Economy
CBN May Change Monetary Policy Stance—FSDH
By Dipo Olowookere
According to FSDH Research, the Central Bank of Nigeria (CBN) may soon change its monetary policy stance if it follows the opinion of the International Monetary Fund (IMF).
The IMF, in its World Economic Outlook (WEO) October 2017 edition, noted that it expects the inflation rate in Nigeria in 2017 and 2018 to remain elevated at double-digit levels. This is based on its assumption of the persistent effects of past inflationary shocks coming from sharp currency depreciations (including the parallel market exchange rate), higher electricity and fuel prices, and an accommodative monetary policy going forward.
The Fund expects an average inflation rate of 16.3% in 2017 and 14.8% in 2018. At the moment, the CBN adopts a restrictive monetary policy in order to curb the high inflation rate and maintain stability in the foreign exchange market.
The inflation rate in Nigeria declined for seven consecutive months to stand at 16.01% in August 2017.
FSDH Research forecasts that it will drop marginally to 15.96% in September 2017.
The IMF projects a growth in Gross Domestic Product (GDP) of 0.8% and 1.9% in Nigeria in 2017 and 2018 respectively. The growth is based on improved oil production and a strengthened agricultural sector.
The IMF expects an average Real GDP growth of 1.6% between 2017 and 2021 while it expects an average population growth of 2.75% between the periods. The GDP growth will not be sufficient to improve the wellbeing of the populace.
According to the IMF, the medium term risks to growth in Nigeria include concerns about policy implementation, market segmentation in the foreign exchange (FX) market and banking system fragilities.
The Fund also predicts a 42% increase in public debt from N18.06trn in 2016 to N25.59trn in 2017 and a further increase to N54.96trn in 2021.
The faster growth in public debt than the growth in GDP (at current prices) will result in a consistent increase in the public debt-to-GDP ratio between 2017 and 2021.
According to the IMF, the public debt-to-GDP ratio will increase to 25% in 2021 from 18% in 2016.
FSDH Research, in its Weekly Insights, said although this is below the target of 40% the Federal Government of Nigeria (FGN) sets for Nigeria, the burden of the interest payments on the loan may retard Nigeria’s growth potential except there are concentrated efforts to grow revenue.
On the global scene, the global upswing in economic activities that started in the second half of 2016 continues to strengthen. The IMF forecasts global economic growth of 3.6% in 2017 and 3.7% in 2018.
Notable increases in investments, trade and industrial production, as well as strengthening business and consumers’ confidence should support the global growth. The IMF identified the medium term risks to global growth to include a more rapid and sizeable tightening of global financial conditions; financial turmoil in emerging market economies; and geopolitical tensions.
The IMF expects oil prices (a simple average of prices of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil) to average US$50.3 per barrel in 2017, an increase from the US$43 per barrel in 2016. The expected increases in global activity and higher oil prices will have a positive effect on the Nigerian economy going forward.
Although FSDH Research believes the IMF growth forecast for the Nigerian economy is conservative, the FGN must intensify efforts to implement policies that will stimulate investments in the Nigerian economy. This is necessary to accelerate inclusive growth.
Friendly policies in agro-allied industries, agriculture, telecommunications, power, solid minerals, real estate and manufacturing are important to jumpstart the economy.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange weakened by 0.22 per cent on Tuesday, April 28, with the market capitalisation down by N4.8 billion to N2.420 trillion from N2.425 trillion, and the NASD Unlisted Security Index (NSI) down by 9.01 points to 4,044.96 points from 4,053.97 points.
During the session, the price of Central Securities Clearing System (CSCS) Plc went down by N1.82 to N767.05 per share from N78.87 per share, while FrieslandCampina Wamco Nigeria Plc appreciated by N1.90 to N100.00 per unit from N98.10 per unit.
According to data, the value of trades increased by 265.7 per cent to N27.1 million from N7.4 million units, and the volume of transactions surged by 305.2 per cent to 1.3 million units from 319,831 units, while the number of deals decreased by 6.9 per cent to 27 deals from 29 deals.
Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with the sale of 3.4 billion units valued at N8.4 billion, followed by CSCS Plc with 59.8 million units exchanged for N4.0 billion, and Okitipupa Plc with 27.8 million units traded for N1.9 billion.
GNI Plc also finished as the most traded stock by volume on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units sold for N1.2 billion.
By Adedapo Adesanya
Pressure is beginning to mount on the Nigerian Naira in the different segments of the foreign exchange (FX) market despite an oil windfall triggered by the Middle East crisis.
On Monday, April 27, the domestic currency further weakened against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) by N16.47 or 1.2 per cent to N1,380.71/$1 from the previous day’s N1,364.24/$1.
It was not different against the Pound Sterling in the same market window, as it lost N16.04 to trade at N1,863.76/£1 versus Monday’s closing rate of N1,847.72/£1, and against the Euro, it slipped by N12.72 to close at N1,615.01/€1 versus N1,602.29/€1.
The Naira also depreciated against the Dollar at the black market yesterday by N5 to quote at N1,390/$1 compared with the previous price of N1,385, and at the GTBank forex counter, it further crashed by N9 to settle at N1,379/$1 compared with the preceding session’s N1,370/$1.
The continued decline of the Naira comes as traders increasingly seek other safe-haven currencies amid continued global disruptions.
The benefit awash in the global market is making foreign portfolio investors stay short in Nigerian markets. Despite this, the daily FX publication released showed that interbank turnover rose to $98.829 million across 78 deals, up from $76.65 million.
Meanwhile, the cryptocurrency market remained cautious, with Bitcoin (BTC) trading at $77,216.66 despite surging oil prices and geopolitical tensions over a potential extended US naval blockade of the Strait of Hormuz.
Analysts say the supply overhang has finally dried up, and the sellers who were spooked by macro shifts or quantum fears have already exited, leaving the market much thinner on the sell-side.
Investors will await decisions made by central banks this week. The US Federal Reserve will announce its rate decision later on Wednesday, while the European Central Bank (ECB) follows on Thursday.
Ethereum (ETH) gained 1.5 per cent to trade at $2,324.59, Dogecoin (DOGE) chalked up 1.4 per cent to sell for $0.1016, Solana (SOL) appreciated by 0.6 per cent to $84.85, Cardano (ADA) grew by 0.5 per cent to $0.2483, and Binance Coin (BNB) advanced by 0.2 per cent to $627.15.
However, TRON (TRX) depreciated by 0.6 per cent to $0.3224, and Ripple (XRP) lost 0.03 per cent to sell at $1.39, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) were unchanged at $1.00 each.
By Adedapo Adesanya
Oil was up by nearly 3 per cent on Tuesday as persistent worries about supply constraints from the closed Strait of Hormuz continued, with Brent futures for June rising by $3.03 or 2.8 per cent to $111.26 a barrel, and the US West Texas Intermediate (WTI) crude futures growing by $3.56 or 3.7 per cent to $99.93 a barrel.
An earlier round of negotiations between the United States and Iran collapsed last week after face-to-face talks failed.
Ship-tracking data showed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade, but some traffic is still moving.
Prices trimmed some of the advances after the United Arab Emirates (UAE), the fourth-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), said on Tuesday it would exit the group on this Friday, May 1, 2026.
This dealt a blow to the oil-exporting group and its de facto leader, Saudi Arabia.
The UAE could quickly add between 1 million and 1.5 million barrels per day of output. However, with the Strait of Hormuz effectively closed, analysts said that there’s nowhere for that supply to go.
The UAE joined OPEC in 1967, but tension with Saudi Arabia over production quotas has been building for years.
Under the OPEC+ deal, the country has been held to roughly 3 million barrels per day while sitting on capacity above 4 million. It has been pushing toward 5 million barrels per day by 2027, and that target is hard to achieve with quotas built around someone else’s view of the market.
The war in Yemen broke whatever was left of diplomatic patience.
President Donald Trump said he was unhappy with the latest Iranian proposal to end the war. The proposal would avoid addressing the nuclear programme until hostilities cease and Gulf shipping disputes are resolved.
The Idemitsu Maru, a Panama-flagged tanker carrying 2 million barrels of Saudi oil, and an LNG tanker managed by the Abu Dhabi National Oil Company (ADNOC) crossed the Strait on Tuesday, shipping data showed.
Vortexa data showed that the amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 153.11 million barrels as of April 24.
The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 1.79 million barrels in the week ending April 24. The official data from the US Energy Information Administration (EIA) will be released later on Wednesday.
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