General News
Nigeria Monetary Policy Makers in Tight Spot as Stagflation Takes Hold
Monetary policymakers are in a tough spot after COVID-19 claimed the economy as a victim of lockdowns and reduced activity. The central bank has to take on a therapeutic role to nurse the country back to health. Are the available remedies enough to save the patient or have decades of over-reliance on the cover-all solution of strong oil revenues blunted their effectiveness?
CBN unlikely to cut rates
In its January decision, the Central Bank of Nigeria (CBN) left its key interest rate unchanged at 11.5 percent, citing the pursuit of price stability. While other central banks adopted looser monetary policy to defend their economies against COVID-19, the CBN simply doesn’t have enough breathing room because it is dealing with stagflation marked by price inflation in the essential needs sector and a loss of productivity at the same time.
The CBN shows decisiveness and determination to reverse the stagflation and loss of output trends, according to its January meeting statement. Even amid the headwinds, it’s encouraging that the CBN realises the problem and is taking measures to handle it.
Nigeria faces severe stagflation
The economic consequences of COVID-19 are the environment of stagflation with rising inflation and a recessionary economy, said the CBN. Stagflation is characterised by price rises which occur when there is an increase in inflation and at the same time an increase in unemployment and lower economic output. Meanwhile, import restrictions announced by the central bank to help local producers have added to fuel inflation which hit a three-year high in December.
Traditional monetary policy is hard-pressed to find a solution to both stagflation and a depressed economy at the same time. Lowering interest rates is one option but in Nigeria’s case might lead to an increase in inflation which is well above the target rate of six to nine percent and make things worse.
The remedy for stagflation depends on treating the root causes. These are the extensive pandemic lockdowns, chronically high inflation, and uncertainties in the oil markets feeding into reduced output and fiscal risks. While most of the causes are likely to pass once the pandemic is under control, none of them appears to have an early ending at the time of writing. Vaccination programmes take time to be effective and meanwhile demand for oil remains at relatively low levels because of travel restrictions.
Economic recession
Nigeria struggles with a recession with the threat of higher unemployment and poverty rates exacerbated by the public health threat from COVID-19. The recession impacts the buying power of the Naira and comes at a bad time after the central bank’s efforts to manage the currency and stoke economic growth in recent years rather than just focusing on keeping inflation in its target band of six to nine percent.
Monetary authorities had to devalue the Naira twice last year after a shortage of dollars pushed up import prices and increased the gap between the official and black-market exchange rates.
Unconventional tools of growth
In January, the CBN disbursed N20 trillion to cushion the pandemic effects and support the signs of improvement which came thanks to easing lockdown restrictions and more promising Oil prices. The CBN said that N192.64 billion was disbursed to households and small businesses from the COVID-19 Targeted Credit Facility.
The deployment of funds directly to their targets is certainly a significant support for the economy but the second wave of infections and ongoing uncertainty about the vaccine rollout threatens to sabotage any meaningful recovery, at least in the short term.
Too early to tighten?
The coronavirus is the dovish factor in the CBN’s price stability mandate and the central bank is likely to adopt a wait-and-see approach for the foreseeable future. Tightening monetary policy this year may be too soon and make Nigeria an outlier among major economies expected to ease or hold rates at record lows to breathe new life into their economies.
Other than direct funding, the CBN may end up using additional unconventional tools to revive growth including tweaking the loan to deposit ratio, the liquidity ratio, and cash reserve ratio. The questions are whether these will be enough to save the patient from more financial pain and what will be the long-term effects on Nigeria’s economic health.
National Space Research and Development Agency (NASRDA) is set to commence the implementation of its space regulation and licensing mandate following the approval of a N20 billion take-off fund by President Bola Tinubu.
Speaking in an interview, Dr. Matthew Adepoju, director-general, NASRDA, emphasised that the agency’s regulatory functions, as outlined in the NASRDA Act (2010), have remained unfulfilled since its establishment in 1999.
To address this, Adepoju submitted a memorandum to President Tinubu advocating for enforcement of space regulation, leading to the recent approval of funds.
Adepoju highlighted the urgency of regulating Nigeria’s space sector to prevent misuse, particularly regarding security-sensitive activities.
The regulatory framework will oversee:
Satellite image providers
Geographic information system operators
Satellite-based telecommunications and broadcasting services
He warned that unregulated geographical data intelligence could be exploited by non-state actors, underscoring the importance of strict oversight.
NASRDA has set up a licensing platform open to public and private sector operators in the space industry.
The regulation will cover Nigeria’s three space segments:
Upstream – Deep space activities
Midstream – Satellites and orbital objects
Downstream – Ground stations and space service users
Although the agency has yet to access the N20 billion fund, Adepoju confirmed that regulatory and licensing functions have commenced.
Amazon has released more details on Project Kuiper, its plan to establish a satellite internet service resembling Starlink. The first launch of satellites for Amazon’s Kuiper project is set to ascend as soon as April 9, less than a week away.
27 satellites are planned to be deployed using an Atlas V rocket, which will blast off from Cape Canaveral Space Force Station in Florida.
This is just the earliest beginnings of the system, which Amazon says will be made up of 3200 satellites in low-Earth orbit. And that’s just for the “first-generation” system that will provide home internet to, according to Amazon, “virtually any location on the planet”.
Amazon has more than 70 additional launches for Project Kuiper planned over the next few years, including sending satellites on rival SpaceX’s rockets.
“We’ve designed some of the most advanced communications satellites ever built, and every launch is an opportunity to add more capacity and coverage to our network,” says Rajeev Badyal, Vice President of Project Kuiper.
“This will be the first time we’ve flown our final satellite design and the first time we’ve deployed so many satellites at once.”
Despite being quite early on in establishing the satellite array required for a functional satellite internet system, Amazon expects to be able to start offering the service “later this year.”
Project Kuiper vs Starlink
Rival Starlink currently has more than 7000 satellites in low-Earth orbit, and future plans include expanding that array to a count of 34,400.
Starlink has also become the leading provider of space junk, with the company’s satellites falling out of orbit “almost every day” according to Space.com.
Satellite internet services like those of Starlink and Project Kuiper require a satellite receiver, which currently starts at £300 for Starlink models.
Starlink charges £75 a month for home internet, which can provide up to 220Mbps typical internet speeds, according to the company’s website.
Satellite internet can often be a workable solution for homes not covered by optical fibre or 4G/5G mobile internet.
The company has also supplied Ukraine with internet connectivity since Russia invaded Ukraine in 2022.
“My Starlink system is the backbone of the Ukrainian army. Their entire front line would collapse if I turned it off,” SpaceX CEO Elon Musk claimed on X. He has since claimed he does not plan to deactivate Ukraine’s access to the service.
Nigerian Military, in partnership with Briech UAS, a communications company, has unveiled the first and largest indigenous attack drones and bombs in Nigeria and Africa.
Briech UAS, alongside the Nigerian Army, demonstrated these attack drones and bombs at the company’s headquarters in Abuja on Wednesday.
General Christopher Musa, chief of Defence Staff (CDS), hailed the initiative as a significant milestone in Nigeria’s progress toward self-reliance in defence technology and a crucial step in enhancing national security.
Musa highlighted the importance of developing combat drones, particularly for intelligence gathering. He pointed out that these drones would play a pivotal role in addressing complex and asymmetric security threats.
“These force multipliers will greatly enhance the operational effectiveness of our military, especially in a world where global politics complicate the procurement of advanced military hardware,” he stated.
“Countries that do not produce these solutions face bureaucratic and diplomatic challenges when acquiring essential platforms. We are directly addressing this challenge.
“If we do not produce what we need, we will be at the mercy of others, even if we have the financial resources to acquire them.
“By manufacturing these drones locally, Nigeria reduces dependence on foreign resources, ensures faster acquisition, and strengthens its ability to respond to security threats swiftly.
“With the brilliant minds we have, particularly among our youth, we can create outstanding technology that competes on a global scale,” Musa said.
Plateau Governor Caleb Mutfwang underlined the importance of supporting indigenous products for Nigeria’s growth.
He stressed that the drones would be vital in safeguarding the country’s sovereignty, particularly in Plateau State, where some of these technologies have already been deployed to enhance the efficiency of ground forces.
Mutfwang also revealed that his state was collaborating with local bomb and drone manufacturers like Briech UAS to counter insurgency with domestically produced weapons.
“As a nation, we made a mistake by allowing non-state actors to acquire capabilities nearly on par with state actors,” he stated.
“We’ve entered into a partnership that has led to the deployment of these facilities in our state. We’ve seen substantial improvements in the effectiveness of our security forces.
“It was a mistake to let non-state actors gather capabilities that could almost overpower legitimate state forces. We must correct that imbalance.
“We must ensure no one within our borders has capabilities that surpass or match those responsible for protecting our national sovereignty,” he added.
Earlier, Dr Bright Echefu, chairman of Briech UAS, noted that insurgent groups like Boko Haram and ISWAP have been using commercial drones for reconnaissance and attacks.
“These drones have been used to track and attack our troops, coordinating ambushes and executing crude aerial strikes,” he said.
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