Economy
Inflation to Ease to 11.31% in February—FSDH
By Modupe Gbadeyanka
The research arm of Lagos-based financial institution, FSDH Merchant Bank, has said it expects inflation rate for the month of February 2019 to moderate to 11.31 percent from 11.37 percent recorded a month earlier.
In its Inflation Watch report, FSDH Research said the drop in inflation will defy electioneering spending, which was earlier predicted to contribute to a rise in the head inflation.
The National Bureau of Statistics (NBS) will release the inflation figure for the month of February on Friday, March 15, 2019, well ahead of the second Monetary Policy Committee (MPC) meeting of this year scheduled for March 25-26, 2019.
On February 23, 2019, Nigeria held the presidential and National Assembly elections, while on March 9, 2019, the governorship and state houses of assembly polls took place.
“If the inflation rate drops, can we expect a further drop in interest rates (yields) on fixed income securities? Or, can we expect members of the MPC of the Central Bank of Nigeria (CBN) to clap their hands for achieving stability in domestic prices and reduce policy rates?” the firm asked, saying it believes inflation rate in double digits, “as we predict it in 2019 and through 2022, may not justify a reduction in the monetary policy rates.”
“We believe there are many other issues that Nigerian economic managers need to address before the Nigerian economy can enjoy a low, as many people suggest, single digit interest rate,” the report said.
It further noted that, “When there is a general increase in the prices of goods and services, there is the tendency for suppliers (producers) to be happy as it should increase their profit.
“However, an increase in the general prices of goods is not good for consumers as it reduces their buying powers: the same amount of money cannot buy the same quantity of goods as it previously could.
“On the other hand, when there is a persistent decrease in the prices of goods and services, the profit of the suppliers (producers) will drop while the consumers’ ability to buy goods increases as a certain amount of money is enough to purchase more units of goods.
“Therefore, a balance in general prices of goods is needed to encourage both producers and consumers. This is why the CBN regularly modifies interest rate and yields to achieve a target range of inflation rate, currently put at 6 percent to 9 percent.”
FSDH Research the price monitor it conducted on certain food and non-food items in February showed that most prices increased at a slower rate in February than in January.
It said the slower pace of increase was an indication of an expected drop in the inflation rate in February.
“Our analysis shows the movements in the international food prices did not exert upward pressure on local prices in February.
“The report published by the Food and Agriculture Organization (FAO) of the United Nations for the month of February 2019 shows that food prices such as sugar, milk, butter, cheese, meat, oils, rice, wheat and maize increased on the international market.
“However, the value of the Naira strengthened against the Dollar during the month. The appreciation recorded in the Naira eliminated the impact of the increase in the international food prices on local prices.
“Although the inflation rate is trending downwards, FSDH Research stresses that certain economic realities may not guarantee a continued downward trend. The key limiting factors to a continued drop in the inflation rate are the need for adjustments to the current pricing regime of Petroleum Motor Spirit (PMS) and the electricity tariff.
“If these adjustments are carried out, government will save a certain amount of money that could and should be redirected to fund other critical sectors of the economy such as healthcare, education, security and infrastructure development.
“If this was the case, we would expect these adjustments to attract investments into those sectors. Although such adjustments may shift the inflation curve from its current level, the good news is that it may not go higher than 13 percent level.
“It is important to note that, if the Federal Government of Nigeria (FGN) implements these pricing adjustments, FSDH Research expects the average inflation rate of 2019 to be around the same average inflation rate of 2018. Meanwhile, the inflation rate would be substantially lower than it was in 2016 and 2017.
“Therefore, it may be better for Nigeria to remove ‘subsidies’ in both the energy and power sectors. We believe it would be a case of temporary pains and permanent gains.”
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its gains by 0.91 per cent on Wednesday, June 3, spurred by three price gainers led by FrieslandCampina Wamco Nigeria Plc, which rose by N13.90 to sell N210.41 per share versus the previous day’s N196.51 per share. MRS Oil appreciated by N10 to N190.00 per unit from N180.00 per unit, and Food Concepts Plc added 5 Kobo to sell at N3.00 per share versus N2.95 per share.
As a result, the market capitalisation increased by N23.91 billion to N2.660 trillion from N2.636 trillion, and the NASD Unlisted Security Index (NSI) gained 39.97 points to finish at 4,446.27 points, in contrast to Tuesday’s 4,406.30 points.
The NASD exchange witnessed three price losers at midweek, led by Nipco Plc, which shrank by N21.30 to close at N325.97 per unit compared with the previous session’s N347.27 per unit, Nitrox Industrial Gases Plc went down by N1.20 to quote at N24.30 per share versus the preceding session’s N25.50 per share, and Central Securities Clearing System (CSCS) Plc weakened to by 69 Kobo to N75.41 per unit from N76.10 per unit.
The volume of trades yesterday significantly improved by 71.5 per cent to 527,221 units from Tuesday’s 307,363 units, as the value of transactions soared by 49.9 per cent to N64.2 million from the preceding session’s N49.9 million, and the number of deals surged by 9.5 per cent to 46 deals from 42 deals.
When trading activities ended for the day, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 64.6 million units exchanged for N4.4 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Adedapo Adesanya
The positive run of the Naira against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) continued on Wednesday, June 3, with the former chalking up N3.79 or 0.28 per cent against the latter, closing at N1,357.26, in contrast to the preceding session’s N1,361.05/$1.
Similarly, the Nigerian currency gained N10.52 against the Pound Sterling in the official market during the session to close at N1,822.67/£1 compared with the previous rate of N1,833.19/£1, and appreciated against the Euro by N9.56 to N1,574.83/€1 from N1,584.39/€1.
Further, at the black market, the Naira improved its value against the greenback at midweek by N5 to trade at N1,375/$1 compared with the N1,380/$1 it was traded a day earlier, and at the GTBank FX counter, it gained N6 to sell for N1,372/$1 versus N1,378/$1.
The boost came as the country’s external reserves continued to gain momentum. A look at the updated data from the Central Bank of Nigeria (CBN) showed that foreign reserves continue to increase with two consecutive inflows in June 2026, settling at $49.876 billion as of Tuesday.
Foreign portfolio investors, exporters and non-bank corporates continue to keep the supply side strong, with the less aggressive FX interventions by the CBN at the official window in recent times helping to ease worries about capital flight.
The apex bank reported that interbank FX turnover declined to $133.731 million across 136 deals, from $169.822 million the previous day.
Meanwhile, the cryptocurrency market remained bearish due to sell-offs triggered by geopolitical uncertainties and the US stock market rally.
Cardano (ADA) dipped by 5.5 per cent to $0.2046, Binance Coin (BNB) slumped by 4.8 per cent to $627.56, Solana (SOL) shrank by 3.9 per cent to $72.99, Ethereum (ETH) depreciated by 2.9 per cent to $1,844.53, and Bitcoin (BTC) slipped by 2.7 per cent to $65,675.87.
Further, Dogecoin (DOGE) depleted by 1.4 per cent to $0.0928, Ripple (XRP) declined by 0.7 per cent to $1.21, and TRON (TRX) lost 0.4 per cent to sell at $0.3336, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) gained 0.01 each to settle at $0.9986 and $0.9997, respectively.
By Dipo Olowookere
Nigeria’s stock market further depleted by 1.44 per cent on Wednesday following panic sell-offs by investors, who are cutting down their exposure to local equities.
Business Post observed that profit-taking dominated Customs Street at midweek, with all the key sectors of the Nigerian Exchange (NGX) Limited closing in red.
The insurance space shed 2.76 per cent, the industrial goods index lost 1.55 per cent, the banking counter declined by 1.53 per cent, the consumer goods segment shrank by 0.28 per cent, and the energy sector weakened by 0.05 per cent.
As a result, the All-Share Index (ASI) contracted by 3,554.05 points to 243,132.61 points from 246,686.66 points, and the market capitalisation moderated by N2.279 trillion to N155.940 trillion from N158.219 trillion.
Lafarge Africa led the losers’ chart yesterday after it gave up 9.97 per cent to trade at N307.90, Zichis lost 9.82 per cent to close at N29.20, Learn Africa depreciated by 9.80 per cent to N11.50, John Holt crashed by 9.80 per cent to N13.80, and Consolidated Hallmark dipped by 8.84 per cent to N6.19.
On the flip side, Abbey Mortgage Bank topped the gainers’ log after it grew by 9.93 per cent to N7.75, International Energy Insurance appreciated by 9.89 per cent to N6.00, Tripple G gained 9.80 per cent to sell for N4.37, Universal Insurance expanded by 8.91 per cent to N1.10, and Royal Exchange improved by 7.14 per cent to N1.50.
A total of 17 stocks gained weight yesterday, while 43 stocks lost weight, indicating a negative market breadth index and weak investor sentiment. This has been the mood of the market since the beginning of this week.
Market participants transacted 923.0 million shares worth N42.3 billion in 69,332 deals on Wednesday, in contrast to the 718.8 million shares valued at N29.3 billion traded in 71,683 deals on Tuesday, representing a drop in the number of deals by 3.28 per cent, and a rise in the trading volume and value by 28.41 per cent and 44.37 per cent, respectively.
Sterling Holdings led the activity chart with 264.6 million units valued at N2.1 billion, Access Holdings traded 76.7 million units worth N1.8 billion, Linkage Assurance exchanged 55.1 million units for N99.2 million, VFD Group sold 35.5 million units worth N378.8 million, and Ellah Lakes transacted 33.1 million units valued at N334.3 million.
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