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UK Interest Rate Rise In 2022 Becoming More Likely

UK interest rate rise in 2022 becoming more likely, says Bank chief

The inflationary pressures building in the UK has made a rise in interest rates next year more likely, the central bank chief has warned.

Against a backdrop of rising fuel prices and the prospect of higher transport costs pushing up the price of food in the run-up to Christmas, the Bank of England’s governor said there were signs that inflation could be sustained and the central bank’s monetary policy committee (MPC) may need to increase borrowing costs in 2022.

With inflation at 3.2% and heading above 4%, he said inflationary pressures appeared to be worsening rather than improving, although a slowdown in the economy’s growth rate over recent months meant the MPC would be reluctant to do anything that choked off the recovery.

Speaking to the Society of Professional Economists in London, Andrew Bailey said: “Recent evidence appears to have strengthened that case [for an increase in interest rates] but there remain substantial uncertainties and we are monitoring the situation closely.”

Last week the MPC voted to keep interest rates at 0.25% and its £875bn stimulus programme in place after concerns that a rebound in economic growth since the early part of the year was beginning to peter out.

The committee said it was concerned that there were more people on the government’s furlough scheme than the Bank predicted in its August health check on the economy, fuelling concerns that unemployment would increase when the scheme ends this week.

Playing down the prospects for a return to previously high levels of growth, Bailey said the economy remained on a journey to a post-Covid situation and policymakers would need to put in the “hard yards” to navigate a route to safety.

“I, and other MPC members, have used the analogy of a bridge to describe the role of economic policy in the age of Covid, the bridge to the other side of Covid. We are still on that bridge,” he said.

“The rate of recovery has slowed over recent months, and that slowing is continuing. Relative to the fourth quarter of 2019, on the latest data to July, the level of GDP was 3.5% lower.

“That’s around one percentage point below the level consistent with the August monetary policy report. It is inevitable in a bounceback that the growth rate will slow as the recovery nears its end point. It is not, though, inevitable – or desirable – that the previous level is not regained.”

Samuel Tombs, the chief economist at the consultancy Pantheon Macroeconomics, said Bailey’s downbeat comments about the economy could be set against his worries about inflation to leave the path of interest rates open.

“Our sense from the speech is that Mr Bailey leans slightly dovishly and is not going to rush to hike [interest rates], unless the case is overwhelmingly strong,” he said.

“But given that the amount of slack in the labour market will be much more apparent in December, when the impact of the wind down of the furlough scheme at the end of this month will be visible in the official data, Mr Bailey is hedging his bets and not providing any hostages to fortune.”

Business

Adopting CNG can reduce Nigeria’s inflation – FG

The Nigerian government has said that successfully adopting Compressed Natural Gas can reduce inflation, which soared to 33.69 per cent in April 2024.

The Programme Director of the Presidential Initiative on Compressed Natural Gas, Pi-CNG, Michael Oluwagbemi, disclosed this during a one-day South-South and South-East stakeholders’ engagement meeting in Port Harcourt, Rivers State.

He noted that Nigerians can realize between 40 to 50 per cent savings from petrol upon adopting CNG.

“It can reduce inflation. It is cheaper. You can realize between 40% and 50% savings from patrol. This is good for Nigeria, and it is safer.

“It is 18 times safer than petrol and diesel. It is cleaner and safer for the environment,” he said.

He added that Nigeria would save about $2.5 billion by converting every one million vehicles to CNG.

Recall that President Bola Ahmed Tinubu asked all federal government ministries, departments and agencies to procure CNG buses.

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Nigeria won’t need to import fuel by June — Dangote

Aliko Dangote, Chairman of the Dangote Group, announced that by next month, Nigeria will no longer need to import gasoline due to the operational plans of the Dangote Refinery.

Speaking as a panellist at the Africa CEO Forum Annual Summit in Kigali, Dangote highlighted that the refinery, which has already commenced supplying diesel and aviation fuel in Nigeria, has the capacity to fulfil the diesel and petrol needs of West Africa and the aviation fuel requirements for the entire African continent.

Dangote emphasised, “Right now, Nigeria has no cause to import anything apart from gasoline, and by sometime in June, within the next four or five weeks, Nigeria shouldn’t import anything like gasoline; not one drop of a litre.”

Highlighting how far the oil company has come, Dangote expressed how they are focused on ensuring that the continent will depend less on imports in the near future.

“We have enough gasoline to give to at least the entire West Africa, and diesel to give to West Africa and Central Africa. We have enough aviation fuel to give to the entire continent and also export some to Brazil and Mexico,” he said.

“Today, our polypropylene and our polyethene will meet the entire demand of Africa, and we are doing base oil, which is like engine oil; we are doing linear benzyl, which is a raw material to produce detergent. We have 1.4 billion people in the population; nobody is producing that in Africa.

“So, all the raw materials for our detergents are imported. We are producing that raw material to make Africa self-sufficient.

“As I said, give us three or a maximum of four years, and Africa will not, I repeat, not import any more fertiliser from anywhere.

“We will make Africa self-sufficient in potash, phosphate, and urea; we are at three million metric tonnes, and in the next twenty months, we will be at six million metric tonnes of urea, which is the entire capacity of Egypt. We are getting there.”

Dangote recalled how his dream for further investment in Africa as well as ending fuel importation in Africa has culminated in what is now one of the biggest refineries in the world.

“For some of us, despite the boom of the capital market in the US—you know, Google, Microsoft, and the rest—we didn’t participate; we took all our money and invested in Africa.

“We had this dream just about five years ago, and we said we wanted to move from five billion dollars in revenue to thirty billion dollars in revenue, and we made it happen. It is possible and now we have made it happen and now we have finished our refinery.

“Our refinery is quite big; it is something that we believe that Africa needs. If you look at the whole continent, there are only two countries that don’t import petroleum products, which is a tragedy.

“They are only Algeria and Libya. The rest are all importers. So, we need to change and make sure that we don’t just go and produce raw materials; we should also produce finished products and create jobs.

Speaking further, the African richest man said, “One of the things we also need to know as Africans is that we produce raw materials and export them when you export raw materials and somebody now keeps importing things into your continent and dumping goods. what you are importing is poverty and exporting jobs. So, we have to change that narrative.”

“We just commissioned in February, and now we are producing jet fuel, diesel, and by next month, gasoline.

“What that would do is that we would be taking most of the African crude that is being produced and also be able to supply not only Nigeria because our capacity is too big for Nigeria, but it would also supply West Africa, Central Africa, and also South Africa.

“We have 650,000 barrels per day, 1 million metric tonnes of polypropylene, and 590,000 metric tonnes of carbon black; those are the raw materials—ink, dyes and co.

“We are expanding more. This is the first phase and we are going out to the next phase, which will start early next year.”(tribune)

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Business

Customs FX rate for import duties rises to N1,530/$

The foreign exchange (FX) rate for import duties has been adjusted by the Nigeria Customs Service (NCS) to N1,530 per dollar.

This was adopted on Friday, May 17, representing a 6.13 percent increase compared to the N1,441.58 adopted on May 6.

The NCS always adopts FX rates recommended by the Central Bank of Nigeria (CBN) for import duties based on trading activities in the official FX market

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