CBN worries as oil fortunes dwindles

*GDP Contrasts to 6.58%

20 March 2013, Abuja –  The Central Bank of Nigeria, CBN, is worried by the ountry’s dwindling oil fortunes, even as the monetary policy committee stated that the Nigeria’s gross domestic product, GDP, rate declined from 7.43 per cent in 2011 to 6.58 per cent in 2012.

Arising from its two-day Monetary Policy Committee, MPC, meeting, the apex bank said the decline was partly driven by the oil sector which contracted by 0.91 per cent.

“The major driver of overall growth, therefore, remained the non-oil sector, with agriculture; wholesale and retail trade; and services contributing 1.37, 2.19 and 2.10 percentage points, respectively.”

In a Communique issued at the end of the meeting, the MPC stated that it was “concerned that the declining contribution of the oil sector to growth, which became apparent in the second half of 2011, continued in Q4 2012. Crude oil production, including condensates and natural gas liquids, decreased by 37,000 barrels per day, bpd, in February 4,  2013 to 2.035m bpd compared with the level of 2.072m bpd attained in December 2012.

“Oil theft in the Niger-Delta remained a source of concern. The Committee was also concerned that the decline in the growth rate of agricultural output which started in the 4th quarter of 2011 continued up to the end of 2012.

The Committee was of the view that although the GDP growth projection remained high, there were a number of risk factors that were likely to affect output performance.

“These include perception of increased levels of corruption and impunity in the country, insecurity particularly in the northern part of the country, as well as mixed signals from power and petroleum sector reforms.”

The CBN however had some cheering news, as it noted “upswing in activities in the capital market, as equities market indicators all trended upwards in the review period. The All-Share Index, ASI, increased by 17.3 per cent from 28,078.81 on December 31, 2012 to 32, 950.08 on March 15, 2013 while Market Capitalization, MC, rose by 17.5 per cent, from N8.97 trillion to N10.54 trillion.

The Committee, however, observed that the improved performance was largely induced by the substantial portfolio inflows, as foreign investors took advantage of the favourable domestic environment brought about by the high yield on government debt instruments, and stability in the naira exchange rate.

Chaired by Lamido Sanusi Lamido, governor of the Central Bank,  the MPC also noted the wide spread between deposits and lending rates, which it attributed to the inefficiencies in the market requiring institutional and structural reforms that would enforce behavioural change on the market, consistent with the long term needs of the economy.

“The Committee was of the view that sustainable low lending rates, could be achieved if the necessary infrastructure such as stable power and good roads, amongst others, were put in place.

The Committee noted that the present infrastructural condition has always provided an incentive for asymmetric response on the part of the banks to the policy rate in a manner that was not always beneficial to the small and medium customers.

With respect to the price level, the Committee observed that the rising pressure in February after a significant moderation in January, was indicative of the fact that there were some underlying factors that could constitute a threat to inflation in the medium term.”

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  • Nigeria’s dwindling oil fortunes may be the wake up call the country’s leadership at all levels need to recognise the perverted values that drive everydaay life in the country, and make a conscious effort to drive CHANGE.