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Business News

CBN raises CRR to 27.5%, holds MPR, other parameters constant

The Monetary Policy Committee of the Central Bank of Nigeria (@cenbank) has raised the Cash Reserve Ratio by 500 basis points to 27.5%. Meanwhile, other parameters such as Monetary Policy Rate, Liquidity ratio, and asymmetric corridor remain unchanged.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the Cash Reserve Ratio by 500 basis points to 27.5%.

Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the first MPC meeting in the year 2020 on Friday in Abuja. Meanwhile, other parameters such as Monetary Policy Rate (MPR), Liquidity ratio, and asymmetric corridor remain unchanged.

Highlights of the Committee’s decision

  • MPR was kept at 13.50%
  • The asymmetric corridor of +200/-500 basis points around the MPR was retained.
  • CRR was raised from 22.5% to 27.5%, up by 500 basis points
  • The Liquidity Ratio was also kept at 30%

According to Emefiele, the decision of the MPC to raise the CRR is informed by recent inflationary pressure in the economy. Also, the CBN Governor stated that the decision to hold other rates was informed by the conviction of the committee members that there is a need to observe the response of the economy to several policies introduced by the Central Bank.

[READ: FG concludes plan to borrow N2 trillion from Pension Fund]

The CBN Governor, the Loan to Deposit ratio raised alongside OMO restriction pushed liquidity high in the economy, while border closure has also exacerbated the inflation rate, which is inimical to growth.

The Inflation Concerns, raising CRR

In the communique later released by the CBN, the MPC stated that the persistent increase in the inflation rate, which stood at 11.98% in December 2019 is a source of concern. Hence, the committee disclosed that inflation above 12% is inimical to output growth in the Nigerian economy.

The MPC also noted that the rising price level is attributable to a combination of expansionary fiscal policy and growth in money supply arising from rising liquidity surfeit in the industry due to changes in the Bank’s OMO policy.

In view of the anticipated medium-term liquidity surfeit from maturing OMO bills held by local private and institutional investors, the Committee stated it is prudent to raise the CRR to curtail liquidity surfeit in the banking system.

According to the MPC, increasing the CRR at this time is fortuitous as it will help address monetary-induced inflation whilst retaining the benefits from the Bank’s LDR policy, which has been successful in significantly increasing credit to the private sector as well as pushing market interest rates downwards.

 Keeping MPR, others constant

On the arguments to tighten, the MPC stated that given that inflation rate inched up in December 2019 and that the rate is still above the upper band of the 6-9% threshold, hence, tightening may be necessary to tame the rising trend in inflation.

Moreover, raising rates would reinforce the stability of the foreign exchange market as an upswing in the rate will inhibit demand pressures in the market through a decline in money supply.

While explaining the decision to hold MPR, the MPC stated that a mix of several monetary and financial policy measures have recently been deployed by the Bank. Hence, maintaining monetary policy rate at its present level is essential for sustainable support to growth before any possible adjustments.

According to the MPC, keeping MPR constant will enable recent policy measures to react suitably to developments as they occur in the near term. In addition, the Committee stated that retaining the current policy position provides avenues to evaluating the impact of the heterodox monetary and financial policies to support lending by the banking industry without altering the policy rate.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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    Business

    How FG can implement blockchain technology for efficient service delivery

    Blockchain technology is an efficient and cheaper platform for governance as it curbs middlemen and bureaucratic channels, makes processes more effective and adequately reduces fraud.

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    KPMG, PwC, Blockchain technology expected to tackle Africa’s challenges across multiple industries

    A report on the Nigerian budget by BugIT last week revealed that Nigeria’s 2021 budget had 316 duplicated capital projects totalling N39.5 billion, a 14% increase to the security sector allocation with no audit done in 5 years and many others.

    Other discrepancies discovered in the report include ZERO audit records of the N10.02 trillion received by the security sector between 2015 and 2021, a total of 117 federal agencies received allocations for “Security Votes” worth N24.3 billion despite many of these agencies already having allocations for “Security Charges” to cover each agency’s security needs, etc. These figures show that the government is permitting multiple leakages in its budget despite falling crude oil revenues and rising debt to revenue ratio.

    The damning report was a catalyst for Socio-Economic Rights and Accountability Project (SERAP) to petition President Muhammadu Buhari to probe the reported N39.5 billion duplicated and mysterious projects inserted into the 2021 budget.

    The Election problem

    Nigeria also lacks transparency in her electoral process resulting in voter apathy, rigging and other forms of electoral fraud, post-election violence, and post-election litigations. The ugly situation is not lost on the Independent National Electoral Commission (INEC) which has called for better use of technology in the conduct of elections, stating that the introduction of technology would enhance the credibility of elections in Nigeria. The electoral umpire has also alluded to working with the National Assembly to introduce reforms to Nigeria’s Electoral Act.

    “There is a need to introduce further technology to enhance the credibility of the elections that we are going to conduct in 2023. That explains why INEC intends to introduce new technology in the revalidation of register, that we have been putting in place since 2010-2011. The way forward is to introduce technology and ensure the register is credible and 2023 elections reflect this credibility and that election are better,” INEC said.

    Can Blockchain offer this technology for transparent service delivery?

    According to euromoney.com, a blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.

    The decentralised database managed by multiple participants makes blockchain technology a system that is difficult to change, hack, falsify or defraud.

    In 2018, Sierra Leone became the first country in West Africa to conduct an election with the aid of the Blockchain, recording votes at 70% of the polling to the blockchain, a first of its kind to prevent electoral fraud.

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    Sierra Leone wishes to create an environment of trust with the voters in a contentious election, especially looking at how the election will be publicly viewed post-election. By using blockchain as a means to immutably record ballots and results, the country hopes to create legitimacy around the election and reduce fall-out from opposition parties,” the developer, Agora said in a statement.

    “Blockchain is the only technology that has been created which can provide an end-to-end verifiable and fully-transparent voting solution for the future” they added.

    Perhaps, Blockchain is proof that it may indeed be possible to “ innovate to prosperity” using technology, especially in low trust societies like Nigeria bedevilled with poor public accounting and electoral processes.

    This position is supported in a report by Northwestern University, citing that Blockchain’s smart contracts can improve efficiency in emerging markets like Nigeria.

    “Blockchain technology has the potential to eliminate one of the most significant barriers to economic growth through private business transactions in developing countries—lack of trust,” the report said.

    “Developing countries often lack effective or transparent institutions and are frequently plagued with corruption that weakens substantially their level of security in economic transactions.

    First, because blockchain uses an open architecture, all transactions are publicly accessible, immutable, and verifiable by anyone. This helps to eliminate corruption and fraud from the transaction. Second, because all smart contract transactions are recorded along a blockchain and cannot be modified ex-post, a permanent and publicly accessible ledger is available to shed any doubt about payments or other transactions throughout the process. And third, because blockchain systems are automated, security in the enforcement mechanism is all but guaranteed. For instance, failure to deliver goods by a set time will automatically trigger a default clause that transmits payment of liquidated damages to the injured party without the intervention of a judge or arbitrator,” the report added.

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    Basically, the report suggests that if the Nigerian government pursues a policy on total efficiency in service delivery, blockchain could be the best alternative for the nation as it reduces corruption and fraud in multiple government sectors.

    Olumide Adesina, a financial market analyst and Yahoo Finance Contributor says implementing a blockchain-driven service delivery model would make governance cheaper and reduce corruption.

    “A blockchain is simply a digital ledger that records information on the network in such a way that it is almost impossible to forge, hack and manipulate despite being open source,” he said.

    “This is an efficient and cheaper platform for governance as it curbs middlemen and bureaucratic channels, makes processes more effective and adequately reduces fraud,” he added.

    Would the CBN’s crypto ban affect blockchain’s use in governance?

    “The CBN ban has little or no effect on the blockchain, as its statutory powers only excluded Nigerian financial institutions from relating to Crypto Exchanges and platforms,” Adesina said.

    Bottomline

    The report of over N39 billion in duplicate expenses shows that even in a period of revenue decline, the government is struggling with curbing corruption in various sectors. The implementation of technology-backed solutions will not only save the nation from resource pilfering and wastage, but it will also be vital in electing credible government officials to oversee proper, efficient service delivery and governance.

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    Corporate Press Releases

    Asharami Energy’s graduate program targets future Upstream experts

    Application for the program kicks off on Friday, 7th May 2021 and closes on Monday, 17th May 2021.

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    Asharami Energy, a Sahara Group Upstream company, has commenced its 2021 Graduate Trainee Program that is geared towards enhancing the sustainability and future of the sector through training of exceptional young talent.

    Henry Menkiti, Chief Operating Officer, Asharami Energy, said the widely sought-after program has been instrumental to the transformation of young engineers and others professionals into top talent across the value chain at Sahara Group. “At the heart of our operations lies unrivaled engineering expertise that is driven by innovation, responsible engineering, and an unwavering commitment to improvements aligned with global environmental, social and Corporate governance standards. The Graduate Trainee Program is for enthusiastic and future thinking individuals desirous of becoming future leaders in the oil and gas sector,” he said.

    Ivie Imasogie-Adigun, Group Head, HR at Sahara Group said the program resonates with Sahara’s human capital transformation strategy aimed at building a leading, nimble and agile organisation for optimal performance.

    Imasogie-Adigun said the program gives graduate trainees exposure to top-level responsibility early in their careers, with ample opportunity to hone their potential across the Upstream value chain. “Sahara’s Graduate Trainee Programs are deliberately innovative and disruptive as we are always ahead on the curve of making a difference. The program has over the years produced outstanding business leaders at Sahara and I enjoin graduates to apply for an opportunity to commence their journey towards excellence in the Upstream sector. ”

    Application for the program kicks off on Friday, 7th May 2021 and closes on Monday, 17th May 2021. It is open to candidates with a Bachelor’s Degree in Engineering, Applied & Social Sciences with a minimum of Second-Class Honors (Upper Division) and NYSC discharge certificate. Applicants can follow Sahara Group on twitter and Instagram @iamsaharagroup for more information on the Graduate Trainee Programs.

    Asharami Energy is one Africa’s leading independent Exploration and Production (E&P) Companies with a diverse portfolio of 8 (eight) oil and gas assets in prolific basins across Africa. Asharami Energy Limited and Sahara Energy Fields Holdings UK Limited are the entities at the forefront of Sahara’s upstream operations.

    These assets are at various stages of development ranging from exploratory fields to mature producing fields with huge potential for positive returns.

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