The Central Bank of Nigeria (CBN), yesterday ordered banks to vacate a Post-No-Debit (PND) restriction earlier imposed on bank accounts of 440 individuals and companies. This was just as the CBN yesterday communicated to banks that it would resume the enforcement of the Loan-to-Deposit Ratio (LDR) policy effective July 31, 2023. However, citing key policy reviews particularly the recent deregulation of petrol price and transition to a unified and market-determined exchange rate – with the attendant inflationary concerns, the CBN’s Monetary Policy Committee (MPC), yesterday resolved to increase the Monetary Policy Rate (MPR), also known as the benchmark interest rate by 25 basis points to 18.75 per cent from 18.5 per cent. A PND refers to all debit transactions, including ATMs and cheques, on the accounts, have been blocked but can receive inflows. It is one instrument through which the CBN gives powers to stop customers from operating their bank accounts, with the permission of the courts.
The central bank conveyed the vacation of restriction in circular, dated July 25, 2023 which was signed by A.M. Barau, on behalf of the CBN Director, Banking Supervision Department, and addressed to all banks. The correspondence read, “You are hereby directed to vacate the Post-No-Debit restriction placed on the accounts of the underlisted bank customers at our instance.” The apex bank further mandated the banks to inform the concerned customers of the vacation accordingly.
Some of the affected accounts included Fortune-K Resources and Investment Nigeria Limited, Voomos Limited, BoxII Limited, OP Amber, KIIPay Limited, Blake Excellence Resort, and Vanu Nigeria Limited. Others were Bakori Mega Services, Ashambrakh General Enterprise, Namuduka Ventures Limited, Crosslinks Capital and Investment Limited, IGP Global Synergy Limited, Davedan Mille Investment Limited and Urban Laundry, Advanced Multi-Links Services Limited, Spray Resources, Al-Ishaq Global Resources Limited, Himark Intertrades, Charblecom Concept Limited, Wudatage Global Resources, Whales Oil and Gas, Mosinox Oil and Gas and A.A. Gwad Ventures. Those also listed included Treynor Soft Ventures, Fyrstrym Global Concepts Limited, Samarize Global Nigeria Limited, and Zahraddeen Haruna Shahru, FirmCoin Resources and SIBT Acuracy, CrossLinks Energy Limited, among several others.
With Subsidy Gone, FX Unified, CBN Raises MPR to 18.75% to Curb Inflation The MPC also adjusted the asymmetric corridor around the MPR to +100/-300 from +100/-700, and retained the Cash Reserve Requirement (CRR) at 32.5 per cent as well as Liquidity Ratio at 30 per cent. Addressing journalists after the two-day meeting of Monetary Policy Committee (MPC) meeting in Abuja, the CBN acting Governor, Mr. Folashodun Shonubi, said the modest increase in the benchmark interest rate was targeted at curtailing potential uptick in inflationary pressures resulting from the policy changes.
Shonubi, also clarified that the current volatility witnessed in the foreign exchange market was driven by the fact that the market needs to find its level, adding that there’s a pent-up demand which current supply may not be sufficient to satisfy. He said the floating of the naira and removal of petrol subsidy were likely to sustain upward pressure on domestic prices in the short to medium term especially considering the negative impact the proposed palliatives would have on liquidity. The acting CBN governor also insisted that previous hike in MPR had continued to make quite a lot of difference by moderating the rate of increase in the prices of goods and commodities. According to him, without the tightening stance, the headline would have spiraled out of control. He said the continued uptick in inflationary pressure to 22.79 per cent in June 2023 from 22.41 per cent in the previous month was driven by the moderate increases to both the food and core components. According to him, legacy headwinds, including security challenges in major food-producing areas; high cost of transportation driven by the rising cost of energy, and inadequacies in public infrastructure continued to drive the rise in food and core inflation. Shonubi, who read the committee’s communique, noted that unfolding dynamics in the monetary policy environment and the resultant pass-through to domestic prices would require greater collaboration between the CBN and the fiscal authority to ensure that macroeconomic stability is achieved.
The MPC’s considerations focused on the persisting rise in inflation and its potential adverse effect on output growth and household income, adding that the continued uptick in inflation (month on month) driven by increase in both the food and core components remained a key challenge. The committee also expressed concerns that the recent policy decisions around subsidy removal, exchange rate liberalisation and disbursement of palliatives would have pass-through effects to inflation. The MPC therefore, called for decisive measures by the bank to address the likely liquidity surfeit from these developments, including using appropriate monetary policy instruments. The committee further prevailed on the monetary and fiscal authorities to sustain collaboration towards addressing the inflationary pressure and incentivise domestic investment to reduce unemployment and boost output growth. It further enjoined the federal government to continue to explore policies to improve investor confidence in the Nigerian economy and pave the way for foreign and domestic investments.
The acting CBN governor also stressed the need to attract investment, particularly to auto manufacturing, aviation, and rail industries to boost non-oil revenues. He said key policy mechanisms to shield the Nigerian economy from persisting global shocks and other emerging domestic shocks were urgently required for the economy to continue to post positive growth.
