of the monetary policy maybe losing its grove, and it is beginning to look that it is beyond the power of CBN's application of monetary policy that comes with tinkling of the interest rate to reduce inflation. The usage of interest rate tinkling to control inflation may has limited effect and maybe waning. Nigerian economy has structural problem that must be corrected to be able to control inflation. The importation of essential commodities with its rising prices and the rising prices of food, petroleum and accommodations are causing the rising inflation.

Obinna Chima, financial Reporter at Thisday wrote, "Worried by rising inflationary pressure in the country, the Monetary Policy Committee (MPC), which is chaired by the CBN Governor, Mallam Sanusi Lamido Sanusi, had surprisingly raised the Monetary Policy Rate (MPR) from 7.5 per cent, to 8 per cent at its last meeting. The Committee which also lifted the Cash Reserve Requirement (CRR) had expressed its desire to battle inflation which has stubbornly remained at double digits, to single digit rate.

Most analysts attributed the hike in inflation to the rise in price of some household items, building materials and rents. They specifically pointed out that the high cost in kerosene and diesel contributed to the significant rise recorded in the CPI."

National Bureau of Statistics (NBS), "The urban ‘All Items’ monthly index rose by 0.2 percent while the corresponding rural index rose by 1.5 percent when compared with the preceding month. The year-on-year average consumer price level as at May 2011 for Urban and Rural dwellers rose by 11.5 and 13 percent respectively.

"The percentage change in the average composite CPI for the twelve-month period ending May 2011 over the average of the CPI for the previous twelve-month period was 12.6 per cent. This was slightly lower than the figure for the preceding month. The average monthly food prices declined by 0.3 percent in May 2011 compared with April 2011 figure. The level of the Composite Food Index (CFI) was higher than the corresponding level a year ago by 12.2 percent."

Nigerian government has been increasing spending while at same time having large trade deficits with some trading partners due to increased spending and importation. Another source of the rising inflation may come from the massive and continuous borrowings of the Federal Government of Nigeria. Nigeria has been borrowing heavily lately in order to finance the rebuilding and renovations of infrastructures.

The myriad issues that contributed to the rising inflation including the massive amount of money injected into the circulation to ease credit crunch. The recapitalization of the failed banks and the buying of the toxic assets of the failed banks introduced equally a large sum into the monetary base.

The scarcity of petroleum products especially kerosene with the long queuing lines in Lagos and rest of the country has brought about hoarding and subsequent higher price. The refining of oil outside Nigeria and importation of petrol at this era of the global rising prices of petroleum are major contributing factors to inflation. Things of these nature and others are triggering higher inflation rate and rising inflationary trends.
























The Time has come for an African to head IMF

With the demise of the Managing Director of IMF, Dominique Strauss-Kahn who has just resigned his position due to alleged sexual rape, the momentum is gathering for the job opening to be filled. This time around the Bretton Woods institute that has always European and American boss may be willing to widen its scope of its applicants. Emerging nations are asking that the position of managing director to be filled by one of them. The time has come to give an African a chance to lead the organization at the dawn of 21 century.

 African nations including emerging and developing nations grip on IMF are getting stronger. According to Dr. Jason Wingard, Wharton school of the University of Pennsylvania, " Based on IMF statistics, voting blocks are changing -- largely due to economic shifts in global production. For instance, the European Union's voting block percentage for its 27 member countries will drop from 32.4% to 29.4% after post-2010 reforms. Developing countries will have a combined voting block that is almost 8% larger than European nations. If the next managing director is elected rather than appointed, over two-thirds of post-2010 reform votes will be cast by non-European Union countries' representatives."

This is a good sign which bodes well for global financial and economic integration. It shows that in the changing world that developing and emerging nations will have a say in making of monetary and economic decision that effect the entire global village. With the rising and ever increasing power of China and India it is logical that a house of IMF is rearrange and has them and others accommodated.

IMF a lender of last resort mostly caters to developing nations of southern hemisphere and has a stronghold in Africa due to increasing integration of the continent to global economy as its share of global economic activities gets stronger and bigger with increasing GDP.

Economically, Africa is the fastest growing landscape at above 5 percent. The economic outlook for Africa is encouraging and on its recent report IMF states that, " Sub-Saharan Africa’s recovery from the crisis-induced slowdown is well under way, with growth in most countries now back fairly close to the high levels of the mid-2000s. Growth this year is expected to average 5½ percent, and 6 percent in 2012. "

Ex-IMF Boss Dominique Strauss-Kahn with a group of African ambassadors and diplomatic representatives

To encourage the continent of Africa for its economic gains and progress is to have Africa produce the managing director of IMF at this point in time. An African leading the powerful institute is a sign that world is serious of bringing in Africans at the table where big deals and decisions are made.

Dominique Strauss-Kahn - IMF

It is not a news anymore neither it is a secret that Africans were not happy with application of the pre-lending requirements before funds were released to the nations of Africa. The criterion that comes with austerity measures embedded in structural adjustment program sapped and arrested African economic development in 1980s and 1990s. The position of IMF boss for Africa will be a compensation and recognition of African endeavor to overcome past mistakes by IMF in Africa.

One great thing of having an African as an IMF chief is that its neutrality in dealing with China and the West will be good for the global economy. The issues of trade deficits, currency assessment and debts will be deliberated with an African in neutrality.

The reclaiming of Nigerian and African dignity

The value and worth of a currency is determined by the wealth of a nation. In this era of global capitalism, a wealth of nation goes beyond the conventional valuation based on the natural and human resources. A nation’s image, perception, security and stability also played an important role in the determination of a nation’s wealth. Therefore currency and its value become the bellwether and principal indicator of the economic status and financial wellbeing of a given nation.

The principal factor in a currency regulation and determination is rooted on the forces of supply and demand, most especially nations that are exposed to global trade and currency transactions. Most currencies are not rigidly fixed but are allowed to float and checkmated by the forces of the market. The gold standard that was tied to a currency has been abandoned and determination of a currency was replaced by the forces of the market and the wealth of a nation. A currency is more than medium of exchange, for a currency is principally used as a settlement of debt both domestic and international.

A wealth of a nation consist of its currency backed by the size of the economy (GDP) which includes of course the natural and human capital, credit worthiness and the debt of a nation.

International Monetary Fund (IMF) an international elite organization is empowered by the member nations to be advisory regulatory of the financial wellbeing of the global market economy. In this case IMF becomes a watchdog to the financial and economic standing of nations, more or a less a financial policeman that can bark but sometimes it can also bite. The later became functional and operational when a nation seeks the aid of the Brentwood institute for a financial counsel and credit due to economic hardship. In this case a nation invites the financial entity and it will come and rearrange the financial house before it accept to help the host. Sometimes IMF can interject without invitation on the grounds of doing public good and protecting the world from financial and economic pandemonium that comes with great recession and sometimes depression.

Never for one second believes and accepts the propagated notion that IMF is just only a financial institution devoid of politics, the whole truth is that IMF is also a political institution. Political economy is bedrock of economic evaluation and determination of a nation’s wealth. Advanced nations have more clout before IMF more than developing nations of south of the hemisphere especially countries of Africa. IMF bureaucrats can prescribe some conditions and criteria to African member nations and the implementation may cause unforeseen hardship but those policies will not be accepted by the more powerful economies of northern hemisphere. The less developed nations bear the brunt of IMF overwhelming control and intimidation.

With this in mind, let’s reflect on Africa of 1980s that ran to IMF for financial bailout due to economic hardship and a laden-back breaking foreign debt caused by herculean mismanagement and corruption. Those were days of capital flights, military coups and political instabilities in Africa. The African dictators asked for credits from international financial institutions but they were directed to go through IMF. The ramifications of the emitted IMF’s austerity measures that come with currency devaluation on African nations brought economic collapse of the continent. There were massive unemployment and brain drains that decimated African economic outlook and prospect. Prices of essential commodities rose beyond the affordability of an average African.

African producers and manufacturers import most of their raw materials with devalued currency and subsequently higher price of dollar makes it impossible to continue production. Literally and figuratively Africa was in mundane hell endowed with higher and rising inflation. The prices of cash crops produced by African countries nosedived because they were instructed to devalue their respective currencies. The once respected and dominant naira was so devalued that many companies went bankrupt with red financial balance sheet. These were the prescriptions given to powerless and poor nations of southern hemisphere.

Most African nations were not producing materials and commodities for export but rely on one or two cash crops for making of small foreign exchange and these nations are receptors of donations from abroad donors to balance their budgets. Therefore what is the meaning and logic behind devaluing their already weak currencies that were streamlined by inflation and political instability? Instead of any gain, it brought about the crash of the currencies that brought stagnation and hyperinflation together with malnutrition and penury in Africa.

The connected and acceptable African economists and government bureaucrats who were anointed by IMF elites were the mouth piece of the goodness of currency devaluation and austerity measures. The government was asked to reject welfare state, therefore to cut down on spending and to remove subsidies from the essential commodities that the poor needed for survival. The IMF Ivy league elites and their puppets have no meat in what is happening to Africa, it is all about policies and economic theories and experiments on Africans. Our leaders were intimidated to challenge those unproven economic theories; moreover African dictators do not want to rock the boat and asked about their democratic credentials. Can IMF point to any success story that came out of Africa as a result of their economic and financial pills it prescribed to Africa?

Then comes Nigeria of 1980s, she has no business asking for help from IMF but she did and she paid dearly for it. Nigeria in 1980s could not acquire credit lines for international transactions due to her weakness in serving her debts and foreign obligations. Nigeria an oil-rich nation has no reason to fall behind in her financial obligations and payments of her foreign debts. But inertia, mismanagement and corruption had claimed a large chunk of her operational and financial integrity.

Today’s Nigeria is the one that can say no to IMF and tell the global financial elites that they do not need them. The country’s economy is growing above 7 percent for more than two years. The country is relatively at peace with an economic expansion of 7.8 percent that is the envy of the whole world. This is not to say that Nigeria is perfect and has reached economic zenith but presently Nigerians are serious about building a strong and prosperous economy. Nigeria is committed to democracy and capitalism, with the successful concluded election the prospect for greatness is geometrically growing.

Therefore for IMF to lately ask Nigeria to devalue her currency is just another gimmick to slow the country down and to control the destiny of the nation. Nigerians and Africans must refuse to be used as a Petri dish for IMF vexing theories. Therefore Nigerian financial actors at CBN and at ASO Rock have done the country well to tell IMF to leave naira alone.






Friday, 06 May 2011 13:23


IMF comes with depressing forecast of lower productivity and higher inflation

There is no doubt about this assertion; International Monetary Fund (IMF) is adamant and committed about being an important entity on Nigerian economic and financial scene. IMF the self-appointed chief financial adviser to Nigeria has made its annual econometric forecast on country’s economy. IMF the bearer of the depressing news is predicting that Nigerian economy will slow down from its above 8 percent growth to 6.9 percent, thus resulting to a GDP lowered by 17.9 percent. Still on the bad news IMF said the economic slowdown will be accompanied with higher inflation.

IMF do not produce any commodity or provide a recognized service that contribute to growing of the country‘s economy. Rather IMF officials have managed to have the ears of the managers of the economy simply on the ground that it is a global monetary and financial institute. But Nigeria must ask herself what has IMF done for her lately.

What has IMF done for Nigeria? That is an easy question to answer; lately IMF has advised Nigeria to devalue her currency naira without giving a logical reason for their advice. For naira that is already weakening by rising inflation to be devalued is for Nigeria to be inviting economic woes voluntarily. Nigeria with undiversified economy with crude oil as a major export to venture to the path of currency devaluation is trekking to road of higher inflation, higher prices of essential commodities and slows down of economic output.

IMF assertion and extrapolation on the Nigerian economy was not elaborated with a particular point of view, principle, proofs and genesis of the declaration. On what logic and economic basis are the elites of IMF making this forecast? This is not to cast a doubt or a shadow on their forecasting, but economics is not based on natural laws because it is a social science. In econometric forecasting nothing is written on stones due to the malleability of economic principle, therefore there is a quantifiable probability that IMF forecasting may not come true.

Nigerian economic and financial gatekeepers must take this with a grain of salt, as an opportunity to review their economic inventory and make necessary adjustments where needed. But one thing that they cannot afford to do is to swallow it as a given, without ready to make their research and analysis. Nigerians must not say ok! And sit down waiting for the rough times to come. The country must be pro-active and be in charge of their economic destiny not waiting for IMF to tell them what to do.

The point must be made perfectly clear that Nigeria should listen to IMF by separating the grain from the chaff. In some aspects of Nigerian economy IMF has some good points. In terms of cutting down on spending and slowing down on the excessive borrowing, there are truths to that. But in some cases when rising spending becomes inevitable as resources are being invested on the people with regards to providing education facilities and social infrastructures, then it will be a return that will eclipse the down side of increasing spending. There are investments on the society and the people that may have short term effects including budget deficits but at the long run it will aid to strengthen the nation by increasing productivity and wellbeing.



Instead of IMF over emphasising about economic slowdown in Nigeria, it should also look at the positive development and growing maturity of the country. IMF can put more emphasis on the economic correlation between increasing investments and good elections. IMF can use their global megaphone and tell the rest of the world that credible election held in Nigeria shows stability and continuation, that Nigeria is truly ready to do business with world. That can help to attract foreign investments thus averting economic slowdown.

 IMF should and can significantly impact the country positively by counseling Nigeria on how energy conservation and its availability can help to checkmate inflation and trade deficits. When Nigeria has ample electric energy to operate their local industries that can ultimately aid to retard and stop excessive and unnecessary importations.

The point to be made is that IMF can go beyond the gateway of financial control. But also IMF can enhance its responsibility as a financial disciplinarian by becoming a cheerleader to a documented progress in a nation and that can in turn bring in goodwill and economic gains.



The Postponement of the Parliamentary Election by INEC is Troubling

Nigerians are going to the polls for the long awaited April election. But Electoral commission chief Attahiru Jega announced on television that the first parliamentary election will be delayed until April 4 "after voting materials failed to arrive in many areas, a major blow to hopes of a break with a history of chaotic polls in Africa's most populous nation, Voters had trooped early to polling stations across the country of 150 million, eager for a ballot less tainted by fraud and violence than 2007 elections that lacked credibility in the eyes of Nigerians and international observers," as reported by Reuters. But we must hold our judgment for now, but it is not good for the long awaited election.

This is no ordinary election in this West African powerhouse but rather an indicative election that will show to the whole wide world how serious Nigeria is with the emerging democratic dispensation. Nigeria’s last held election of 2007 according to domestic and international observers was marred with violence and irregularities that made it incredible and unacceptable.

Nigerian prestige this time is on the line, the civilized world will not accept anything short of free and fair election neither will Nigerian citizens accept election irregularities as business as usual. Everything at the moment is going right for Nigeria: The economy is getting stronger; Nigeria is regaining her confidence after being away from diplomatic circle and finally playing the significant role of the giant of Africa. For Nigeria to arrive and taking her distinguish seat among the comity of nations, she must first and foremost get the election thing right this time.

Let us be realistic, Nigeria is an emerging democratic nation and nobody expects to see everything work-out quickie clean. But what is expected of Nigeria is to organize and implement a free and fair election to the best of her knowledge. Of course there is no utopia in election; there maybe hiccups here and there. But the key issue is to produce a credible election results that are relatively fair and free, that majority of Nigerians can accept as a credible result. The election results must be correct with little or no mistake and should be self-evident to all the parties that the results are correct and right.

A credible election outcome will not only increase Nigeria’s diplomatic standing in diplomatic circle but it will also give a brand new image to a nation that badly needs to rebrand her image. This election can become a foundation for Nigeria to build solid blocks of good reputation that can make her attractive for domestic and foreign investors. When Nigeria gets her house in order investors cannot have double mind of investing their capitals and resources for a long duration. A such ambivalence among investors can result to capital flights and divestments.

In nation building and in growing an economy, political stability becomes the most paramount and imperative condiment for investors and tourists to stay put. Capitalists and investors do not put their money on nations that have weak political stability and risk losing their investments. An election is an indication that a democracy is working as it should, becoming an enabler and assurance that a nation is willing to do business. Political stability is an insurance that the risk of investing in a nation is limited and risk management is at the optimum level.

For a million times we have heard the phrase that Nigeria is potentially a great nation. Now the time has come for Nigeria to actualize it, this time Nigeria cannot afford to fumble the ball and fails to score a credible goal. The merits of free and fair election are numerous including a rising diplomatic standing and ascending self-assurance. Nigeria must truly take the lead in Africa be it economically or politically because Nigeria is the natural leader of Africa. The ascendency to a truly giant of Africa must come with a substantial improvement in the democratic standing and this can be achieved by holding a credible election this time.

No one is saying that democracy is all about election but in actuality election is the chief component of democracy thus buttressing the wellbeing of democracy and its political actors. Nigeria has come at a crossroad and she must make the right decision to seize the opportunity and make good of her promise. Nigeria can make this work in her country by proving to herself in particular and to friends including her foes that this is a new and improve Nigeria that is ready and willing to assume and reclaim her mantle as the largest democracy in Africa.

The global village is watching and Reuters wrote recently, "The African giant, home to more people than Russia, won an unprecedented third term as chairman of West African regional bloc ECOWAS last week and sees itself as a prime contender for a permanent seat on the U.N. Security Council. But its credibility as a regional leader at a critical time, with Ivory Coast plunging back into war and the international community striving for a common voice on North Africa, hinges on the success of elections which begin on Saturday. Polls as flawed as the last ones in 2007 -- marred by ballot stuffing and intimidation -- could easily erode the goodwill President Goodluck Jonathan has built up since inheriting power last year when his predecessor Umaru Yar'Adua died in office." Nigeria cannot afford to make the mistake of yesteryears.

Terence McCulley, U.S. ambassador said, "Nigerian leadership in ECOWAS, at the African Union, and at the United Nations has been impressive and commendable, particularly with regard to the crises in Cote d'Ivoire and in Libya, The quality of these elections will certainly be important as to how the U.S. and other nations view Nigeria, and how effectively Nigeria can exercise leadership internationally," as he commented on this April election to Reuters.


Nigeria needs credible election for her survival


This is a sign that the world is rooting for Nigeria to do it right this time. Subsequently empowering and gaining more confidence comes with a credible election outcomes, as Nigeria deliberate on the issues of Ivory Coast, Libya and other hot spots in Africa.

Nigerians cannot abandon the whole issue of election credibility to INEC and the government. The citizens of the country must see themselves as stakeholders in making this work for the country. The citizens can play the critical role as watch dogs, not by being forceful and violent rather by being responsible and voting without causing fracas and attracting undesirable attention.

Nigeria cannot afford to mess things up for so many things are at stake: Nigeria’s prestige and future will not be thrown into the mud. Nigeria must understand that a culture of free and fair elections is not made in the sky or in stars but are made when men and women of goodwill seize the opportunity and transform their country. The culture of credible election will nurture a socialization that can be smoothly and naturally passed to the next generation and posterity. This time around we all hope that Nigeria will do it right!



  Waiting for election materials


INEC staff




 INEC Staff stranded


Nabbed over election materials

Afripol subscribed to gradual interest rate raise for market's stabilization

For the second time Central Bank of Nigeria (CBN) raised the benchmark interest rate to 7.5 percent from the previously 6.5 percent. The one point ascension of the interest rate was part of the aggressive monetary policy tightening by the apex bank to hold back the inflation and soldified the gain made that was buttressed by the receding inflationary trend. The February rate of inflation has receded to an annual 11.1 percent, although a point behind the targeted 10 percent but a good development.

Central Bank of Nigeria Communiqué No. 75 of the Monetary Policy Committee Meeting, March 21-22, 2011 was signed by Governor Sanusi stated that the, "Members of the Committee voted unanimously for further tightening of monetary policy because of heightened risk of inflation. The Members specifically pointed out the rising international food and energy prices, the impact of import costs on domestic prices, the challenges that fiscal stance posed to the external value of the Naira and the likely front-loading of public expenditure in the election period. Against this background, the following decisions were taken:

1. A majority of 9 to 3 Members voted for an increase in MPR by 100 basis points from 6.50 per cent to 7.50 per cent. The 3 Members voted for a 50 basis points increase;

2. A unanimous decision to,

a. Retain the symmetric corridor of +/- 200 basis points;

b. Retain the current CRR of 2.0 per cent and the liquidity ratio of 30.0

per cent; and

c. Extend the CBN guarantee on interbank transactions and

guarantee of foreign credit lines by three months from June 30, 2011

to September 30, 2011."

The aggressive raise of the benchmark interest rate may actually get the task accomplished by quick reduction of inflation. But in long term it may defeat the primary purpose by reverting back to credit crunch at the monetary base. It is logical to gradually hike the interest rate methodically as the market is examined and stability re-enhanced and re-enforced.

The 7.5 percent raised maybe too aggressive, Afripol subscribed to rather a gradual ascend at half point addition at 7 percent. The point is not lost at what monetary policy committee is trying to accomplish in steming down inflation and consolidating the gain made so far. To mop up the liqudity in the market so fast may not bring the relative balance and stability needed in the market. The gradual process of drying of the liquidity at monetary base does not have a shock effect on the market. Therefore raising the benchmark interest rate to 7 percent rather than 7.5 percent would have been better.


Dangote and Adenuga as symbols of Nigeria’s growing economy

The two giant Nigerian business executives Aliko Dangote and Mike Adenuga making the powerful list of Forbes 2011 Billionaires of the richest people in the world is an omen of deepening Nigerian capitalistic economy. Nigerian economy is making an impressive growth that it can produce two-ranked of the richest business executives in the world.

Aliko Dangote, the Group President/CEO of Dangote Group ranked as the richest Nigerian and African with a net fortune quantified at $13.8 billion. Mike Adenuga, founder Globacom made The Forbes 2011 Billionaires’ List for the first time with a net worth of $2 billion, which is impressive and massive amount of wealth by any standard.

Although many were speculating that Adenuga’s worth was under quantified in the Forbes ranking. Mfonobong Nsehe‘s piece posted at Forbes blog had a quote from an individual in Lagos, "Globacom has 20 million subscribers- almost as much as MTN [another wireless carrier] does. MTN is worth $30 billion. Mike Adenuga owns Globacom. How can he be worth only $2 billion? It is not possible. Have you forgotten that he also owns Equatorial Trust Bank- Nigeria’s largest privately held bank? Don’t you know that he owns Conoil Producing- Nigeria’s first indigenous Oil exploration company? Do you know that he owns the highest stake in Conoil Marketing? $2 billion is too small. If Mike Adenuga is poor, he’s worth at least $5 billion. You people should increase his net worth."

With $2 billion worth or more it is a herculean achievement to be at a pinnacle of capitalism in the global ranking of fellow capitalists and investors. That is a significant and enduring attainment by a Nigerian based capitalist.

Emeka Chiakwelu, principal policy strategist at Afripol commented on the growing impact the billionaires are having on Nigeria’s image and economy, "With business executives and billionaires of Alhaji Dangote and Mr. Adenuga statures, Nigerian image is being remake as a destination for capitalism, profit and land of investments. This is great for our country Nigeria, it will help to rebrand Nigeria and attract foreign investors."

The most encouraging thing about the two richest Nigerians are their unflinching confidence in the economy of Nigeria. Another issue that worth to be recognized was that all their wealth was basically made from investing and growing businesses in Nigeria. This must send the right signal to both local and foreign investors that Nigeria is ready to grow their money and yield possibly the largest dividend in Africa if not in the whole world.

Nigerian economy has been growing impressively and it is the fasted growing economy in Africa. Nigeria‘s economy is accelerating at a growth rate of 7.4 percent in the first quarter of 2011. Although the vulnerability of rising inflation at above 13 percent is being monitored by Sanusi’s Central Bank of Nigeria (CBN) and will utilized all the effective monetary policies at his disposal to rein in the rising inflationary trends.

The Nigerian billionaires must not relent on encouraging economic expansion by committing to Nigerian and African economies which have been always their hallmarks. Aliko Dangote already "has started building investments in cement plants and terminals across Africa including Senegal, Zambia, Tanzania, Congo, Ethiopia, Cameroun, Sierra Leone, Ivory Coast, Liberia and Ghana," writes Tatiana Serafin in her Forbes’ blog.

According to Serafin’s piece, Mike Adenuga’s "Globacom launched services in Nigeria in 2005, in the Republic of Benin in 2008 and has licences to operate in Ghana and Cote d’Ivoire (with Togo and Senegal next). He took a big gamble laying a $1 billion undersea fibre optic cable, Glo-1, to link Africa with the rest of the world. (Partnered with Alcatel-Lucent) The connection will help lower prices for customers as well as help Adenuga expand more quickly."

The emerging Nigerian business executives and Nigerian universities especially the business schools should look up and willing to learn from the two most successful Nigerian billionaires. Our universities must create curriculums on teaching students the models of operations and methodologies employed by the business trail blazers.

The point here is that Nigeria is already showing its relevance as a powerful emerging market by the quality of business tycoons emanating from the second largest African economy.

Africa Political & Economic Strategic Center (AFRIPOL) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.


The devaluation of Naira recommendation by IMF is without logic

The International Monetary Fund (IMF) is an organization founded with a prime objective of stabilizing international monetary exchange rates and facilitating development through the application and enforcement of liberalizing economic policies to its 187 member countries which includes Nigeria.

This time around IMF has definitely proven to us that its recent prescription for Nigeria to devalue her currency naira is not based on sound and logical economic proposition. Not that any time in the past that IMF monetary recommendations on and for developing economies have been logical. In the 1980s when many developing nations especially in Africa were cash scrapped and were in deep recession they turned to IMF as a lender of last resort. The period marked the nadir point of haplessness in Africa due to IMF‘s structural adjustment program known as conditional ties given to these countries before they could be eligible for the loans they were asking from the institution.

Nigeria this time is not asking for any intervention from IMF. The economy of Nigeria is growing progressively at above 7 percent and naira is relatively strong and stable. The weak point that can be perceived from the economy is the growing deficit trade especially from China, rising inflationary pressure and continuous depletion of the crude account by excessively withdrawal. Even with that Nigeria has a substantial foreign reserve which falls to U.S $33.12 Billion in January. But thanks to rising oil price the reserve will commence to replenish and grow.

The volume of the foreign reserve is not bad by any standard especially with regards to the country‘s GDP which was growing at 7.4 percent in first quarter 2011. The point is that Nigeria has adequate war chest to defend naira and ward-off aggressive currency speculators. Therefore IMF suggestion that currency is overrated has no basis for Nigeria can defend her currency standing in the global currency market. Moreover the local high demand of dollar has become a check on the value of naira.

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Dominique Strauss-Kahn, Managing Director International Monetary Fund (IMF)

Afripol organization experts discussed the issue of IMF and naira’s devaluation. Afripol concluded that there is absence of monetary logicality for devaluation of naira.

Gideon Nylan, an expert on political economy of developing nations at Afripol, concluded, "The Nigerian middle class has yet to recover from the IMF devaluation of 1986. Suddenly teachers, lawyers, doctors, and civil servants saw their life savings disappeared. In order to support their families and create a better living for themselves, they left the country for greener pastures in other countries."

Emeka Chiakwelu, Principal policy Strategist at Afripol commented, "Bretton Woods institution (IMF) asking Nigeria to devalue her currency is akin to throwing kerosene to a burning fire. There is no logic to that, Nigeria’s currency has already been steadily diminished by the rising inflation and further devaluation is contrary to a sound economic judgment."

Chiakwelu noted that, "IMF should be in business of enhancing an economy by giving logical counsel not by depreciating methodology. IMF has the power to increase Nigeria’s special drawing rights (SDRs) and including naira into ‘basket of currencies’. Instead IMF chose to play a role that will be increasing the price of foods and raw materials in Nigeria by devaluation of naira. "

Beware of Trojan horse coming as IMF helping- hand because history has proven that it has severe ramification. What will be the justification for Nigeria to devalue her currency?

The economy is not wholly export base except crude oil and the economy is not diversified with array of manufactured products for export. The logic of devaluation is to induce and increase export by lowering the prices of local manufactured products making them attractive for export. But that is not the case with Nigeria, a mono-product exporting country, crude oil which generates about 90 percent of the country’s foreign exchange. By devaluating naira the price of oil will nosedive and country’s foreign reserve will dwindle, while the incentive to buy Nigerian fiduciary bonds and securities in international market will depreciate.

To be factual Nigerian currency naira has already be weaken by rising inflation. At this point in time the inflationary trend is gradually creeping into the monetary base and with that naira is gradually but steadily losing its ground. Therefore what is logic of further devaluating a currency already weaken by rising inflation and by so doing summon a hardship that will be felt by majority of Nigerians. Most of the products and materials utilized by final consumers and raw materials in Nigeria are mostly imported from abroad. With the devaluation of naira importation and oversea products will become more expensive and out of reach of majority of Nigerians.

Devaluation may discourage importation and foreign products in Nigeria as a result of the subsequent appreciation of foreign currencies for trading notably dollar as naira loses value. But with that Nigeria may not gain or take the advantage because the economy is not diversified and our local production is still at the rudimentary stage. Nigerian industries are still dependent on foreign expertise and raw materials to function at a reasonable capacity and with devaluation of naira the prices of dollar and pound will soar with relative to naira. Subsequently, it will have adverse effect in our growing local industries. The prices of food and agricultural products will be high away beyond the masses in a nation where 70 percent of the population survived with less than two dollars per day.

African experience in 1980s with IMF left a bad taste in their mouths, when the cash strapped African nations turn to IMF for credit. It became a disaster for Africa and the consequences of Africa's entanglement with IMF sow the seed for economic depression in today's Africa. IMF‘s conditional ties for loans were so stringent for these nations to swallow. It was called structural adjustment programs which will supposedly reform the economies.

The pathways to IMF’s structural adjustment initiative were paved with hardship and misery. These nations, poor nations of Africa were compelled to cut their spending drastically without putting into consideration the suffering of the masses especially women and children. On the wise counsel of IMF and its Ivy League experts African nations devalued their currencies on the grounds that it will increase export.  They failed to see that most African nations were not producing anything but relied on agricultural crops and donors to finance their budgets. With the devaluation the price of crops decline sharply on the international market and Africa’s yoke enhanced.

The criteria for obtaining loan by devaluation of currency coupled with neo-liberal economic policy based on liberalized trade and open market was once IMF prescription for Nigeria in 1980s. At that point in time Nigeria was being heaped with foreign debt and was falling behind in the service of her foreign debt. Thus it became difficult, if not impossible for the country obtain line of credits unless the swallow the austerity measures given by IMF. The consequences were annihilation of infant industries and untold hardship of average Nigerians. The problem of Nigeria then was more of mismanagement and misplacement of priority.

But that is not the case with the present Nigeria that is not seeking any loan or aid from IMF. Nigeria GDP is bulging with economy projected to grow at more than 7 percent in 2011, although with vulnerabilities of inflation and excessive spending and depletion of foreign reserve. The withdrawal may make sense because the country needs to defend the value and stability of naira from international and aggressive speculators.

Nigerians for one moment can walk a little taller, knowing quite that the caliber of men and women at Central Bank of Nigeria (CBN) led by Governor Sanusi Lamido are willing to stand up when necessary and defend the economic and financial interest of the country.








Sanusi‘s Central Bank of Nigeria raised interest rate to  6.50 percent

Rising Inflationary trend is the most persistent threat to Nigeria’s growing economy.   The Central Bank of Nigeria and its monetary policy committee voted to lift the benchmark interest rate of previously 6.25 percent to 6.50 percent. The last time the monetary committee gathered at the end of fourth quarter of 2009, they left the interest rate unaltered at 6.25 percent. The inflation rate then was exceeding 13 percent although its surging momentum has since receded, yet inflation rate is still above 10 percent in the first quarter of 2011.

The  governor of Central Bank of Nigeria (CBN) promised to hold back inflation below 10 percent last year but  inflation rate is still moving upward in spite of the tighten of the monetary policy. Sometimes the CBN can be overly cautious with its application of monetary instrument to stem down inflation. When the benchmark interest rate was retained last year, Afripol financial experts commented on the timidity of the monetary policy committee in not raising the interest rate in the face of rising and persistent inflation.

Then Afripol commented that, “The Monetary Policy Committee of CBN is cautious in not altering the interest rate for fear of spurring any changes in the economy.  But their timidity is not justified because inflationary trend is rising and infusion of the funds is not going to slow it down. Therefore it is logical that Monetary Policy Rate (MPR) at 6.25 percent be increased not retained. Again Nigerian economy is expected to grow up to 10 percent in the preceding year and together with inflow of cheap money from both foreign and domestic investors may spur higher inflation.”  Therefore it may be little late, but the lifting of the benchmark interest rate will still be contributing in stabilizing and revising the inflationary trend.  But this is not the time to pass judgment on the process, for the key thing is to do the right thing for the economy and financial wellbeing of Nigeria.

Mr. Vincent Ogboi, an economic and financial expert at Afripol stated, “Rising inflation does not booster well for a progressive economic growth. Governor Sanusi must focus on inflation as a laser beam, with monetary policy at his disposal to bring the inflation rate to a single digit. One thing is to lower the inflation but another is to make it sustainable for long term economic growth. The rising prices of agricultural products and hydrocarbon need an intervention of the executive and legislative arms of government in plotting a strategy to revolutionize agriculture and energy sectors of the economy.

Ogboi further stressed that, "Nigeria must not forget that the time is now to diversity her oil based economy. Nigeria must harness her human capital and use it to her full advantage. Oil resources may not last forever but human capital with a large population base is going nowhere soon”

What’s the deal with the rising inflation?

Without doubt, Nigeria’s economic fundamental is relatively healthy. The GDP is growing at an impressive rate. The growth annual rate of 2010 was about 7.8 percent with a striking 8.29 percent at fourth quarter of last year and the economy is expected to grow above 8 percent in 2011. Naira is relatively strong when compared to dollar, in spite of the continuous withdrawal from Nigeria‘s foreign reserve which act as a war chest against aggressive currency speculators. The minister of finance was forecasting a more liberal growth of 10 percent on the grounds that infrastructures and electricity will be upgraded and improved. The level of investments flowing into the economy and Nigerian stock exchange are quite impressive.

Nigerian agricultural products. Photo: Sunday Adedji

Nigeria has injected a lot of money into the monetary base to recapitalize the banks that were bailed out from total collapse due to mismanagement.  Nigeria recapitalized the banks with almost $4 billion and Nigeria’s Asset Management Corporation (AMCON) is buying back toxic debts from bad banks at the tune of $14 billion. The liquidity flowing into the economy due to quantitative easing has the tendency to overheat the economy, thereby triggering inflationary trend.  At same time the quick economic growth that attracts investment can over stimulate the economy and keep the inflation surging.

On the borrowings of large amount of money, Nigeria's debt-to-GDP ratio may be minimal but that will not be an inducement for excessive borrowing. All the borrowings are bringing in a lot of money into the circulation and that too can exert inflationary pressure on the economy.  The borrowings Nigeria made last year was enormous but it is not cooling off in 2011. Reuters reported that “Sub-Saharan Africa's second biggest economy (Nigeria)  plans to issue 66.5 billion naira in February, including 36.5 billion naira in three-year and 30 billion naira in five-year bonds. For March, the DMO said in its offer calendar it would issue 30 billion naira each in three-year and five-year paper.”

The achieving of lower inflation cannot be left only to the reserve bank. All the branches of the government and economic sectors have roles to play. Government will deliberately encourage the consumption of local manufactured products. Agriculture must be improved not only in preservation and storage but availability to all the corners of the country is intrinsic. This is where the improvement of transportation and infrastructure comes in.  The over creation and printing of naira must be decelerated no matter how tempting it might be.

Governor of Central Bank Nigeria and its monetary policy committee have to be on top of the issue of rising inflation. The problem of inflation can retard economic growth and dwindling away gained economic progress.  In case of Nigeria with a problem of high unemployment, inflation can make matters worse by discouraging research and development. The ramification is that employers will have no appetite to produce and hire in economy weaken by inflation.


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