BREAKING NEWS, Business Briefs
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INCREASES in the prices of bread, meat and cereals have pushed up the country’s inflation rate to eight per cent. This was contained in the consumer price index, CPI, released by the National Bureau of Statistics, NBS, released on June 16.
The CPI report noted that the eight percent recorded in May represented an increase of 0.1 percentage point over the 7.9 percent recorded in April. Since a decline of the headline index in January, the report stated that prices had continued to trend upwards, however, at a slow pace, increasing by 0.1 percentage points (year-on-year) each month between February and May.
The report stated that on a month-on-month basis, the highest price increases were recorded in bread and cereals, fruit, soft drinks and meat groups. “In May 2014, the CPI, which measures inflation, was marginally higher when compared with April 2014. Prices rose by eight per cent (year-on-year) in May, from 7.9 percent recorded in the previous month. Since a decline of the headline index in January, prices continue to trend upwards, albeit at a slow pace, increasing by 0.1 percentage points (year-on-year) each month between February and May. The price increases seen in May were as a result of higher prices in groups that contribute to both the food and core sub-indices.”
Specifically, the report stated that food prices edged higher to 9.7 percent from 9.4 percent in April. Prices were pushed higher as a result of higher prices in the bread and cereals, fish, dairy, fruits and vegetable groups. The price increases in the food sub-index were, however, weighed down by relatively slower increases in the meat, oils and fats, potatoes, yams and other tuber classes.
On a-month-on-month basis, the NBS said the urban and rural indices had increased by 0.8 per cent and 0.77 percent, respectively, which were about 0.2 percentage points higher than rates recorded in April.
NAICOM on Risk-based Capital
THE National Insurance Commission, NAICOM, is exploring the use of risk-based capital for solvency management. According to George Onekhen, deputy commissioner, finance and administration, this is in tandem with its goal of joining other developed industry regulators and operators.
Onekhen said the commission has started the process of risk-based supervision and would start the implementation soon. According to him, risk-based capital relates to the risk every insurance company carries. He said what is outstanding is for the Commission to have a framework based on a financial statement.
Onekhen said for any jurisdiction to apply solvency 2 margin, it must be legal, adding that the issue of proportionality determines what level companies should apply the margin. He noted that in Europe, there is a minimum amount of turnover that firms need to exceed to be required to apply Solvency 2.
“For us to find out the relevance to Nigeria,” he said, “the amount of capital a company has in naira has to be converted to euro, adding that this would show where the companies fall”. He stressed that most firms in the country were outside this range. However, he explained that Solvency 2 has three pillars. In summary, he said that the area we need to look on is Risk Based Capital and that it was being attended to so that in case an insurance firm decided to write a motor portfolio only, then it might need just an amount that is proportionate and commensurate with the risk they carry. For example, if company A writes a motor insurance only and company B writes a combination of motor and aviation, company B would be required to have a higher capital because of the higher level of risk that it carries. Also, if company C writes a combination of motor, aviation and oil and gas, it would be required to have a higher capital than company A and B. So, there must be a correlation between a risk company A carries and the capital which it deploys to do that business. This is what risk based capital is all about,” he said.
Onekhen further explained that Pillar 1 deals with quantitative requirement while Pillar 2 deals with corporate governance and supervisory review process. Pillar 3, on the other hand, deals with market discipline. “In Pillar 1, there are two items which has to do with the rules on valuation of asset and liabilities and risk based capital. As far as Pillar 1 is concerned, the valuation of assets and liabilities, we have dealt with it by implementing the International Financial Reporting Standard, IFRS.”
Dangote Cement Allays Price Hike Fears
DANGOTE Cement Plc, has dismissed fears that the recent upward review of the quality standard of cement manufactured in the country by the Standards Organisation of Nigeria, SON, would lead to a price hike on the commodity. The company said it was necessary to allay the fears of consumers that the upgrade of cement quality and the new classification of grades would affect prices, insisting that quality had nothing to do with price.
Devakumar Edwin, group managing director, Dangote Cement, said those making such insinuations were doing so to blackmail the regulatory authorities into backing down on the new quality standard. He explained in an interview with journalists that for any patriotic manufacturer with consumer interest at heart, there was no relationship between the new standard review and the price of the product except for profiteering.
Edwin noted that his company started producing 42.5 grade of cement for the past eight years at its Obajana and Ibese plants with the same price of the lower grade of 32.5 produced by some other competitors. According to him, the switch over to a higher quality of cement should not be a difficult process that would necessitate an increase in the price of the product.
The Dangote Cement boss added that his company had even gone ahead to produce the 52.5 grade of cement and that it would be uncharitable for anyone to claim that the new standard would lead to a hike in the price of the product. Edwin then pledged that much as his company would continue to cooperate with government and authorities in the regulation of the cement industry, it would ensure that the price was not hijacked by profiteers.
Compiled by Anayo Ezugwu
— Jun. 30, 2014 @ 01:00 GMT
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