Cost Of Fund Increases As Interest Rates Hits Benchmark At 14%
In an attempt to mitigate inflationary trends and price volatility, the Central Bank of Nigeria (CBN) has increased interest rate benchmark from 12 to 14 per cent. The CBN Governor, Godwin Emefiele, who disclosed this described the increase as a ‘difficult choice.’
The decision was taken by the Monetary Policy Committee (MPC) of the CBN yesterday. Analysts, who expected a reduction, say the decision will lead to significant increase in cost of funds and disrupt efforts to kick-start growth.
Following successive negative growths in the last two quarters (six months) and persistent rise in prices of goods and services, government, late last week, admitted Nigeria is in recession. Nigeria’s economic data agency, the National Bureau of Statistics (NBS) confirmed that growth has entered a ‘negative territory’, hitting – 0.36 per cent in June.
Apex bank’s policy makers only tampered with the Monetary Policy Rate (MPR) from 12 per cent to 14 per cent, leaving Cash Reserve Ratio at 22.5 per cent; liquidity ration, 30 per cent and the Asymmetric Window at +200 and -500 basis points.
Already, the 200 basis points increase in effort to compensate investors due to the rising inflation, has been described as unprecedented, because most analysts had expected retained rate or 100 basis-point move.
“The action taken to combat inflation could serve to improve business confidence and corporate investments which will ultimately promote growth. The committee voted to increase Monetary Policy Rate by 200 basis points to 14 per cent which effectively narrows negative real rates to -2.5 per cent from -4.5 per cent. This was against our expectation that the Monetary Policy Rate will be left unchanged,” the President of Time Economics, Dr. Ogho Okiti said.
But Emefiele affirmed that the committee also considered the high inflationary trend, which has culminated in negative real interest rates in the economy, noting that this was discouraging to savings.
“The prolonged non-payment of salaries is a development, which has affected aggregate demand and worsened growth prospects. The committee weighed the risks of the balance of probabilities against growth and voted to hold, allowing fiscal policy some space to stimulate output with injections, but this has been long in coming.
“The negative real interest rates did not support the recent flexible foreign exchange market as foreign investors’ attitude had remained lukewarm, showing unwillingness in bringing in new capital under the circumstance.
“There existed a substantial amount of international capital in negative yielding investments globally and Nigeria stood a chance of attracting such investments with sound macroeconomic policies.
“Consequently, members were of the view that an upward adjustment in interest rates would strongly signal not only the Bank’s commitment to price stability but also its desire to gradually achieve positive real interest rates.
“Such a decision, it was argued, gives impetus for improving the liquidity of the foreign exchange market and the urgent need to deepen the market to ensure self-sustainability. Members were of the opinion that this would boost manufacturing and industrial output, thereby stimulating growth which is desired at this time,” he said.
By the action, CBN is hoping to lure more foreign bonds investors although, with inflation hitting a decade-high of 16.5 per cent in June, rates are still in negative territory of -2.5 per cent, but better than -4.5.
He reiterated that the economy was passing through a difficult phase, dealing with critical supply gaps, underscoring the imperative of carefully navigating the policy space to engender growth and ensure price stability.
The bank chief affirmed that its policy makers were confronted with two options —restarting growth or fighting inflation.
5 Tips To Start A Business
There are so many things that comes in mind when you want to start a business.
Here are 5 tips that would be helpful and might come in handy when you want to start your own business.
1. Do what You Love
The driving power or force of an entrepreneur is the passion in them that drives them to do what they love. You must love what you’re doing since you will be spending your time and energy nurturing the business.
2. Make Plans
Ensure that you create a business plan when you want to start up yours, this brings about understanding and helps you strategize important ideas for your business. Having a solid business plan is very important.
3. Source Of Capital
Always be aware that when you start a business, you won’t become wealthy or rich overnight, you may not gain your profits immediately. However, it is advisable to have a source of capital in order to ensure of smooth-running system of your starting up process.
4. A Team
In business, you cannot do it all alone, you’re not an island and you would require some level of support specifically a team that supports you and your ideas, you might require a mentor who can always guide and provide you with helpful advice. You might as well hire a consulting firm.
Don’t wait until your business officially starts before you make contact with potential clients, start now to promote your business and network yourself. This will give you some form of assurance.
3 P’s To Build A Long-Standing Business
When starting a business what comes to mind? Is it to gain profit or for it to last long?
Many would say profit, their main purpose of even building the business is to gain profit but however, won’t you want your business to last long? Even if you step down or pass down responsibility, wouldn’t it be a great opportunity to see your business flourish even when you aren’t there.
Here are 3 Ps to build a business that will survive long after you’re gone.
Having people with great talent to carry your value, vision and mission is a necessity. You need to build a people machine by recruiting new talents that will bring new and fresh ideas that will make your company grow and also replacing employees that require replacement. However, this people machine should run smoothly, it is even advisable to hire an outside recruiter to do this.
This is where matters concerning strategy and execution comes in, this is where you define the key goals you want your company to achieve and the mechanisms or methods involved in delivering them and holding people accountable for their various duties. This phase determines how you measure progress. Have your goals and projects set, while you distribute the various responsibilities to your employees ensure you hold them accountable.
This has to do with the rules governing your entire business, has to do with ethics, interpersonal relationships with co-workers, employees, customers and partners. You need to set policies to guide the everyday activities of your workers in order not to risk anyone crossing the lines. Be thoughtful and systematic about the policies you form, always keep in mind what’s best for your company.
5 Soft Skills That Will Save Your Job
While you are busy acquiring all the skills in this world, it is also important to acquire soft skills because these days, a university degree and your long years of working experience is not enough and saying that the world is moving quickly is an understatement, Everything is happening so quickly that you might wake up and discover that robots have taken over your job. That is why it is important to improve your soft skills too.
Here are 5 important soft skills that will save your job
Being creative often means being able to solve problems and manage situations with limited resources.
Both written and verbal communication skills helps boost your performance because they help you to extract clear expectations from your manager so that you can deliver excellent work.
It is the capacity to be aware of control and express one’s emotions and to handle interpersonal relationships with empathy. It is important to find time outside of the office to explore new experiences that allows you to explore new experience that helps you grow, and build empathy for others. One can get these skills by volunteering, reading, attending conferences and cultural events and more.
A company’s success is not dependent on just one person. A company’s success is the result of many people working towards a common goal. When employees can contribute their talents, everybody wins.
When people with diverse backgrounds and perspectives are together in high-pressure environment, conflict naturally arises. Hence, an employee with great conflict management skills is an asset to the organization as the individual ensures that their bosses don’t have to do the dirty works of settling conflicts among colleagues.
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