The Monetary Policy Committee (MPC) has commenced its final two-day meeting of 2024 in Abuja, with analysts widely anticipating a hike in the Monetary Policy Rate (MPR) by 25 to 50 basis points, buoyed by recent quarterly economic gains.

The MPR hike is driven by Nigeria’s persistent inflationary pressures, volatile naira, and ongoing economic reforms.

Nigeria’s inflation surged to 33.88% in October 2024, up from 32.7% in September, according to the National Bureau of Statistics (NBS). This marks the third-highest inflation rate in the country’s history, only trailing the 34.19% peak recorded in June 2024.

The Central Bank of Nigeria (CBN) has aggressively implemented monetary tightening since 2022, raising the MPR by 1,525 basis points (bps) over the period, including 825 bps since mid-2023.

The inflationary pressure stems primarily from supply-side factors, such as flooding in northern Nigeria, rising food prices, and transportation costs.

Razia Khan of Standard Chartered Bank told BusinessDay that inflation remains driven by these shocks rather than excessive demand.

“This follows a rise in October inflation to 33.9 percent y/y, reflecting continued pressure on food and transport prices. Given meaningful monetary tightening in recent months, the October inflation uptick was much faster than we had expected. In our view, it reflects the lagged effect of earlier flooding in northern Nigeria, and possibly also the lagged effect of September’s sizable fuel price increase, which was followed by a much smaller increase in October. Supply-side shocks, rather than excessive demand, continue to drive Nigeria’s inflation,” she said.

Other analysts who spoke to BusinessDay broadly expect the CBN to raise the MPR in response to persistent inflation and naira volatility. Ayodeji Ebo of Afrinvest suggests a 25-50bps hike to maintain the attractiveness of naira-denominated assets and reduce pressure on foreign exchange.

“Given the unrelenting rising inflation, I expect the CBN MPC to raise the MPR by 25-50bps to keep the interest rate attractive and reduce pressure on FX. On the other hand, it will add further pressure on the companies due to the impact on financial costs.”

However, he warns this could add financial strain on businesses due to rising borrowing costs.

Tobi Ehinmosan of FBNQuest Capital Research concurs, emphasizing the MPC’s commitment to addressing inflationary pressures.

“I think the MPC has always reiterated that their main objective is to address inflationary pressures and ensure price stability. As such, if inflation continues to trend up, the MPC may likely continue to sustain its hawkish stance to rein in inflation,” Ehinmosan noted.

Meanwhile, Charlie Robertson of FIM Partners UK Ltd expects no rate change, citing fragile confidence in the naira as a potential reason for caution.

The CBN has ramped up its use of Open Market Operations (OMO) to manage liquidity. In the first nine months of 2024, it sold N7.6 trillion in OMO bills, compared to just N150 billion during the same period in 2023. This tool has been critical in mopping up excess liquidity and supporting exchange rate stability. Ayodele Akinwunmi of FSDH Merchant Bank noted that this aggressive strategy aligns with the CBN’s objectives to stabilize inflation and the naira.

The Last Hike in Sight?

While a rate increase is widely expected, analysts like Khan believe the November hike could mark the end of the current tightening cycle. “The cumulative effect of earlier tightening is likely still working its way through the economy,” she explained.

Nigeria’s economic reforms under President Bola Tinubu, including fuel subsidy removal and foreign exchange liberalization, have compounded inflation but also laid the groundwork for long-term structural improvements. Many, including the International Monetary Fund (IMF), have noted that the impact of these reforms, alongside the CBN’s monetary tightening, will be critical in shaping Nigeria’s economic trajectory in the coming years.

For consumers and businesses, the likely hike means higher borrowing costs, which could dampen investments. However, the overall effectiveness of these policies in a supply-driven inflationary environment remains a topic of debate.

In a recent interview at the Hong Kong University of Science and Technology, Nvidia CEO Jensen Huang shared candid insights into the state of artificial intelligence (AI) and Nvidia’s contributions to its development.

Huang discussed the persistent issue of AI hallucinations, explained key advancements in AI development, and reflected on his career journey, including personal anecdotes about how he set high expectations for himself from an early age.

AI hallucinations, a notable challenge in artificial intelligence, occur when models like chatbots or generative AI systems produce outputs that sound plausible but are factually incorrect or entirely fabricated. It often stems from incomplete or biased training data, poor model architecture, and overfitting or underfitting during development.

These errors, distinct from AI biases or simple mistakes, have real-world implications across various domains.

Addressing the phenomenon—Huang was forthright about the challenges involved. He stated that resolving this issue would likely take several years, despite the progress in AI technologies.

“Today, the answers that we have are the best that we can provide,” Huang explained. However, he emphasized that current systems require users to evaluate whether an AI-generated answer is sensible or fabricated. He noted, “We need to get to a point where the answer that you get, you largely trust,” but acknowledged this milestone is still years away.

During the interview, Huang outlined three critical areas of AI development. The first stage is pre-training, which he likened to a college education, where the AI ingests vast datasets to build foundational knowledge. Next is post-training, which involves refining the AI’s capabilities in specialized tasks through techniques like reinforcement learning, synthetic data generation, and multipath learning.

The final stage, Test Time Scaling, represents what Huang described as “thinking.” Here, AI systems break down problems step by step, iterating and simulating outcomes to enhance solution quality.

“Today, the answers that we have are the best that we can, but we need to get to a point where the answer that you get is not the best that we can provide, and somewhat you still have to decide whether is this hallucinated or not hallucinated, does this make sense, is it sensible or not sensible? We have to get to a point where the answer that you get, you largely trust.”

He also added, “I think that we’re several years away from being able to do that, and in the meantime, we have to keep increasing our computation.”

Despite the challenges, Huang expressed optimism about the role Nvidia has played in AI’s evolution. He highlighted that Nvidia’s groundbreaking work has drastically reduced the cost of computation by a factor of a million. This, according to Huang, has fundamentally altered researchers’ habits, enabling exhaustive data analysis without hesitation.

“What Nvidia has contributed is that we’ve taken the marginal cost of computing and reduced it by a million times.” He said, “When the cost of something reduces by a million times, your habits fundamentally change…that is the single greatest contribution Nvidia ever made, that we made it so that using a machine to learn exhaustively an enormous amount of data is something that researchers wouldn’t even think twice to do. That’s why machine learning has taken off.”

The conversation also touched on Nvidia’s skyrocketing demand and the increasing need for computing power in AI. Huang refrained from predicting whether AI computing demands would continue to multiply at the same exponential rate over the next decade but acknowledged the trend’s transformative implications.

A host at the event highlighted that the demand for AI computing has grown fourfold annually, translating into a million-fold increase over a decade, a trajectory that has underpinned Nvidia’s meteoric stock performance.

Responding to critiques about the high price of Nvidia’s AI GPUs, Huang defended the costs by emphasizing the massive discount Nvidia has effectively offered over the past decade.

“It’d be a million times more expensive if Nvidia didn’t exist,” he quipped. “I gave you a million times discount in the last 10 years. It’s practically free!”

On a personal note, Huang recounted how he wooed his wife by promising he would become a CEO by the age of 30—a goal he achieved. The anecdote added a lighter, more human touch to a discussion largely focused on the technical and economic dimensions of AI development.

Strategies like using diverse datasets, refining training methods, and employing cross-verification tools like Nvidia’s NeMo Guardrails have been recommended to mitigate AI hallucination risks?.

The Port Harcourt Refining Company (PHRC) in Rivers State has commenced crude oil processing, marking a significant milestone for Nigeria’s energy sector.

This development, confirmed by the Chief Corporate Communications Officer of the Nigerian National Petroleum Company Limited (NNPCL), Femi Soneye, on Tuesday, is expected to foster competition in the refining industry, potentially leading to more affordable petroleum products for Nigerians.

“Today marks a monumental achievement for Nigeria as the Port Harcourt Refinery officially commences crude oil processing. This groundbreaking milestone signifies a new era of energy independence and economic growth for our nation,” Soneye declared.

He also commended President Bola Ahmed Tinubu, the NNPCL board, and Group Chief Executive Officer (GCEO) Mele Kyari for their dedication to this transformative project.

Background of the Port Harcourt Refinery

The Port Harcourt refinery, one of Nigeria’s largest, was shut down in 2019 due to a lack of functionality. In 2021, the Federal Government approved $1.5 billion for its rehabilitation, a project that has faced numerous delays over the years.

Initial promises by the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, placed the refinery’s start date in September 2023, later postponed to December. In March 2024, GCEO Mele Kyari further adjusted expectations, projecting an April launch date.

Despite these missed deadlines, Kyari reiterated in August 2024 that the refinery was a critical part of efforts to restore Nigeria’s refining capacity.

A Shift in Nigeria’s Energy Sector

The refinery’s reopening is a significant step toward reducing Nigeria’s reliance on imported petroleum products. Although the country is a major crude oil producer, it has long struggled with inadequate refining capacity, leading to a dependency on costly fuel imports. This situation was worsened by Nigeria’s crude-for-petrol swaps and years of fuel subsidies, which drained foreign exchange reserves.

The commencement of operations at the Port Harcourt refinery comes shortly after the Dangote Refinery began producing diesel and aviation fuel in September 2024. The Dangote Refinery hailed as the largest single-train refinery in the world, represents another key milestone in Nigeria’s efforts to meet domestic fuel demand.

With both the Port Harcourt and Dangote refineries operational, Nigerians hope for relief from the soaring fuel prices that followed the removal of subsidies earlier in 2024. The cost of petrol skyrocketed from approximately N200 per liter to over N1,000 per liter, contributing to widespread economic hardship.

NNPCL has also announced plans to expedite the restoration of the Warri Refinery to further bolster domestic production capacity. Mele Kyari expressed optimism that these efforts will enable Nigeria to become a net exporter of petroleum products by 2024.

“We are focused on delivering this rehabilitation project, our two other refineries, and all other investments towards revamping the nation’s refining capacity,” Kyari stated during a visit to the Port Harcourt Refinery in August 2024.

Fostering Competition

The resumption of operations at the Port Harcourt refinery introduces competition in Nigeria’s refining sector, which has long been dominated by imports due to insufficient local capacity. With the Dangote Refinery already operational, producing diesel and aviation fuel since September 2024, the Port Harcourt facility is expected to challenge market monopolies, improve supply dynamics, and stabilize prices.

NNPCL has also announced plans to privatize the Port Harcourt refinery for better efficiency and profitability. The privatization effort aligns with the government’s broader strategy to restructure the oil and gas sector, attract private investment, and reduce operational inefficiencies that have plagued state-owned refineries.

Regional Benefits

While the Port Harcourt refinery’s production capacity is significantly lower than that of the Dangote Refinery—designed as the world’s largest single-train refinery—its strategic location is expected to offer unique advantages. The refinery will serve consumers in Nigeria’s eastern region, where the high cost of logistics associated with transporting petroleum products from other parts of the country has driven up prices.

The resumption of operations at the Port Harcourt refinery, coupled with Dangote Refinery’s contributions, underlines a shift in Nigeria’s energy landscape. These developments are expected also to reduce the country’s reliance on costly fuel imports, alleviate foreign exchange pressures, and provide a buffer against global oil price volatility. For ordinary Nigerians, the hope remains that these changes will translate into more accessible and affordable energy.

The refinery’s reopening and the broader push for efficiency through privatization reflect a significant step forward. However, energy analysts believe that the ultimate test will be how these reforms impact consumers, the economy, and the long-term sustainability of the oil refining sector.