Turbulent Times
Prologue
As Nigeria’s economic narrative unfolds, markets are intrigued by what can be described as a compelling saga, where the Central Bank’s strategies appear to be converging with market resilience. The local currency has sustained a downward trend as scarcity of the dollar bites harder. NAFEM closed the week at $/N808.27 while the parallel market trended as high as $/N1,190 at the end of the week. In this volume, we navigate the symphony of economic intricacies currently shaping the nation’s fiscal destiny.
Turbulent Times
In volume 66, we highlighted the CBN’s commitment to boost FX liquidity and the removal of the ban on 43 items previously restricted from officially accessing FX. Following this development, there has been a buzz across the market revolving around the impact of the ban on food inflation. Reflecting on September 2023, where Nigeria witnessed a spike in inflation, soaring to 26.72%, a surge driven by escalating food prices and the harsh economic challenges attributed to the removal of fuel subsidies in May 2023.
In June 2015, the Central Bank of Nigeria (CBN) imposed restrictions on a few items with a goal to preserve foreign exchange reserves and boost local production, particularly focusing on 11 essentials. At, the policy faced criticism from experts who argued that its effect could be inflation in the prices of imported food items, contributing to the existent food inflation crisis. Irrespective of the foregoing, food inflation in September 2023 stood at a staggering 30.64%, a 7.30% increase compared to the previous year. Some schools of thought argue that lifting foreign exchange restrictions on the 43 items may not significantly impact the rising food inflation due to the upward trajectory for exchange rates in the foreseeable future.
The global crude market witnessed a stir, in the early hours of Friday, October 20, Brent crude oil hit $93 per barrel, the surge was primarily attributed to heightened tensions in the Middle East. Oil traders closely monitored the Israel-Hamas conflict, fearing its escalation into a larger regional crisis involving other nations. The conflict is believed to significantly impact global oil price volatility, with the Middle East supplying approximately one-third of the world’s crude oil.
Market Highlights: Vol 67.
- FMDQ changes ‘I&E Window’ to ‘NAFEM.’
- AfDB’s AFAWA to mobilize $5 billion in financing of African women-led businesses by 2026.
- Ghana asks bondholders to take haircuts of as much as 40%
Local News: Vol 67.
- Naira slumps further, exchanges $/N1,190.
- Naira redesign: Falana slams Emefiele, says N3.2 trillion was withdrawn but only N402 billion printed.
- Nigeria hands $1.5 billion cash to struggling households.
- Senate Leader canvasses legislative measures to stem Naira devaluation.
Global News: Vol 67.
Inflation raging at 130% is pushing Argentina down a radical path.
EU pledges €150 billion infrastructural fund to Nigeria, others by 2027.
South Africa to surpass Nigeria as Africa’s biggest economy.
Bank of America reports 2.48% decline in Q3 pre-tax profits but declares $0.91 dividend.
Bitcoin’s price expected to double, with spot ETF in play.
Stock pickers sidelined with world events overshadowing earnings.
Discourse: Vol 67.
- Considering the recent and persistent rise and fall of the naira, what position do you think the naira stands against the dollar in the coming week(s)?
- Among the factors that encourage foreign investment, what in your view is responsible for foreign investors’ apathy in Nigeria?
- What are the likely implications of the seemingly unending Israel-Hamas conflict on the Nigerian market and the African market in general?
Outlook
- N250bn expected liquidity injection.
- The markets await the outcome of the NTB auction scheduled for the week.
- Some buy interest likely as coupon inflows are to be reinvested this week.
