CBN increases Monetary Policy Rate to 18%

 

.As FG removes excise duty for telecoms services

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), has increased the Monetary Policy Rate (MPR) to 18 per cent from 17.5 per cent.

 

The CBN Governor, Mr Godwin Emefiele said this on Tuesday when he read the communique issued at the end of the 290th meeting of the MPC.

 

The News Agency of Nigeria (NAN) reports that this is the 6th consecutive increase of the MPR, which is the baseline interest rate in an economy.

 

At the last MPC meeting in January, it was increased by 100 basis points, from 16.5 per cent to 17.5 per cent.

 

According to Emefiele, 10 out of the 12 Committee members present at the meeting voted for a moderate rise in the MPR

 

He, however, said that all other parameters remained constant.

 

The Asymmetric Corridor of +100/-500 basis points around the MPR, the Liquidity Ratio of 30 per cent and Cash Reserve Ratio (CRR) of 32.5 cent were thus retained.

 

According to Emefiele, the committee debated whether to continue the rate hike to further check inflation.

 

He said that the MPC also considered whether to hold the rate to observe emerging developments and allow for the impact of the last five rate hikes to permeate the economy.

 

“Loosening in the view of the committee members would undermine gains so far achieved

 

“MPC observed the upward risk to price development and expectations of the removal of the Premium Motor Spirit (PMS) subsidy.

 

“These, in the view of members, provide a compelling argument for an upward adjustment of policy rate, albeit less aggressively, ” he said.

 

He also said that the apex bank’s Naira redesign and cash withdrawal policies had resulted to a sizeable reduction in currency outside the banking system.

 

According to him, that is an indication of improvement in the potency of monetary policy tools of the CBN.

However,the Federal Government has announced the removal of excise duty for telecommunications sub-sector of Nigeria’s Digital Economy Industry in line with the recommendations of the Committee it constituted to review the applicability of the duty to the sector which is considered already overburdened with taxation and sundry levies.

Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami, disclosed this on Tuesday at a press briefing organized to provide updates on the status of the 5 percent excise duty, whose applicability to the telecom sector was objected by the Minister in August 2022, following which President Muhammadu Buhari suspended its application to the telecom sector and set up a Presidential Review Committee on Excise Duty in the Digital Economy Sector.

Pantami, who is the Chairman of the Committee, specifically set up for the purpose of reviewing the proposed excise duty in the telecom sector, said the Committee had carried out its national assignment and accordingly submitted its report to the President, justifying why the sector should be exempted.

He said the Committee’s submissions can be summed up in three arguments put forward to justify why additional burden in form of taxes or any level should not be imposed on the telecom sector to prevent a reversal of the important contribution the sector is making to the growth of the Nigerian economy.

 

According to him, “Our justifications are based on three premises: First, is the fact that operators in the telecoms sub-sector of the digital economy industry currently pay no fewer than 41 different categories of taxes, levies and charges; secondly, that telecoms has continued to be a major contributor to Nigerian economy in terms of Gross Domestic Product Contribution (GDP).

 

“The third ground for contesting the Excise Duty in telecom sector is the fact that, despite increase in the cost of all factors of production across sector, and naturally leading to increase in costs of products and services, telecom sector is the only sector where cost of service has been stable and in many cases continued to go down over the past years and therefore, adding more burden will destroy the sector,” the Minister said.

He said that Buhari, having looked into the arguments put forward by the Committee and relying on the provision of Section 5 of the Nigerian 1999 Constitution, as amended, has therefore, exempted the telecoms sector from the list of sectors to pay the excise duty as stated in Finance Act of 2021 and other subsidiary legislations, all of which are not as superior as the Constitution which permits the President to grant such waiver.

“I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the five percent excise duty to be paid and this is because of the strength of the argument presented to him by the Committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the 5 per cent excise duty.”

 

The Minister assured Nigerians, who are telecom consumers, that the presidential exemption given to the telecom sector shall be sustained by the incoming administration as “the decision by the President is not about any political party or any administration but about Nigeria and welfare of Nigerian citizens.”

 

He said that the Digital Economy Sector has continued to contribute significantly to the growth of the Nigerian economy, having contributed 14.07 percent to the GDP in the first quarter of 2020; 17.79 percent in the second quarter of 2021; and 18.44 percent in the second quarter of 2022.

 

He added that the sector has also increased its quarterly revenue generation for the government from N51 billion to over N480 billion, representing a growth of 594 percent; while the cost of buying data has also reduced from N1,200 in 2019 to N350 presently, despite the increase in the cost of operations, including the energy challenge that has caused mobile network operators to power base stations with over 32,000 power generating to provide seamless services to their teeming consumers.