Economy
Why Nigeria May Hike Pump Price, Raise Interest Rate, Devalue Naira in 2019
By FSDH Research
Certain key events, both at the global level and in Nigeria, will influence economic and business activities in 2019.
FSDH Research examines a few of these events and discusses the implications for businesses and investments in Nigeria.
The expected hike in interest rates in major advanced countries will lead to an increase in global yields and may put pressure on currency in Nigeria.
There are strong indications that the US Federal Reserve, Bank of England and European Central Bank will increase interest rates in 2019. The expected increase in the interest rate in the international market may also lead to an increase in the interest rate in Nigeria because of monetary policy adjustments to reduce capital flight.
Nigeria may lose a substantial amount of its projected crude oil revenue due to a limit on crude oil production and the drop in the global crude oil price. This may also lead to a drop in the supply of foreign exchange into Nigeria, resulting in a possible depreciation or devaluation of the Naira.
Nigerian businesses should look for local alternatives, where possible, for the raw materials needed for their production process.
They should also limit or eliminate foreign debt, particularly if they do not have foreign exchange receivables to mitigate the possible foreign exchange risk.
FSDH Research also advises that businesses should put in place appropriate foreign exchange hedging strategies. The Q3 2018 Balance of Payment (BoP) report that the Central Bank of Nigeria (CBN) published shows that earnings from crude oil and gas accounted for 94.4 percent of total export earnings during the period.
The external trade report that the National Bureau of Statistics (NBS) published for Q3 2018 shows that crude oil exports accounted for 85 percent of total exports. Therefore, any adverse movement in crude oil price or production has high negative implications on the Nigerian economy.
Although FSDH Research expects the general election in 2019 to be peaceful, its outcome will determine economic activity and business in Nigeria.
A peaceful election will ensure stability of the Nigerian economy and pave the way for the flow of investments, both Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) into Nigeria. Certain longterm business and investment decisions may be taken immediately after the election if the current government retains power.
However, if there is a change in power, investors may wait until after the presidential inauguration on May 29 before they take long-term investment decisions, to give them enough time to access details of the policies of the incoming government.
There are certain macroeconomic realities that the Nigerian government must contend with in 2019.
FSDH Research believes the fiscal deficit in 2019 may be higher than in 2018, and higher than what is projected for the year 2019. In order to execute certain plans that will move the economy forward, government may have to increase borrowing or partner with private sector operators on key projects.
An increase in borrowing will increase the interest rate, while partnership with the private sector will expand economic activity and create new job opportunities.
Already, the ratio of government’s debt service to revenue is high and at an unsustainable level. Therefore, additional debt, in an environment of rising interest rates, may reduce government’s ability to execute critical programmes that will improve the business environment.
While fixed income investors may enjoy higher yields in 2019 than in 2018, businesses may suffer under rising interest costs.
FSDH Research analysis shows that electricity and the pump price of Premium Motor Spirit (PMS) are two key prices that government will need to adjust in 2019 to free up funds for developmental purposes.
The adjustment may increase the inflation rate in the short-term, but it will benefit the economy in the long-term. More investments are required in the power sector than are currently available.
However, the sector may not attract investment in the absence of a cost-reflective tariff. Government already allows an off-grid power supply arrangement based on ‘willing buyer, willing seller’. The tariff at which this arrangement is settled is higher than the tariff for the power from on-grid supply. Appropriate policy responses from government and strategies from the business community may ameliorate the likely negative impacts of these key events in 2019.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited recorded another milestone after it further closed higher by 1.18 per cent on Thursday amid renewed confidence in the market.
The All-Share Index (ASI) crossed the 170,000-point threshold during the session as it added 1,975.18 points to the preceding day’s 168,030.18 points to settle at 170,005.36 points.
Also yesterday, the market capitalisation of Customs Street was up by 1,268 trillion to N109.129 trillion from the N107.861 it ended a day earlier.
The growth recorded during the session was powered 55 equities, which outweighed the losses recorded by 19 other equities.
Guinea Insurance expanded by 10.00 per cent to N1.43, Seplat Energy grew by 10.00 per cent to N7,370.00, RT Briscoe increased by 9.95 per cent to N11.49, Neimeth chalked up 9.90 per cent to close at N11.10, and Zichis rose by 9.89 per cent to N6.11.
At the other side, Deap Capital lost 9.62 per cent to trade at N6.20, Universal Insurance slipped by 9.43 per cent to N1.44, Haldane McCall declined by 9.09 per cent to N4.00, Red Star Express went down by 9.04 per cent to N15.60, and UPDC depreciated by 7.02 per cent to N5.30.
Business Post reports that the energy index was up by 4.68 per cent, the industrial goods improved by 0.79 per cent, the banking space grew by 0.64 per cent, and the consumer goods sector soared by 0.11 per cent, while the insurance counter lost 0.31 per cent.
Yesterday, market participants traded 713.0 million stocks valued at N22.3 billion in 46,104 deals versus the 694.8 million stocks worth N20.6 billion transacted in 42,095 deals on Wednesday, showing a spike in the trading volume, value, and number of deals by 2.62 per cent, 8.25 per cent, and 9.52 per cent, respectively.
Access Holdings sold 106.6 million shares valued at N2.5 billion, Chams transacted 44.5 million equities worth N201.3 million, Champion Breweries traded 44.5 million stocks for N774.3 million, Universal Insurance exchanged 34.8 million shares worth N53.6 million, and Deap Capital sold 22.7 million equities valued at N141.9 million.
By Adedapo Adesanya
The Naira weakened against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, February 5, by N7.78 or 0.57 per cent to N1,366.06/$1 from the N1,358.28/$1 it was traded on Wednesday, according to data from the Central Bank of Nigeria (CBN).
The Nigerian currency also depreciated against the Euro in the same market segment yesterday by N5.92 to close at N1,611.95/€1 versus the preceding session’s closing price of N1,606.03/€1, but appreciated further against the Pound Sterling by N8.05 to N1,855.38/£1 from the previous day’s value of N1,863.43/£1.
The domestic currency’s exchange rate for international transactions on the GTBank Naira card was further strengthened after an N8 price appreciation on the greenback to settle at N1,375/$1 compared with the N1,383/$1 it was exchanged at midweek, and at the black market, it maintained stability at N1,450/$1.
The loss suffered by the Nigerian Naira in the official market appears to be an isolated event, as Nigeria’s gross external reserves rose to $46.80 billion as of February 4, 2026, from $46.70 billion a day earlier, underscoring improved capacity to meet foreign obligations and support market confidence.
The local currency has been able to find a solid path despite no indications of any intervention from the apex bank in recent week strengthening the case of price discovery.
As for the digital currency market, Bitcoin (BTC) tumbled more than 13 per cent over the past 24 hours, selling at $63,075.23, its steepest one-day decline since the FTX-driven crash in November 2022.
The sell-off extended beyond crypto, with silver plunging 15 per cent and gold sliding more than 2 per cent. US stocks also fell.
The latest downturn comes as investor confidence in crypto’s utility as a store of value, inflation hedge, and digital currency falters.
Ripple (XRP) plunged by 23.4 per cent to $1.15, Dogecoin (DOGE) went down by 14.2 per cent to $0.0879, Cardano (ADA) declined by 13.4 per cent to $0.2459, Binance Coin (BNB) slumped by 13.2 per cent to $606.83, Solana (SOL) dipped by 13.1 per cent to $78.70, Ethereum (ETH) crashed by 13.0 per cent to $1,841.67, and Litecoin (LTC) lost 13.1 per cent to trade at $50.70, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) were at $1.00 each.
By Adedapo Adesanya
Crude oil was down by almost 3 per cent on Thursday in choppy trading, after the US and Iran agreed to hold talks in Oman on Friday.
Brent crude futures depleted by $1.91 or 2.75 per cent to trade at $67.55 per barrel, and the US West Texas Intermediate (WTI) crude futures slumped by $1.85 or 2.84 per cent to $63.29 per barrel.
The US and Iran are set to hold nuclear talks in Oman today after President Donald Trump warned the country’s supreme leader should be “very worried.”
The high-stakes talks are scheduled to take place on Friday in the Omani capital, Muscat, and will involve Iranian Foreign Minister Abbas Araghchi and President Trump’s special envoy, Mr Steve Witkoff.
Tensions between the two countries have escalated sharply in recent weeks following a deadly crackdown by Iranian security forces on nationwide anti-government protesters. The crackdown prompted Trump to send a US military “armada” to the region and threaten to launch strikes.
Now, market analysts noted that the talks are being given the benefit of the doubt, but noted scepticism that any reasonable deal could be made with Iran.
The discussions come as the US builds up forces in the Middle East, and regional players seek to avoid a military confrontation that many fear could escalate into a wider war and impact the Strait of Hormuz.
About a fifth of the world’s total oil consumption passes through the Strait of Hormuz between Oman and Iran. Other OPEC members, Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, export most of their crude via the strait, as does Iran.
Strength in the US Dollar and volatility in precious metals also weighed on commodities and risk sentiment more broadly on Thursday. The greenback getting stronger makes oil expensive for holders of other currencies.
On the supply side, discounts on Russian oil exports to China widened to new records this week as sellers cut prices to attract demand from the world’s top crude importer and offset the likely loss of Indian sales. This week, a trade deal was announced between the US and India, which agreed to halt purchases of Russian crude.
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