 Till the breakfast and plus TV Africa, Nigeria's Apex Bank has announced that the nation's interest rate and other key monetary policy parameters will remain unchanged. The Central Bank of Nigeria, Governor Gordon Amifili, announced this and the retention of its benchmark monetary policy rate at 11.5 percent on Tuesday after the Monetary Policy Committee meeting. The benchmark rate is the rate at which the central bank lends to banks, which therefore determines the rate at which the commercial banks can lend money to businesses and individuals in the country. As usual, this announcement has got the economic analysts crushing those numbers and we're glad to have one of those on the program this morning. Let's welcome Professor Ken Ife, who is an economic analyst. Professor Ife, good morning to you. Good morning. Welcome. How has the Monetary Policy Committee done the right thing and the wise thing in retaining the interest rate at 11.5 percent? I think they have actually given all the circumstances in the segment from the government. They have climbed very, very difficult circumstances, sometimes they have to take this decision. But I think in the best interest, in general, that is in the totality, I think they are above right. There are so many headwinds internationally, nationally, but I think on balance, I think they've taken the right decision. And if you ask me, I mean, they were all fully aware that American third and older European economies ended quantitative easing and so they are now normalizing monetary policy. And the impact of that is that the monetary policy rates are heading up and that's also going to push inflation. Inflation is already high across the world, but that's going to still push it a little bit further. But the interest rate that is going to go up will actually make foreign portfolio investments that we have been having vaporize away because they are going to go to safer territories to earn a bit more and there's this risk factor that they are going to be enjoying. So that may disadvantage us, but that moment standing, we have the most MSME friendly central bank in living memory that has placed a diversification and employment generation at the heart of monetary policy. In other words, they are going for growth, going for employment, going for diversified economy and then choosing the appropriate policy mix, monetary policy mix are supposed that. So that's a different approach, but that's the right one. So they're not standing by that very active in the marketplace, they are very active in the production systems to make sure that they are energizing systems and breaking away from the structural rigidity that have characterized the variety of our industries and the political economy that is so dominant in many aspects of our economy. So I think on that score, they've been doing a great job and they're fighting inflation. This year, as far as I know, is the year they're going to dedicate on price stability. So they are going to be giving out for inflation. But I don't think that yesterday is the right day to begin to tighten monetary policy. It will come definitely on the horizon, definitely on the cards. It will come with the gradual process. And this is because they have so many bores in the air. I want you to have so many bores in the air. You have to be a bit careful, you have to wait for some of the policies to sit in so that you can see the effectiveness before compounding. But I think that's what I see and I think that it will be right. Okay, according to the CBN governor, Godwin Emelfili, the growth recovery for domestic economy was really strong in 2021. And it's expected to progress reasonably in 2022, following considerably improvement in the first quarter of 2021 and a positive outlook for the fourth quarter of 2021. How does this resonate with Nigeria as the question, especially when the inflation rate is still high? I know you have talked about the fact that they are going to fight the inflation rate. But let's show your thoughts on this one. Yeah, the growth has been spectacular over the last one year, moving up to picking up to 5% and down to 4%. And we're just waiting for the figure for the last quarter, which are suspiciously just over 3%. So that we'll average out at 3% for the year. And that's not a bad idea because that's compared to what has happened in 2020. So it was gruesome in 2020. So having said that, even though we are showing some growth, the recovery is still fragile and inflation is high, as you mentioned. Ideally, we should be a single digit. And that's the ambition of the CBN that we should be around 6.9%. That will happen around 2025, if not earlier, according to all the projections that I have looked at. But there's a concern that in the last few days, there's an uptake in inflation against the backdrop of five months of steady drop in inflation. Obviously, the steady drop that we saw was a contraction in the spread between the food-sour basket index, the core inflation, and the composite price index, which is the headline inflation. The gap has always been, that is, if you look at the food-sour basket index at the top, it's always 5% gap to headline inflation and 9% to 10% gap with the core inflation. But that has narrowed down to 3%. So that gradual narrowing down of the spread is actually what was driving the downward trend on inflation. But just last December, you know, it's a festive season. Obviously, a lot of spending has gone on food and some of the items like drinks. And then they are cut because they push the price up anyway because the cost-ability to buy in Christmas season is very elastic. So they get it. So we expected the uptake. Actually, it was going to be as much as 1%, but it was also 0.23%. So there should be no cost for alarm. It's a seasonal thing that we do have when you look at. And on the other hand, you're going to spoil growth when you get the growth figure for the last quarter. It's going to be a bit up. So that's all because of the amount of money that is pushed out and investment, all of that. So does that concern me? I don't think so because it's very, very marginal. And in fact, if you look deeper into the spread, you will find out that the drop in food-sour basket index is about 0.23%. But when you look at the core inflation, it's very small, 0.02. So it's very, very tiny, which means that all indices were roughly staying the same. It was the food that was coming down, that went up. So if the food went up by 0.23, and then the core only moved by 0.02, what does it tell you? It tells you that all the other indices we are keeping because core is all indices minus food-sour basket index. So when sub-basketting, the food went up a little bit, and then there was no corresponding rise in core inflation. It meant that all the players were just there. It was just the movement in food that gave you that object. So it will come down. All right, Mr. Professor, if there's some economic watchers predicting doom for the Nigerian economy, and expect that the economy will continue to bite hard, and not just bite hard, bite harder, they're saying the NPC was meant to adjust the rate in a way to sort of ease the economic burden in the hardship that Nigerians are currently facing. What do you say to this? No, see, this thing is very intricate, simply because there is a lot of structural factors that are playing. You cannot hold money supply entirely responsible. If you look at money supply, there is a lot of money in circulation because we needed to have those money to fight our way out of recession. You have 3.5 trillion on the monetary side, 2.3 trillion on the fiscal side for economic sustainability plan. We have so much injection into the economy in 2020, carried down in 2021, and that was why we were able to quickly jump out of such within a quarter. But having said that, we need to gradually begin to pull back the money in circulation. You notice that the central bank actually gave quite a huge amount of overdraft to the government. You also notice that there are a lot of politicians now going to be spending money. I'm actually praying that those politicians should bring their dollars and change it to Naira so that we can have more accretion to the bank on dollar terms, and you have more dollar to spend. But unfortunately, they begin to bring out all the Naira that they hid in their septic tanks and all that, then it's not gonna help anybody. So what is going to happen is we're going to begin, if you try to lower the interest rate, the MPR rate now to say 10 or nine, what you're going to do is you're gonna spoil more borrowing. And when you have far more borrowing, it's just a basic situation that we have. The inflation pressure will continue to rise. So it's not the best thing to do right now to lower it. Then of course, if you raise it, you are going to start challenging the growth that we are having at the moment, and the ability to, so in whichever way you go now, you're going to, somebody's gonna pay a price right now. So I would suggest that, for example, if you look at the plan, the spending plan, the domestic borrowing is expected to be 2.57 trillion, and then the foreign borrowing is supposed to be 2.57 trillion by the budget, and then bilateral loans, 1.16 trillion. If I was advising the Ministry of Finance, I would say go and do the domestic one first and prioritize domestic borrowing, because then you are taking money out of the system. You understand, issue more treasury bills and then begin to suck out money from circulation. And then at the same time, possibly to this, the central bank can also use its own open market operation to begin to take a lot more money out. So without actually thinking within monetary policy rates. So that's my feel at this moment to begin to put pressure on the reverse. They put this in reverse gear. The money is circulation in reverse gear and then consequently affect the inflation because also the politicians are going to be pouring out their money. So let's put it in a position where we can compete at that market to suck out quite a few amounts of money. But having also said that, but you also need to be aware that almost 40% of our population are unbanked. So, and that's what one of the good things that Ian Naira was going to help us with, to suck all those unbanked people into the banking system. Once they start using token and all that, then they are visible. So that means that there are challenges around transmission of monetary policy. You can have full transmission of monetary policy when a lot of the, that huge number, over 80 million people are not in the banking system. And then of course, you know that half of the population are poor. So they don't really have as much money with them. So there are a few people that actually have the bulk of the money. So, you know, so that's why we have to be a bit more trust in what we do. Okay, so I don't know if you actually agree. Sounds like you agree, but I'd like some clarification on that as, you know, the CBN governor and the committee agreed that changing the rate at this time would actually, you know, it's not too good because at some point, number one, it could probably reverse the gains and it could worsen the inflation rate. Is that what you're saying? Do you agree? Yeah, yeah, that's what I'm saying. Yeah, I gave you the both sides of it. Whichever way you go now, you're going to hit somebody. Somebody's going to get hurt. But at some point, at some point we will have to face the prospect of raising the rates. At some point, but not, I didn't think it's just now. Because don't forget again, that next month they're going to return, you know, there was territory forbearance on the banks to restructure loans. And then the second measure was to reduce intervention rates from 9% to 5%. So by next month now, month and CBN is going to start reversing that, taking it back from 5% back to 9%. So somebody's going to get hurt, you know what I mean? So the economy is going to begin to feel that they have to now start to repain at a higher rate and then possibly, possibly that might affect the non-performing loans. So we don't know by how much. So you're going to be careful. You have to wait for these things, take them one at a time. So that you can see the impact of that reversal. And the money's involved at high horrendous. So you have to wait and see how that plays out before you compound it with a rate rise. And I don't know if I make sense. Okay, so but let me quickly. It's always good to allow, it's always good to allow in a time lag between when a particular policy is going to hit the ground and then see what the probable impact of it is going to be before you jump to another one. That's why I'm saying that we can't have too many balls in the air at the same time. Okay, so another concern that was raised is the fact that the emerging markets in 2022 will probably slow down because of, you know, the low vaccination rate and the fact that there are no policies to support this. Well, the thing is, well, I'm not sure of Nigeria is in that category because we have a very, very low vaccination rates of single digit and then, but we have learned to live with COVID. If anything, our systems, our airlines, our, you know, I mean, our airline has returned to 60% of pre COVID level. And if you look at the last GDP release, you will notice that certain sectors like finance, ICT, quite a few of them actually posted double digit growth. So what am I saying is that the rate of transmission and the penalties that we have to pay for that, they are not threatening. I can't see that we have locked down on the table. At all, I can see that. So what it means is that if you don't continue, the virus is not going to go away. There's going to be more mutations, but by and large, I think we have learned a few lessons. We are not, I mean, me and you, we're using Zoom now. We're not going to stop using Zoom because there's a very, many of these things have now become new now. And so we just have to play by the air, but I don't think you're going to see the kind of disruption that we're storing 2020 that sent many of the sectors to my most 40% growth rate is unbelievable. So now we are recovering and I'm very, very confident that, I mean, in the area, I couldn't go for Christmas to make my family in London back because I was so scared about the freezing conditions and the transmittability of this, this corona or whatever they call it, but I have all my three doses, but I'm still not convinced. So I have to stay back and couldn't go. Okay. Prof, the monetary policy, apart from the monetary policy rate being retained at 11.5%, the CRR was retained at 27.5%. And the liquidity ratio at 30%. Can you kindly break that down for us? Okay, the liquidity ratio, we have been performing very well. If you look at the December, during the last meeting, they quoted the liquidity ratio around 40%. That is actually measured on it. So it means that it was outperforming the 30% targets of liquidity ratio. So that's good news. Then also, the CRR at 27.5% is okay. I tell you why, because you know, there is, it shouldn't really be agreed to increase the CRR because we've already increased the low to the positive ratio from 55% to 60 to 65%. So if you add 27.5% to it, it's 90% percent. So there isn't, there's very little room left for the banks to lend. So if anything, if you wanted to increase spend, then you can say, okay, let's lower the CRR rate to release more money to the banks to lend. But I think it's okay that we stay where we are at the moment. And we're using a lot of intervention funds to augment the lending. But also if you look at the banks, they have actually increased money supply to the credit to the private sector. It's almost about 25 million. So that has gone up consistently to last year. And that's because of the concerted action by the CBN to push lending to the market. Because in the end of the day, about 6 million businesses are receiving all kinds of intervention funds. Over 4 million of them are Vancouver's program. And they got nearly 1 million on the targeted facility. But then there are 42 million MSNBs in Nigeria. So where are the other 38 million going to go to money for? So that's why they are pushing credit to the private sector so that the private sector will actually be going to the market to go. So that's a very sensible thing to do. So I would support that they stay where they are for now. And behind the mind that the situation will change in the next two, three months, I believe. All right. Quite interesting. All right, that's very interesting. You are adamant that, you know, keeping the interest rates at 11.5% and just keeping them stable, not increasing them, not tightening it, not loosening it, is what Nigeria's economy needs as a woman. Some of your colleagues disagree. They feel that it's... No, but this economy is not an exact science. And then also, there's political correlation right now. The politicians are all over the place. They are going to be, you know, in a blue hot air, left, right, and center. But it always asks for the evidence. What's the evidence? How do they make up the statements? Well, I'm for the evidence. And let me tell you another thing is the reserves are not doing badly. One over $40 trillion, billion dollars. And also, the trade imbalance is ridiculous. We were in $28 trillion and then exporting $5 trillion. And we have the trade imbalance of $8 trillion. Am I not straight to you? And even look at the major person here is China. China is dumping $2.44 trillion of whatever they're dumping it in Nigeria. So you also have to worry about the impact that it's going to have on, you know, do you get more money available? Then people are going to grab it and go and import. Because imports is what they can buy and sell and passing the, you have what you call inflation pass through. So, you know, there's no price regulation here. So anything they buy, whether it's a some standard, be they dump it on the population and the population will pay that huge price for buying dollar at $5.50 naira and all that stuff. So you also have to worry about that. Because again, you don't, and the other thing is this. When I suggest that more of the government borrowings should begin from home, but at also at a decent rate, because if you give a good yield on securities, on government securities, then that's gonna attract more people into buying. And then also some of the foreign, portfolio investment will come chasing that high yield. For example, I saw one that was about 13% for something to set. That's great because 30% percent is really positive interest because it's in excess of 11.5% based rate. So the government attract more foreign portfolio investment to come and just get the difference. Or not to doubt that a lot of the symptomatic investors may go for that rather than the time when it was under 1% and then it gradually went up to 4%, 5%. Okay. So that's where we're going to see more money go to. Okay, so let's quickly also look at another concern that the fact that there might just be ease with the inflation rate in months, according to the projection of this community, of the committee, and of course the CBN governments because of the intervention, they say it's significant, but other Nigerians have queried how significant this intervention from the CBN and the agriculture sector has been. Do you think that this might be a true picture for us? Look, let me tell you, always ask for the evidence. Anybody that tells you to ask for the evidence. Look, if we didn't have the president give the marching order to the central bank, that people should eat what they produce and produce what they eat. And given that the central bank exceeded 43 items from their forest eligibility in 2017 and then backed it by qualitative intervention into any intervention in our court to ensure we can produce enough. If this did not happen, we nearly 1 trillion now being invested, just 900 or something trillion now invested in Anchorage-Bruwer's program and all the other powers. Even the targeted facilities had the role to play in boosting consumption. Now, if this did not happen, more people would have died of hunger and starvation in Nigeria than all the debt you have in conflicts all over the country and COVID put together. That's what I'm saying to you. We have a population growth rate of 3%. We have an organization growth rate of 4.66%. From now to 2020, 30, the people that are going to be in the city will increase from 50% to 75%. That is an organization driven by young people heading out to the city and the people who are growing the food at average ages of the five years and a lot of them are already on the boarding gates. So who is going to grow the food of this country? Who's going to grow the food? And we're not feeding 200 million people. We are feeding 300 million people all the Francophone countries around the North. A lot of them are landlocked. Chad is landlocked. Mijie, Mali, Bokela, Faso, they're all carrying food from Nigeria. And you've seen one of the samples, the example of a header, a former crisis going on. Those cars want to come down to graze in the lower belt, where you have better tropical vegetation. So we are loaded with conflict and more people would have been dying of hunger and starvation. So whoever tells you anything asks for the evidence. Coming back to the, you saw the rice pyramid. The rice pyramid was only possible. It does not bring you the picture of what happened about the grandma pyramids in the past. You saw them over a million tons of grains being on display. But that is just in Naguja. All other states are going to be having their own rice pyramid. And I know that this will be released immediately to the mailers to mail so that the price can come down on the human being. So it's a big fit, you know, by no standard, it is very, very important to get. Now, what is the, and let me tell you what why it's so significant. If you look at, if you ask somebody in 2014, what are the problems of agriculture in Nigeria? You know what I tell you? Oh, feeder roads to rural area to bring out the food, electricity, then transportation. They also say post harvest losses in between 30 to 70%. And they'll point out all kinds of things. Fertilizer, the farmers need fertilizer. And what happens? You have hundreds of billions of Naira buying fertilizers. Yes. One size fits all fertilizer that is being sent to the state. And you see some commissioners going to sell the trailer loads to sell them. Not even give it to the farmer, they sell them. You see, some commissioners have been dismissed. Then you call the grains that will arrive. They don't get to the farm until the farmer is in his over. So what you found here was the actual man that actually does the business who grows the farm doesn't actually have a look in. He doesn't have access to the finance. And the government program is not designed to deal with the access to finance that is the critical thing to them. Apart from all the shenanigans going on on the agricultural development program. So what we had, as you say, the 2014 was agricultural development program. What we have now is agribusiness. You have the banks saying, okay, I'm going to intervene. They're not going to get involved in politics. I'm not going to get involved in political economy of what goes on. Who supplies that? No, I'll go for the farmer and then give him the money. So the central bank carries the banks with them and then directs them. First of all, they have to risk lend it to the agriculture so that the banks are comfortable to lend. So you have to implement biometric bank verification so that the banks know who they are dealing with. And then you have to implement a use of satellite to identify those coordinates of the so-called one hectare, one hectare, one farmer. Where are they? So the bank can actually see where the land is and they sit on their table and know whether they are clear that land or they didn't. Then we also wanted to do GSI, Global Stranding Instruction. So if the farmer doesn't pay, the bank is now authorized by law to sweep the account of that farmer everywhere everybody has gone. And of course, they will not guarantee the cost of sweeping the account. Thank you, Professor. If there's so many things to talk about as regards the economy, you seem to have a bit of an optimistic view of a CBN's policies. You've talked about the right price permits. A lot of Nigerians feel, you know, if things are moving forward with this rice revolution, why are we seeing the reflection in the price on the market? Of course, agricultural interventions. But it could have been worse. It could have been worse. The picture is that we would have had more people dying on the surface than home. We have to go, sir. I've recorded all the interventions. We want to fight COVID put together. Yes, agricultural interventions, you know, in the poultry sector, the farmers can't even afford the feed, sir. But we'll have some more time to talk about it. Thank you very much for your time. Professor Kenneth Fez, an economic analyst, it's been very thrilling listening to you and gleaning from your waist. And we appreciate your time, sir. Thank you. All right. It's still the breakfast on Plus TV Africa. Merci. It almost seemed like a classroom I totally enjoyed it. But we have a discussion on Nigeria's corruption, ranking on the corruption perception index by Transparency International up next. Yes. And of course, when we return, we'll head straight to that conversation. And look at what are all of these figures, the statistics mean for the Nigerian populace and it means for the Nigerian economy.