Financial Energy Review
The Central Bank of Nigeria, (CBN) is set to step up its intervention in the energy sector as it approaches the regulators in the sector on modalities for the intervention.
Disclosing this at a media briefing yesterday after its Monetary Policy Committee, MPC, meeting the CBN Governor, Mr Godwin Emefiele, said the apex bank would be meeting with the Nigerian National Petroleum Company Limited (NNPCL) and the Federal Ministry of Power in the first instance for this purpose.
Meanwhile, he announced the retention of the Monetary Policy Rate (MPR) at 11.5 per cent along with all parameters as the key MPC decision at the meeting.
The decision to intervene in the current scarcity of petroleum products and power outages throughout the country, according to Emefiele, follows the concerns of the MPC on the impact of inadequate electricity on domestic prices.
He said: “MPC also notes that the rising price of diesel is compounded by the problem of inadequate electricity supply which has adversely impacted domestic prices. MPC advises the CBN Management and the fiscal authorities to take specific and urgent actions to avoid many power generating stations shutdown for turn-around maintenance, resulting in the current unwarranted shutdown of generating assets.
Speaking further, Emefiele said that the apex bank has invested heavily in the power sector and stood ready to do more for Nigeria to have stable power supply, adding that the engagement with the power sector authorities would be to provide whatever support was needed.
His words, “The CBN has always been there to support the power sector. Like you all know, we have disbursed over N1.3 trillion in the last five years, to support the generators (electricity), the Discos, to acquire equipment or to buy meters, improve what is being paid to electricity generating companies to pay for their gas, so that the system can continue to operate.
“We will be engaging with the Minister of Power, NERC (Nigerian Electricity Regulatory Commission) and NBET (Nigerian Bulk Electricity Trading Company) to see whatever we can do to support them.”
Emefiele also said that his team was determined to improve CBN’s interventions in order to increase food production and grow the economy through various investments in other real sectors of the economy.
Explaining the rationale for the retention of the MPR and other policy rates, Emefiele said: “In its consideration as to whether to hold, tighten, or loosen, MPC remained concerned that the global situation on rising prices may continue in the near term but may begin to moderate if deliberate and urgent actions are taken by both the monetary and fiscal authorities to correct the rising inflation. On another hand, Committee was satisfied that the use of the Bank discretionary CRR policy should be deployed more aggressively to control the level of money supply in the economy.
“On tightening in order to rein in the rising price level, MPC was of the view that given the fragile state of the current GDP growth and the potential external and domestic headwinds from the Russia-Ukraine war, a contractionary policy stance would stifle the expected investment expansion needed to drive growth and absorb the shocks in Nigeria.
“MPC also feels that not only would tightening reverse the steady improvement recorded in credit expansion, it is also of the view that tightening would not necessarily tame the inflation, particularly where the marginal decline is relatively not yet sustainable. In the case of whether to loosen, the Committee feels that loosening would trigger further liquidity surfeit and fuel inflationary pressure as available funds outstrip the economy’s absorptive capacity. “
“MPC also feels that loosening would trigger FX demand pressure, as the excess liquidity would exert demand pressure on the FX market and trigger a naira depreciation which would also fuel inflation.
Based on the foregoing, the Committee decided to adopt a hold stance as it would indicate a precautionary and consistent policy stance with the prevailing economic conditions particularly as further economic and financial shocks are exerted from the ongoing Russia-Ukraine war.”
