Economy

MPC May Delay Hike in Rates Until January 2019—FSDH

Published

7 years ago

20/11/2018

By Dipo Olowookere

Ahead of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN), which kicks off tomorrow, analysts at Lagos-based FSDH Research have said the apex bank may not tamper with the monetary policy rate (MPR) until its January 2019 meeting.

Though the company noted that rising demand for foreign exchange leading to a consistent decline in the foreign reserves, and rising inflation rate were major justifications for an increase in policy rates, it maintained that the CBN may continue to use the conduct of Open Market Operations (OMO) to manage the temporary liquidity in the financial system that may affect price stability.

Business Post recalls that at its meeting in September 2018, the MPC maintained the MPR at 14 percent, with the asymmetric corridor at +200 and -500 basis points around the MPR; the Cash Reserve Ratio (CRR) at 22.50 percent and the Liquidity Ratio (LR) at 30 percent.

According to FSDH, a review of the global economy shows that global growth remains fairly strong, but trade restrictions may reduce global growth. This is according to the International Monetary Fund (IMF), which projects a global growth rate of 3.7 percent for 2018 and 2019.

The growth rate forecast is slightly lower than the growth rate projections the IMF released in July 2018. Although FSDH Research notes that despite the recent drop in the price of crude oil on the international market, the moderately strong global growth should sustain global crude oil prices around $70/b in the short-term.

FSDH Research says it expects the Federal Open Market Committee (FOMC) of the US Federal Reserve to raise the Federal Funds Rate (Fed Rate) by 0.25 percent when the committee meets in December 2018.

The October 2018 US unemployment rate at 3.7 percent (lower than the target of 6.5 percent), inflation rate of 2.5 percent (higher than the target of 2 percent) and the growth of 3.5 percent in the economy all support arguments for an interest rate increase.

The investment firm said an increase in the Fed Rate may further place additional demand pressure on foreign exchange in Nigeria and possibly increase capital flight from emerging markets. Thus, a rate cut in Nigeria is not appropriate under these situations.

It said the short-term forecast for the Nigerian economy shows that economic growth remains fragile. The IMF forecasts growth rates of 1.9 percent and 2.3 percent in 2018 and 2019 respectively. These growth rates are lower than the Nigerian population growth rate. Thus, the economy needs policy stimulus to record a growth rate that is inclusive. Nevertheless, monetary policy easing in the form of an interest rate cut may not stimulate growth. Appropriate fiscal measures and incentives that will improve the ease of doing business in Nigeria will lay strong foundation for sustainable growth.

The Purchasing Managers’ Index (PMI) survey published by the CBN for the month of October 2018 expanded at a faster rate. FSDH Research attributes the expansion in the PMI to the increased economic activities that are usually associated with the last quarter of the year.

FSDH Research said it observed a consistent drawdown in the external reserves in order to maintain foreign exchange rate stability in Nigeria.

The CBN increased the supply of foreign exchange at the Investors’ and Exporters’ Foreign Exchange Window and increased the yield at the OMO to dowse demand pressure at the foreign exchange market.

Consequently, the drawdowns from the external reserves continued until November 2018. CBN remained the largest supplier of foreign exchange at the I & E window in the last three months.

FSDH Research noted that an attractive Nigerian Treasury Bill (NTB) yield around the current level of 16 percent may help to attract foreign portfolio investment and reduce capital flight.

Nevertheless, there is a need for deliberate fiscal measures and engagements that will promote non-oil exports that attract foreign investment into Nigeria and will guarantee foreign exchange stability.

The inflation rate increased to 11.28 percent in September 2018, the second increase since January 2017, principally due to the increase in the Food Index.

FSDH Research says it expects inflation rate to increase marginally to 11.34 percent in October and to end the year 2018 at 11.7 percent.

It said an increase in food prices, electioneering spending, and a possible increase in the minimum wage, are potential factors that will influence the direction of the inflation rate in the next three months.

Despite the expected rise in the inflation rate, it will be difficult for a hike in the interest rate to stem the rising inflation rate, as the cause of the rising inflation rate is not within the scope of monetary policy.

According to FSDH, the MPC may deal with the possible negative impact of an increase in the minimum wage at its January 2019 meeting. Thus a hold decision may be appropriate.

Data from the CBN shows that the key monetary aggregates in the country are below the target the CBN sets for the country. This development supports an argument for an expansionary policy to boost credit creation.

However, the current structural rigidities in the economy do not support strong credit growth. Therefore, unconventional policies are required to boost credit creation and business expansion to stimulate growth.

Measures that remove the risks inherent in the economy will encourage credit expansion and this will support sustainable growth.

Economy

NASD Market Falls 1.18% to Extend Losing Streak

Published

1 day ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south for the fourth consecutive session after it shed 1.18 per cent on Friday, March 13.

The unlisted securities market recorded a loss despite closing without a price decliner, and ending with two price gainers led by Geo Fluids Plc, which gained 1o Kobo to sell at N3.10 per share compared with the previous day’s N3.00 per share. Industrial and General Insurance (IGI) Plc appreciated during the session by 2 Kobo to trade at 54 Kobo per unit versus Thursday’s closing price of 52 Kobo per unit.

When the market closed for the day, the market capitalisation lost N29.83 billion to close at N2.489 trillion compared with the N2.519 trillion it finished a day earlier, and the NASD Unlisted Security Index (NSI) crashed by 49.84 points to 4,160.46 points from 4,210.31 points.

Market activity improved yesterday, as the volume of transactions rose 179.5 per cent to 10.4 million units from 3.7 million units, but the value of trades declined by 68.4 per cent to N29.9 million from N95.0 million, while the number of deals weakened by 11.5 per cent to 46 deals from 52 deals.

Central Securities Clearing Systems (CSCS) Plc remained the most active stock by value on a year-to-date basis with 38.4 million units worth N2.4 billion, Okitipupa Plc followed with 6.4 million units traded at N1.1 billion, and FrieslandCampina Wamco Nigeria Plc transacted 6.3 million units for N584.3 million.

Resourcery Plc ended the trading session as the most traded stock by volume on a year-to-date basis with 1.1 billion units valued at N415.6 million, trailed by Geo-Fluids Plc with 130.8 million units valued at N504.5 million, and CSCS Plc with 38.4 million units worth N2.4 billion.

Economy

Naira Trades N1,366/$1 at Official Market, N1,400/$1 at Black Market

Published

1 day ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira continued to claw back some gains against the Dollar in the different segments of the foreign exchange (FX) market, as its value was strengthened on Friday.

In the black market, it gained N10 against the United States Dollar yesterday to close at N1,400/$1 compared with the preceding day’s rate of N1,410/$1, and at the GTBank forex counter, it chalked up N6 to close at N1,385/$1, in contrast to the N1,391/$1 it was traded a day earlier.

Similarly, in the Nigerian Autonomous Foreign Exchange Market (NAFEX), it appreciated against the greenback during the session by N5.28 or 0.38 per cent to quote at N1,366.23/$1 versus Thursday’s closing price of N1,371.51/$1.

It also improved its value against the Pound Sterling in the official market on Friday by N21.81 to settle at N1,812.99/£1 compared with the previous day’s N1,834.80/£1, and gained N13.86 against the Euro to sell at N1,568.03/€1 versus N1,581.89/€1.

Pressure eased further on the FX market as the Central Bank of Nigeria (CBN) continued interventionist operations this week, selling Dollars to banks to boost liquidity after a $500 million boost last week.

This was complemented by inflows from foreign investors, exporters and non-bank corporates, among others, while Nigeria’s gross external reserves remained above $50 billion, the highest since 2009.

The Governor of the apex bank, Mr Yemi Cardoso, also eased fears of a Naira devaluation, saying the country’s financial system has been strengthened by reforms.

Regardless, external pressure looms as the US Dollar strengthened globally due to its war with Iran, now ongoing for three weeks.

Meanwhile, the cryptocurrency market was largely down as traders and investors continue to align with current realities.

The market is adapting to the conflict in real time. Early in the war, every headline produced an outsized reaction because nobody could price the tail risk. Now, traders have a framework where strikes happen, oil spikes and bitcoin dips only to recover again.

Cardano (ADA) depreciated by 3.8 per cent to $0.2623, Dogecoin (DOGE) lost 1.7 per cent to finish at $0.0948, Ripple (XRP) slumped 1.5 per cent to $1.39, Solana (SOL) dropped 1.4 per cent to sell for $87.33, Binance Coin (BNB) went down by 1.3 per cent to $653.58, Bitcoin (BTC) declined by 1.1 per cent to $70,670.63, and Ethereum (ETH) decreased by 0.9 per cent to $2,078.78.

However, TRON (TRX) appreciated by 1.7 per cent to $0.2941, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.

Economy

Oil Stays Above $100 as Strait of Hormuz Traffic Stalls

Published

1 day ago

14/03/2026

Adedapo Adesanya

By Adedapo Adesanya

The price of the major crude oil grade, Brent crude oil, closed above $100 on Friday for the second consecutive session, as the Iran war heads toward its third week, with oil tanker traffic through the Strait of Hormuz still effectively at a standstill.

It gained 2.67 per cent or $2.68 during the trading day to close at $103.14 per barrel, while the US West Texas Intermediate (WTI) crude oil grade appreciated by 3.11 per cent or $2.98 to settle at $98.71 per barrel.

Brent futures were up about 10 per cent for the week following the 27 per cent rise seen last week, which marked the biggest weekly gain in oil prices since the COVID-19 pandemic in 2020. WTI futures, which saw their best week since 1983 last week, ended the week more than 8 per cent higher.

US President Donald Trump said American forces launched a major bombing raid on Iran’s strategic Kharg Island, targeting military facilities on the key Persian Gulf outpost while warning Iran that its vital oil infrastructure could be destroyed if shipping in the Strait of Hormuz is disrupted.

The terminal accounts for roughly 90 per cent of Iranian crude shipments, loading millions of barrels per day onto tankers bound largely for Asian markets.

The US and Israel’s strikes in the conflict have largely targeted Iranian military and nuclear infrastructure. Oil facilities elsewhere in Iran have been hit, but Kharg’s massive storage tanks, jetties, and pipelines had remained untouched until the latest strike.

Iran’s new supreme leader, Mojtaba Khamenei, vowed to keep fighting in a message delivered via state television.

There have been a number of attacks on foreign ships in or near the Strait, feeding into concerns that a prolonged war could translate to a global economic shock.

Prices are rising despite the US and its allies rolling out some measures to keep a lid on energy costs.

The International Energy Agency (IEA) has agreed to release 400 million stockpiled barrels, the largest such action in history.

The US has issued a 30-day waiver for India to purchase sanctioned oil from Russia. President Donald Trump is considering loosening rules under the Jones Act that require American ships to transport goods between domestic ports, including oil and gas, in an effort to lower costs.

Traders are continuing to monitor developments in the Middle East.