Members of House of Representatives Committee on Banking and Currency led by Jones Chukwudi Onyereri, its chairman, were in Lagos office of the Central Bank of Nigeria (CBN) for an oversight visit. In their desperation, they tried to know why the CBN raised the Monetary Policy Rate (MPR) and the impact it will have on the common man.

Godwin Emefiele, CBN governor, who spoke through Bayo Adelabu, deputy governor, corporate services, CBN, explained that the pressure on the naira, apart from the declining oil prices, was also as a result of liquidity in the banking industry, whereby a lot of frivolous demands were being made by customers.

“We are saying banks should lend to the critical and desirable sectors of the economy and to sectors that can engender production activities, not trading, not to import toothpicks.

“So, we are saying that the only thing to do to stop banks from granting loans to these customers is to mop up more of the monies available to the banks. That was why we increased the CRR on private sector deposits. We believe it will reduce the pressure on the foreign reserves. If we don’t do that, the impact on the common man is going to be increased cost of production,” he said.

Part of the critical decisions taken by the Monetary Policy Committee (MPC) in the just concluded month are the increase by 100 basis points from 12 percent to 13 percent; increase of the Cash Reserve Ratio (CRR) on private sector deposits by 500 basis points, from 15 percent to 20 percent with immediate effect and retention of public sector CRR at its current level of 75 percent.

The MPC also moved the Retail Dutch Auction System (RDAS) mid-rate to N168 from N155, and the band around it widened to +/-5 percent.

However, the CBN advised Deposit Money Banks (DMBs) not to response to the increase in the MPR aggressively, as regards to lending to the economy.

Consequently, the apex bank said that any bank caught in excessive spread in lending rates will be called to order, saying “we expect banks not to respond aggressively to increase in MPR. Any bank that wants to increase rate beyond affordable limit, customers will go to banks with lower rate. Any bank making excessive spread will be called to order.”

According to him, the adjustment in MPR and the CRR is the best the apex bank can do to address the issue of declining external reserve resulting from strong demand for foreign exchange and continued decline in oil price.

The committee chairman however said the CBN had not done very well in regulating the banking sector, as they expected the apex bank to put a cap on interest rates on loans.

The CBN therefore called on Nigerians to be patriotic and patronise locally manufactured goods as a response to austerity measure, saying “we are encouraging companies to go into local production. We can produce raw materials here instead of importing them.”

HOPE MOSES-ASHIKE

http://businessdayonline.com/2014/12/why-cbn-increased-monetary-policy-rate-to-13/#.VIGDEzHF-xU

A good policy but can be made better if the rate is reduced to 6% for the following sectors
1) Agriculture
2) Mining
3) Construction
4) Manufacturing

In order to encourage borrowing for expansion of production and reduction of the price of their finished products.

Increased production might lead to more employment therefore more naira into peoples pockets and reduction in price will reduce the naira leaving peoples pockets.

After this, we can review our tax policies to see how Nigeria can be rescued from the curse of over dependence on oil wealth.


As for traders(importers) the rate should be increased to 20% to discourage importation.



God bless GEJ

God bless the good people of Nigeria.

This new policy is very bad for business.We should expect 30 to 35% interest rate from banks very soon. Discouraging banks from lending to traders while banks themselves engage in trading by making money from loan spreads. Talk of double standards.

Make I book space first incase...

Elcemento:
This new policy is very bad for business.We should expect 30 to 35% interest rate from banks very soon. Discouraging banks from lending to traders while banks themselves engage in trading by making money from loan spreads. Talk of double standards.

This policy is good and will be made better if the CBN reduce the rate to 6% for agriculture mining construction and manufacturing sectors and increase the rate to 20% for traders(importers).


In short


Import duties should be increased by 1,000% for finished imported products to discourage importation and encourage local production by making foreign finished products too expensive for people to buy which will force people to patronize local products thereby strengthening local industrialization.


Government should partner foreign firms and set up industries whose products we import.

Atlwireles
Collynz09
SincereNigeria
Berem
Obiagelli
Ilugun
Ikengawo
Blackpenis
Ak47man


A discussion for educated minds

No insult needed

hmmm....you made a lot of sense here o.Never looked at it from that angle.I just hope everything makes sense on long run sha.

BlackTechnology:


This policy is good and will be made better if the CBN reduce the rate to 6% for agriculture mining construction and manufacturing sectors and increase the rate to 20% for traders(importers).


In short


Import duties should be increased by 1,000% for finished imported products to discourage importation and encourage local production by making foreign finished products too expensive for people to buy which will force people to patronize local products thereby strengthening local industrialization.


Government should partner foreign firms and set up industries whose products we import.

Elcemento:
hmmm....youmade a lot of sense here o.Never looked at it from that angle.I just hope everything makes sense on long run sha.

He made lots of sense.

Unfortunately Naira land members will not rush towards threads like this because of the reduction in their IQ due to destructive criticism.

Obiagelli

Anything to say


Concerning black technology view point.

BlackTechnology:


This policy is good and will be made better if the CBN reduce the rate to 6% for agriculture mining construction and manufacturing sectors and increase the rate to 20% for traders(importers).


In short


Import duties should be increased by 1,000% for finished imported products to discourage importation and encourage local production by making foreign finished products too expensive for people to buy which will force people to patronize local products thereby strengthening local industrialization.


Government should partner foreign firms and set up industries whose products we import.

Now you are beginning to sound like buhari the last time i was discussing Buhari's economic policy in 1983, members of this forum said people had to queue fir essential commodities (finished product).
Till we get a leader with strong resolve and sense of direction, we wasting our time.

The government should also look at its self, purge waste and stop handing policies to us alone.

EasternLeopard:



Obiagelli

Anything to say


Concerning black technology view point.

Already made a point sir. Funny enough we are in similar situation as 1983 when oil prices fell. I hope we (citizens and government) are ready to do the right thing.

BlackTechnology:
Atlwireles
Collynz09
SincereNigeria
Berem
Obiagelli
Ilugun
Ikengawo
Blackpenis
Ak47man


A discussion for educated minds

No insult needed

Where are these people?

BlackTechnology:
A good policy but can be made better if the rate is reduced to 6% for the following sectors
1) Agriculture
2) Mining
3) Construction
4) Manufacturing

In order to encourage borrowing for expansion of production and reduction of the price of their finished products.

Increased production might lead to more employment therefore more naira into peoples pockets and reduction in price will reduce the naira leaving peoples pockets.

After this, we can review our tax policies to see how Nigeria can be rescued from the curse of over dependence on oil wealth.


As for traders(importers) the rate should be increased to 20% to discourage importation.



God bless GEJ

God bless the good people of Nigeria.

How do you reduce interest rate to 6%, with inflation almost at 9% and our budget deficit expected to double. The economy is not mechanical or command and control.

atlwireles:


How do you reduce interest rate to 6%, with inflation almost at 9% and our budget deficit expected to double. The economy is not mechanical or command and control.

Is there an economic law that says interest rate must be higher than inflation rate.


What if when the interest rate is reduced for those 4 sectors , and the businesses are told to cheapen their products so that inflation falls. Don't you think inflation rate will fall.?

Remember Dangote crashed the price of cement even when nothing was done about inflation rate. And you will agreed with me that if distributors follow suit , inflation rate in the construction sector will fall due to cheaper cement which might help reduce the general inflation rate by some digits.


That inflation rate has gone up doesn't mean it can't be brought down


Once the cost of doing business falls, cost of finished products will most likely fall. And if cost of finished products falls, inflation rate will fall if this effect is on key sectors.

Don't forget that one of the factors that affects cost of doing business is interest rate. TRUE or FALSE.

Obiagelli:

Now you are beginning to sound like buhari the last time i was discussing Buhari's economic policy in 1983, members of this forum said people had to queue fir essential commodities (finished product).
Till we get a leader with strong resolve and sense of direction, we wasting our time.

The government should also look at its self, purge waste and stop handing policies to us alone.

Did buhari reduced the rate for agricultural mining construction and manufacturing sectors.? No
Apart from refinery, did buhari establish other industries whose products constitute our largest imports.
Obiagelli this policy is completely different from buhari's own.

EasternLeopard:



Is there an economic law that says interest rate must be higher than inflation rate.


What if when the interest rate is reduced for those 4 sectors , the businesses were told to cheapen their products so that inflation falls. Don't you think inflation rate will fall.?

Remember Dangote crashed the price of cement even when nothing was done about inflation rate. And you will agreed with me that if distributors follow suit , inflation rate in the construction sector will fall due to cheaper cement which might help reduce the general inflation rate by some digits.

The reality of business operations demand such a law. Why lend a person N100, @6%. when inflation is 9%. You have lost money right out of the block. You are already at -3% loss.

atlwireles:


The reality of business operations demand such a law. Why lend a person N100, @6%. when inflation is 9%. You have lost money right out of the block. You are already at -3% loss.

OK

First answer the rest of the points raised.?

Secondly is dangote running at a loss now that he has reduced the price of his cement .?

EasternLeopard:


Did buhari reduced the rate for agricultural mining construction and manufacturing sectors.? No
Apart from refinery, did buhari establish other industries whose products constitute our largest imports.
Obiagelli this policy is completely different from buhari's own.

What you guys always fail to recognise is that we had a vibrant agriculture and manufacturing sector then, we i think 3 car manufacturing plants for instance.

This policy is learning from Buhari’s and its not even close yet

Obiagelli:

What you guys always fail to recognise is that we had a vibrant agriculture and manufacturing sector then, we i think 3 car manufacturing plants for instance.

This policy is learning from Buhari’s and its not even close yet

OK


What of electronics and electrical products which constituted our highest imported goods then .and now
How many electronic and electrical industries did he established then.
Don't forget that people had more radios TVs bulbs Iron etc than cars. True or False



Secondly
Did he reduce the rate for those key sectors .

EasternLeopard:



OK

First answer the rest of the points raised.?

Secondly is dangote running at a loss now that he has reduced the price of his cement .?

You see why buhari had to reduce inflation first. This policy isn't comprehensive enough

I don't get you, why electrical products, why noy textile? Do pple own more tvs than clothes. You shouldnt attempt to rubbish the policy just because it's buhari

EasternLeopard:



OK

First answer the rest of the points raised.?

Secondly is dangote running at a loss now that he has reduced the price of his cement .?

The rest of the point is not possible in a market driven environment. Government cannot ask people to crash their prices without destroying supply chains. Cost of production and competition will always determine price. A good example is government price control polices. It has always led to scarcity and higher prices. Triggering more inflation.

Dangote brought the prices of their product down, because production of cement is exploding. They are losing market share, because more supply is entering the market and we still have more plants in the pipeline.

Is Dangote running at loss? probably not, prices will continue to shrink in the cement sub sector as production keeps heading upward.

BlackTechnology:


This policy is good and will be made better if the CBN reduce the rate to 6% for agriculture mining construction and manufacturing sectors and increase the rate to 20% for traders(importers).


In short


Import duties should be increased by 1,000% for finished imported products to discourage importation and encourage local production by making foreign finished products too expensive for people to buy which will force people to patronize local products thereby strengthening local industrialization.


Government should partner foreign firms and set up industries whose products we import.

A nation that imports almost everything should not increase trarrifs to 1000%.. Are u willing to pay 1000% on your phone or tab that you are using to post on NL??
Have u tried borrowing?? The banks charge as much as 30% collateralised security..

Obiagelli:

Now you are beginning to sound like buhari the last time i was discussing Buhari's economic policy in 1983, members of this forum said people had to queue fir essential commodities (finished product).
Till we get a leader with strong resolve and sense of direction, we wasting our time.

The government should also look at its self, purge waste and stop handing policies to us alone.

I wouldn't advocate for a wholesale 1000% increase in import duty. It would only be the elite that would be able to afford TV sets and cars
Besides, other countries may retaliate, and slap a similar duty on Nigerian goods.

When the Nigerian-based manufacturing plants of Nissan, KIA, and Innoson penetrate the Nigerian market to an appreciable level, then we can talk of a gradual increase in import duty.

Cfcfan, i am typing from a very tiny blackberry, i will mention u with better reply soon.

atlwireles:


The rest of the point is not possible in a market driven environment. Government cannot ask people to crash their prices without destroying supply chains. Cost of production and competition will always determine price. A good example is government price control polices. It has always led to scarcity and higher prices. Triggering more inflation.

Dangote brought the prices of their product down, because production of cement is exploding. They are losing market share, because more supply is entering the market and we still have more plants in the pipeline.

Is Dangote running at loss? probably not, prices will continue to shrink in the cement sub sector as production keeps heading upward.

Do you agree with me that interest rate affects cost of production. Yes or No


If we reduce interest rate the cost of production will decline therefore price of finished products will decrease.

When cost of finished products decline, demand will increase and the these 4 sectors will make more money True or False.

If demand increase,

1) production will most likely increase. Meaning more people might be employed to increase production which will put more money into their pockets therefore stimulating the economy which will make it easier to tax people on the long run and take Nigeria out of oil wealth dependence.

2) New businesses will enter into those sectors in order to make money. This will increase competition further driving down price, create more jobs and put more money into peoples pockets making it easier to tax people on the long run .


3) We will achieve the Dangote scenario in these key factors. Yes or No

Obiagelli:
I don't get you, why electrical products, why noy textile? Do pple own more tvs than clothes. You shouldnt attempt to rubbish the policy just because it's buhari

After Food clothing shelter, the most widely used products are electronic and electrical products.

EasternLeopard:



Do you agree with me that interest rate affects cost of production. Yes or No


If we reduce interest rate the cost of production will decline therefore price of finished products will decrease.

When cost of finished products decline, demand will increase and the these 4 sectors will make more money True or False.

If demand increase,

1) production will most likely increase. Meaning more people might be employed to increase production which will put more money into their pockets therefore stimulating the economy which will make it easier to tax people on the long run and take Nigeria out of oil wealth dependence.

2) New businesses will enter into those sectors in order to make money. This will create more jobs and put more money into peoples pockets making it easier to tax people on the long run .


3) We will achieve the Dangote scenario in these key factors. Yes or No

Interest rate effect the cost of production in a credit based economy. SME in Nigeria are not affected by interest rate, because 95% of them don't have bank credit or have access to obtaining said credit.

Nigeria businesses need help with the cost of transportation and the cost of energy. Most people, even in advanced economies don't start businesses with the help of bank loans. Family and savings account for most seed money used in new businesses.

atlwireles:


Interest rate effect the cost of production in a credit based economy. SME in Nigeria are not affected by interest rate, because 95% of them don't have bank credit or have access to obtaining said credit.

Nigeria businesses need help with the cost of transportation and the cost of energy. Most people, even in advanced economies don't start businesses with the help of bank loans. Family and savings account for most seed money used in new businesses.

Gbam

But look at it from this perceptive


Interest rate is reduced and the businesses in these sectors are encouraged to sell at cheaper price.

Because of this, more money remains in peoples pockets making it easier for them to patronize the products offered by SMEs.

This in turn causes effective demand to increase towards the SMEs who now makes more money and uses this money to expand their businesses leading to more jobs which also puts more money in peoples pockets making it easier for people to pay taxes and liberating Nigeria from the curse of oil.

EasternLeopard:


Gbam

But look at it from this perceptive


Interest rate is reduced and the businesses in these sectors are encouraged to sell at cheaper price.

Because of this, more money remains in peoples pockets making it easier for them to patronize the products offered by SMEs.

This in turn causes effective demand to exist towards the SMEs who now makes more money and used this money to expand their businesses leading to more jobs and money in peoples pockets making it easier for people to pay taxes and liberating Nigeria from the curse of oil.

Sorry, this's like wasting my time. I live in a real world, do real business and not some dreamland . Base your assumptions on realities, the ones you see today in Nigeria. That's how Naria and kobo are made and lost daily.

Thanks I'm done with this thread.

By the way the only reason the interest rate went up was to slow down speculation and create another medium for all the billions speculators were using to pressure the Naira. It seems to have worked, for now. As long as the dollar remains at a 10 year high, against all freely traded currencies in the world today. We might need another hike on the interest rate, to keep out Tbill rates attractive.

atlwireles:


Sorry, this's like wasting my time. I live in a real world, do real business and not some dreamland . Base your assumptions on realities, the ones you see today in Nigeria. That's how Naria and kobo are made and lost daily.

Thanks I'm done with this thread.

By the way the only reason the interest rate went up was to slow down speculation and create another medium for all the billions speculators were using to pressure the Naira. It seems to have worked, for now. As long as the dollar remains at a 10 year high, against all freely traded currencies in the world today. We might need another hike on the interest rate, to keep out Tbill rates attractive.

OK


But have an opened mind next time


Being rigid in economic operations will do you no good.