Short-term interest rates are likely to stay elevated in line with the government’s clear efforts to make the Naira an attractive currency in global terms by ensuring real returns. Although this approach may not be popular in analytical circles, it is sensible to predict based on the established policy agenda. Due to the extremely high cost of adopting this approach (with specific reference to fiscal policy), we do not foresee further elevation beyond the short end of the curve. In fact, it is expected that fiscal authorities will embrace less costly funding options for mid to long-term needs.
Cryptocurrencies and equities seem to have ballooned in the last couple of days following the emergence of President-elect Donald Trump, and while this is very positive news, we are of the opinion that prices may have discounted the rest of the Biden-Harris dispensation, and as such, we expect some repricing to factor the gap period between now and Trump’s inauguration in January, however short.
Oil prices in the same breath have been priced to reflect Trump’s resumption, but we foresee more chaos in the Middle East before he takes over. To this end, our outlook for oil prices is bullish as escalations between Israel and Iran may grow more intense and direct.