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CBN retains interest rate at 14%

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  • Obama hails exchange rate flexibility at talks with Buhari

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Rate, which is the benchmark lending rate, at the current 14 per cent.

The decision to leave the rate unchanged was contrary to expectations of economic analysts, manufacturers and some government officials.

Indeed, the Minister of Finance, Mrs. Kemi Adeosun, had on Monday said there was a need for the apex bank to lower interest rates so that the government could borrow domestically to boost the economy without increasing debt servicing costs. But addressing journalists at the end of the two-day MPC meeting, which was held at the central bank headquarters in Abuja, the CBN Governor, Godwin Emefiele, said the apex bank decided to hold the lending rate in order to maintain its primary objective of price stability.

He also said the decision was unanimously agreed on by all the 10 members of the committee who attended the meeting. Apart from the MPR, he said members of the committee also left the Cash Reserve Ratio and the Liquidity Ratio unchanged at 22.5 per cent and 30 per cent, respectively.

The MPC also called on the Federal Government to introduce tax incentives to stimulate activities and return the economy to the path of growth. Emefiele said the Federal Government should toe the line of other developed countries such as the United States that adjusted its tax policy during the period of economic recession to stimulate consumer demand.

For instance, he said the government should consider reducing the tax burden on the low and middle-income earners, while increasing the rates payable by the rich. He said, “In the United States and other economies, when you have situations like this, there are those who are naturally vulnerable – the weak, the low and middle-income people. What the government can do is to reduce their tax rates; and for the rich, increase their tax rates so that they can pay more, and this balances out.

“In fact, you can increase more for the high-income earners so that the disposable income for the poor and vulnerable, and middle-income earners can increase so that they can pump liquidity and use it to boost consumption spending.”

Emefiele said the MPC considered the numerous calls for rate reduction but came to the conclusion that the greatest challenge to the economy at the moment remained incomplete fiscal reforms, which raise costs, risks and uncertainty.

The CBN governor said the committee was of the view that in the past when the rates were reduced to achieve these objectives, it was later discovered that rather than deploy the available liquidity to provide credit to agriculture and manufacturing sectors, it provided opportunities for lending to traders who deployed the same liquidity in putting pressure on the foreign exchange market.

This, he lamented, resulted into limited supply of foreign exchange, thus pushing up the exchange rate. He, however, lamented that the purpose for which the funds were deployed by the banks was not in line with the objective of the CBN. He said, “Both the monetary and fiscal authorities all have the intention to achieve growth, but the direction through which we want to achieve it may differ for as long as you still achieve the growth.

“The issues here are that when you say reduce interest rates, there are two possibilities here. Firstly, you are saying that because you want it to spur credit to the private sector at lower rate. Secondly, which I have heard the fiscal authority talk about, is that they need to be able to borrow at lower rates to spend.

“Our own view at the MPC, which was exhaustively discussed, is that in the past, there was a time when the MPC took the decision to reduce the policy rate and the cash reserves. These were intended to lower rate and encourage spending to the private sector. After we did that, the following meeting we said because we did not see the impact of credit to the private sector that we needed to further reduce the CRR.”

Responding to a question that the decision to hold the benchmark interest rate was against the call by Adeosun to reduce it, the governor said that borrowing at lower rates to spend on consumption in an economy not backed by industrial capacity would further fuel inflation. He said while the committee agreed that it was expected to stimulate growth through aggressive spending, doing so without corresponding efforts to boost industrial output by taking actions to deepen foreign exchange supply for raw materials would not help reduce unemployment.

Emefiele said, “The second part of it is that when you lower the interest rate, it will make it possible for the fiscal authorities to borrow at lower rates. “But we are saying fine. If you borrow at lower rates to stimulate spending, what that does is that it simulate demand for goods, but when you stimulate demand for goods by providing cash or money to be spent without taking action to boost industrial capacity, manufacturing capacity and output, what happens is that you will see a situation where too much money will be chasing too few goods, which will worsen the inflationary conditions that we have now.

“And that is why we are saying that the option that we would like to adopt is while the fiscal authority is going ahead to spend, what we want to do is to retain the rates where they are so that that will again encourage the inflow of capital, because between July and now, we have seen the inflow of above $1bn.”

The governor also said that the CBN would continue to monitor the sale of forex to the BDCs, adding that any bank undermining the integrity of the foreign exchange market would be sanctioned in line with current guidelines.

In the meantime, United States President Barack Obama yesterday praised President Muhammadu Buhari for allowing flexibility in exchange rates.

He spoke during a meeting of the two leaders on the sideline of the 71 United Nations’ General Assembly in New York.

They also discussed ways of countering the Boko Haram militant group.
Details of the meeting were yet to be made available last night.

President Buhari also said yesterday that the anti-corruption campaign of his administration and the economic programme of diversification will significantly address the lack of job opportunities and deprivation that make Nigerian youths vulnerable to recruitment by human traffickers.

He spoke at a meeting on Modern Slavery, hosted by British Prime Minister Theresa May on the margins of the 71st Session of the United Nations General Assembly (UNGA71).

He commended the British Prime Minister for drawing the attention of the international community to such a serious matter to coincide with a time that the global focus is on migration and refugee crisis.
He called for practical and innovative measures to address all modern day human tragedies.

Punch with additional report from Nation

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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