Economy
After Recession: A Need for Policy Change?
We expect the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to hold rates at the current levels, while the fiscal authority continues to implement policy measures to sustain growth. The MPC is scheduled to meet on September 25 and 26, 2017.
The current tight monetary policy is justified in order to curb the high inflation rate and maintain stability in the foreign exchange (FX) market.
At its July 2017 meeting, the MPC maintained the Monetary Policy Rate (MPR) at 14%, with the asymmetric corridor at +200 and -500 basis points; Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) at 22.50% and 30% respectively.
In the international scene, the International Monetary Fund (IMF) in its World Economic Outlook, July 2017 edition, forecasts global economic growth at 3.5% in 2017. The IMF indicated that the risks around the global growth forecast are from monetary policy normalisation in some advanced economies, notably the U.S, anti-globalisation stance, and geopolitical tensions.
The Federal Open Market Committee (FOMC) of the United States (U.S) Federal Reserve (The Fed) maintained the Federal Funds Rate (The Fed Fund Rate) at its September 2017 meeting but signalled unwinding of balance sheet as from October 2017.
At the domestic level, the Q2, 2017 figures from the National Bureau of Statistics (NBS) shows that the GDP in Nigeria recorded a growth rate of 0.55%. The recovery in crude oil production and price and the introduction of the Investors’ and Exporters’ Foreign Exchange Window (I&E Window), increased the supply of foreign exchange, and helped to pull the economy out of recession.
Meanwhile, the accretion to the external reserves continued after the MPC meeting in July 2017. The 30-Day moving average external reserves increased by 3.21% to $31.83bn as at 31st August
2017, from $30.84bn as at 31st July 2017.
However, the value of the Naira recorded a mixed performance but has shown relative stability since the last MPC meeting in July 2017. The value of the Naira depreciated in the official market, while it closed unchanged in the parallel market. The premium between the inter-bank and parallel markets averaged about N61 between the last MPC meeting in July 2017 and September 15, 2017 from an average of N66 during the period between the MPC Meetings of May and July 2017.
The monetary aggregates as at July 2017 show that the annualised growth rate in money supply is below the target that the CBN sets for the year 2017. The broad money supply (M2) decreased by 5.08% to N22.20trn in July 2017, from N23.39trn in December 2016. This is lower than the CBN’s growth rate target of 10.29% for the year 2017.
The CBN has maintained tight monetary policy to curb high inflation rate and ensure FX stability.
Our forecast shows that the inflation rate will remain in the range of 15.55%-16.20% between September 2017 and December 2017.
This is based on the assumption that the Federal Government of Nigeria (FGN) does not increase the price of Premium Motor Spirit (PMS) and Electricity Tariff. The forecast range is higher than the CBN’s target of 6%-9% and the growth retarding inflation benchmark of 12.5%.
The yields on NTBs decreased in August 2017, compared with the yields in July 2017. At the NTBs auction, average yield on the 91-day, 182-day and 364-day NTB dropped. The yields on the FGN Bonds that we monitored closed higher in August 2017 when compared with the yields in the preceding month. We expect the yields on the fixed income securities to drop.
This is because of the stability in the FX market, plans of the FGN to refinance part of the local debt with foreign debt and the positive GDP growth rate expected going forward.
Looking at the developments both in the domestic and international markets, a hold in rates at this meeting will be appropriate in order to sustain the current growth rate in the economy. However, the MPC may adjust the asymmetric corridor around the MPR to signify easing.
Meanwhile, fiscal measures in the forms of tax relief and tariff adjustments are required to boost economic activities.
By Adedapo Adesanya
Oil was up more than 3 per cent on Tuesday as renewed Iranian attacks on the United Arab Emirates (UAE) heightened concerns about the worsening outlook for global supply.
Brent crude futures appreciated by $3.21 or 3.2 per cent to $103.42 a barrel, while the US West Texas Intermediate (WTI) crude futures gained $2.71 or 2.9 per cent to trade at $96.21 per barrel.
Prices had fallen previously after some vessels sailed through the critical Strait of Hormuz, a vital gateway for about 20 per cent of the world’s oil and liquefied natural gas trade
The Iran war shows no signs of abating as it renewed attacks on the United Arab Emirates (UAE) on Tuesday, causing oil loading at the port of Fujairah to be at least partly halted after the third attack in four days ignited a fire at the export terminal.
Fujairah, located on the Gulf of Oman just outside the Strait of Hormuz, is a critical exit point for oil volumes equivalent to roughly 1 per cent of global demand.
The attacks on oil installations by Iran and the ongoing disruption to shipping through the Strait of Hormuz have traders worried for long-term impairment to supply that could keep prices elevated.
The effective closure of the strait has forced the UAE, which is the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), to reduce its output by more than half.
Several allies of the US rebuffed President Donald Trump’s call on Monday to send warships to escort shipping through the strait.
On Tuesday, French President Emmanuel Macron said France would never take part in operations to unblock the strait, and would only participate in a coalition that could provide freedom of navigation once hostilities ended.
Meanwhile, the Trump administration reiterated its position that they see the Iran conflict lasting weeks, not months.
The head of the International Energy Agency (IEA), Mr Fatih Birol, has suggested member countries could release more oil, in addition to the 400 million barrels they have already agreed to draw from strategic reserves.
By Adedapo Adesanya
A 10 per cent equity stake has been acquired by Odu’a Investment Company Limited in a subsidiary of FCMB Group Plc, FCMB Pensions Limited.
The move is aimed at strengthening its presence in Nigeria’s growing pension industry.
The company disclosed that the transaction was completed after receiving all required regulatory approvals from the National Pension Commission (PenCom) and the Central Bank of Nigeria (CBN), while the Securities and Exchange Commission (SEC) has also been duly notified.
Odu’a Investment said the acquisition represents a strategic investment in a resilient and steadily expanding segment of Nigeria’s financial services sector.
The company added that the deal also reinforces FCMB Pensions’ shareholder base through the entry of a long-term institutional investor.
Chairman of Odu’a Investment Company Limited, Mr Bimbo Ashiru, said the investment aligns with the organisation’s strategy of partnering with strong institutions operating in sectors critical to Nigeria’s long-term economic stability.
“This investment reflects Odu’a’s strategy of partnering with strong institutions operating in sectors that are central to Nigeria’s long-term economic stability and growth,” he said in a statement.
“The pension industry plays a critical role in mobilising long-term savings and strengthening the financial system. FCMB Pensions has built a solid platform serving contributors across Nigeria, and we see a significant opportunity to support its continued growth and impact,” he added.
Also commenting on the transaction, the Managing Director of Odu’a Investment Company Limited, Mr Abdulrahman Yinusa, described the deal as a vote of confidence in FCMB Pensions’ leadership and long-term prospects.
“Our partnership with FCMB Group Plc reflects confidence in FCMB Pensions’ strategy, leadership, and long-term potential. Together, we will work to expand its reach, support its strategic objectives, and deliver sustained value to contributors and other stakeholders,” Mr Yinusa said.
The investment brings together two established institutions with complementary strengths and a shared focus on long-term value creation. According to the company, the partnership positions FCMB Pensions to deepen market penetration and enhance service delivery within Nigeria’s contributory pension scheme.
Odu’a Investment Company Limited is an investment holding company jointly owned by the governments of the six South-West states of Nigeria.
The firm manages a diversified portfolio spanning real estate, financial services, hospitality, agriculture, and industrial investments, with a mandate to generate sustainable economic value and support regional development.
By Aduragbemi Omiyale
The chief executive of the Nigerian Exchange (NGX) Group Plc, Mr Temi Popoola, has said Nigeria’s capital market is undergoing a re-rating as global investors begin to reassess the country’s economic trajectory and investment potential.
“What we are seeing is a gradual re-rating of Nigeria. investors are beginning to look at the data more closely, the returns, the reforms, and the improving macroeconomic direction, and that is changing sentiment,” he said during a live interview on BBC Newsday in London.
He is in the United Kingdom as part of broader investor and stakeholder engagements during President Bola Tinubu’s state visit to Buckingham Palace.
Mr Popoola explained that Nigeria’s equity market has delivered strong returns in recent months, positioning it more competitively among emerging and frontier markets. According to him, this performance is helping to recalibrate long-held risk perceptions and attract renewed interest from international investors.
He added that improvements in Nigeria’s energy landscape, including increased domestic refining capacity and ongoing sector reforms, are helping to reduce the economy’s exposure to external oil price shocks, further strengthening investor confidence.
Mr Popoola emphasised that beyond short-term market movements, consistency in policy implementation will be critical in sustaining this shift in perception. “Global capital responds to clarity and consistency. As those elements become more evident, Nigeria naturally becomes more investable.”
He also highlighted the importance of sustained engagement with global financial centres, noting that platforms such as London play a key role in connecting Nigeria’s capital market to international pools of capital.
According to him, Nigeria’s evolving market structure, combined with ongoing reforms, is strengthening its position as a viable destination for long-term investment. “There is a broader recognition that Nigeria offers significant opportunities. The focus now is ensuring that this recognition translates into sustained capital flows.”
The NGX group chief concluded that Nigeria’s capital market is increasingly being viewed through a more balanced and data-driven lens, reflecting both its resilience and its long-term growth potential.
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