Again, Reps to debate Islamic banking
TO hedge inflation predicted to rise in the second half of 2011 driven by the planned implementation of the new minimum wage of N18,000 in August, coupled with high cost of energy and imports as well as fresh injection of about N1.6 trillion into the troubled banks by the Asset Management Company of Nigeria (AMCON), the Central Bank (CBN) yesterday moved the Monetary Policy Rate (MPR) by 75 basis point, from eight per cent to 8.75 per cent with immediate effect.
MPR is the rate at which the CBN lends money to commercial banks.
Meanwhile, the House of Representatives said yesterday that it would review the submissions of the Governor of the Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, regarding the setting up of Islamic Banking in the country and take a proper stand on the matter.
And as Anambra State government denied taking any loan from any Islamic bank in the world, the House had cautioned its members against the danger of allowing the presentation of the CBN governor to distract it from its main legislative agenda.
This is the outcome of a meeting of the Monetary Policy Committee (MPC), the highest economic policy think-tank of the apex bank, which began in Abuja on Monday.
Addressing newsmen at the end of the MPC meeting, Mr. Sanusi declared that the action was taken because inflation had remained elevated during the first quarter of 2011 and only moderated towards the end of the second quarter, but with possible prospect of a backlash on the implementation of the newly-adopted minimum wage for workers as well as the high cost of energy and the injection of a fresh liquidity of N1.6 trillion into the banking sector by AMCON.
The MPC communique as read by Sanusi said: "Inflationary pressures remained elevated during the first quarter of 2011 but moderated towards the end of the second quarter. The year- on-year headline inflation rate declined from 12.8 per cent in March and 12.4 per cent in May 2011 to 10.2 per cent in June 2011.
The downward movement in inflation in June 2011 was due to the moderation in both food and core inflation. Food inflation fell for the first time since February 2008 to below 10 per cent. It declined from 13.6 per cent in March and 12.2 per cent in May to 9.2 per cent in June 2011. Core inflation decreased from 12.8 per cent in March and 13.0 per cent in May to 11.5 per cent in June 2011. Staff projections indicate that both headline and food inflation would continue to moderate in the second half of the year.
However, core inflation is projected to increase during the same period driven mainly by cost of energy, power and imports.
"On the domestic scene, the committee noted that inflationary pressures which were traceable to the high expenditure levels associated with the April 2011 general elections as well as the effects of rising international energy, commodity and food prices had moderated by June 2011. This development was due in part to the tight monetary policy stance of the Bank since September of 2010.
"However, the committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices. Significant injection of liquidity from the Federation Accounts Allocation Committee (FAAC) in the third quarter coupled with the impact of AMCON recapitalising intervened banks to the tune of N1.6 trillion will both add to inflationary pressures.
"The committee welcomed the favourable growth projections but cautioned that the current security challenges, infrastructural bottlenecks and the uncertainty in the international economy as well as fiscal development could undermine investors' confidence and output growth in the near term," the MPC communiqué further warned.''
Accordingly, in view of the need to proactively address the impact of huge injection of liquidity in the third quarter to correct the negative real interest rate situation in the market and attract foreign capital inflows to build up reserves to protect the economy against possible external shocks, the MPC decided as follows:
• Tighten monetary policy by a majority decision of 10 to two
• To raise the MPR by 75 basis point from 8.0 per cent by a majority vote of eight members in its favour, one member favoured 50 basis point increase while three members voted for holding the MPR at 8.0 per cent.
• To maintain the corridor at +/- 200 basis point around the MPR.
At a press conference, the House ad-hoc committee on Media, said that members were very unhappy with the impressions created that the House had endorsed Islamic Banking following the presentations of the CBN boss last week.
The press conference which was presided over by the committee's chairman, Opeyemi Bamidele, made it clear that the two issues which warranted an invitation to Sanusi, that is, the Islamic Banking and the Cash withdrawal Limit, were still alive and awaiting the formal consideration of the House on another legislative day.
Opeyemi stated that during a closed door session of the House earlier yesterday, members took turns to decry the negative reports that the presentations by Sanusi had attracted to the House because of the impression that it had endorsed the position of the CBN on Islamic Banking.
"The issue of Islamic Banking is not as conclusive as it was presented because stakeholders are still working out modalities and as far as the House is concerned, we are still going to debate the matter. So, the issue is still alive and we are going to consider and debate it before a decision is taken", Opeyemi said.
The Islamic Banking issue almost throw the House into another rowdy session yesterday as members rose in protest against some disclosures by Sanusi.
Uche Ekwunife (APGA-Anambra) had sought the permission of the House to allow her read a letter from the Governor of Anambra State, Peter Obi debunking claims by the CBN Governor, Sanusi Lamido Sanusi to the effect that the state has allegedly solicited for financial assistance (loan) from Jaiz Islamic Bank.
Clutching the letter including that of the State Commissioner for Finance denying the claims by the CBN Governor during his submission last Thursday, Ekwunife urged the Chamber to compel Sanusi to offer an unreserved apology to the state for misinforming Nigerians on the financial dealings of the state.
She contended that the Federal lawmakers from the state had been inundated with complaints by their constituents following Sanusi's submissions and seeking more clarifications on the matter.
In denying the purported loan by Anambra State, the lawmaker in an emotion laden voice said: "Since Thursday, we have not rested. But I want to tell you that Anambra State has not solicited for assistance from the Islamic Bank.
"We are not taking this misinformation lightly, the CBN governor must apologise to Anambra State for misinforming the Nigerians", she said.
Attempts by another Member, Zakari Mohammed to draw attention of the House to a media publication which allegedly assassinated the reputation of the Chamber following its failure to ask specific questions on grey areas during Sanusi's visit was ignored by the Deputy Speaker, Emeka Ihedioha.
Deputy Speaker, Emeka Ihedioha, who presided over the session, called for restraint on the controversial matter, even as he urged members not to allow the issues arising from the appearance of the CBN to distract them from their contract with the Nigerian people.
Meanwhile, a Bill for an Act to Amend the Fiscal Responsibility Commission (Establishment) Act 2007 to empower the Commission to enforce proper remittance of revenues to the consolidated revenue fund of the federation, and provide penalties against the statutory corporations for non-compliance and the related matters scaled through second reading and was consequently referred to the Committee on Finance when constituted.
The Guardian