Market News

Nigeria inflation expected to rise further, UK data eyed for rate cut clues - BUSINESSDAY

APRIL 15, 2024

By Eniola Olatunji and Wasiu Alli

With Nigerians facing a possible 32 percent inflation surge for March, the UK releases unemployment and inflation figures that could influence the Bank of England’s interest rate decision.

Read also: Dangote says diesel price reduction to cut Nigeria inflation

April 15:

CPI and inflation report for March

The National Bureau of Statistics will be releasing the March inflation figures.

The Financial Derivatives Company has projected that inflation will hit 32 percent, further squeezing the purchasing power of the citizens and fuelling a cost-of-living crisis.

In February Nigeria’s consumer price accelerated to 31.70 percent, a 14-month consecutive increase.

Inflation has continued to be on the rise due to high energy costs, the impact of exchange rate fluctuations and persistent insecurity concerns in the country which is affecting agricultural activities.

To fight inflation, Olayemi Cardoso, the governor of the central bank has hiked the country’s benchmark interest rate by a combined 600 basis points to 24.75 percent from 18.75 it was last July.

Cardoso has equally ramped up efforts toward stabilising the exchange rate fluctuations which has seen the naira appreciate steadily against the dollar from about N1,900 per dollar in February to around N1,125/$ now.

Though FDC predicts that inflation is set to peak in May/June, it noted that a decline is certain after the wage review by the federal government.

DMO to issue N450bn FGN bonds

The Debt Management Office will be issuing three tranches of FGN bonds worth N450 billion on Monday.

The issuance includes a new five-year N150 billion bond alongside reopenings of seven- and ten-year bonds, each valued at N150 billion.

At the last auction in March, DMO sold N475.6 billion across the three bonds offered with the stop rates of the longest tenure at 20.45 percent.

The government frontloaded a substantial part of its 2024 borrowings in the first quarter. The second quarter bond auction calendar suggests that the government aims to raise between N300 billion to N600 billion monthly compared to the 2.5 trillion borrowings in the first quarter.

Read also: Emerging markets sweat as US inflation soars to 3.5%

April 16:

UK unemployment data for February

The UK Office for National Statistics will be releasing the unemployment rate for February.

The unemployment rate rose to 3.9 percent in January from 3.8 percent in December, while annual average wage growth including bonuses fell to 5.6 percent from 5.8 percent in the previous month.

The Bank of England has waited to see signs that wage growth is slowing before making a move to reduce interest rates and is expected to view the latest figures as another reason to begin that process this year.

The unemployment rate measures the percentage of the total workforce that is not working, yet actively seeking employment. In the U.K., this measure spans the prior three months.

A reading that is higher than the current is generally negative for the pounds, while a lower-than-forecast reading is generally supportive for the pounds.

“Inflation has continued to be on the rise due to high energy costs, the impact of exchange rate fluctuations and persistent insecurity concerns in the country which is affecting agricultural activities.”

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April 17:

UK inflation data

The UK Office for National Statistics will be releasing its inflation data on Wednesday.

In February the United Kingdom inflation fell to 3.4 percent from 4 percent in January, driven in part by a slowdown in the pace of food and restaurant price rises. The February figure is the lowest since September 2021, when it was 3.1 percent.

Investors are betting that inflation will tumble further through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.

Price watch for household kerosene and petrol

The National Bureau of Statistics (NBS) is set to release its March data for household kerosene as well as its premium motor spirit (petrol) on Wednesday.

According to NBS, the average retail price per litre of Household Kerosene (HHK) paid by consumers in February 2024 was N1,340.94, showing a year-on-year increase of 14.23 percent from N1,173.89 in February 2023.

While Kaduna tops the state with the highest average price at N1,866.67 per litre, kerosene was sold for as low as N971 per litre in Bayelsa, making it the state with the lowest average price.

March’s price watch is expected to see a marginal increase, hitting about N1,400 per litre, according to forecasts by many analysts.

Also on Wednesday, the Bureau of Statistics will release its price watch for PMS.

The average retail price paid by consumers for Premium Motor Spirit (Petrol) for February 2024 was N679.36, indicating a 157.57 percent increase when compared to the value recorded in February 2023 (N263.76).

With the removal of the petrol subsidy in May 2023 by President Bola Tinubu, the petrol prices have tripled from about N238 to N679, causing public transportation providers to hike fares and pushing inflation up to a 27-year high of 31.7 percent in February.

“As Nigeria’s oil production is yet to see a significant boost, petrol price for March is expected to increase. However, given that Dangote refinery commences its sale of PMS by May, oil production will be improved, thereby leading to a decline”, an energy expert said.

Read also: Inflation pushes land price in prime locations up 42% in 6months

April 19:

NBS to release March’s price watch for diesel

Nigeria’s National Bureau of Statistics will release its price watch for Automotive Gas Oil (diesel) for the month of March on Thursday.

The average retail price of diesel paid by consumers increased by 50.20 percent on a year-on-year basis from N836.91 per litre in February 2023 to N1,257.06 per litre in February 2024.

With the Dangote refinery selling diesel at about N1,200 per litre, the price is expected to further drop on the back of improved production.

Naira on race to N1000/$

The naira is on set to hit N1000 after showing aggressive gains this week to a four-month high of N1120 per dollar on the black market.

A dollar sold for N1,125 on the streets on Friday after a three-day holiday break that led to a moderation in demand.

Goldman Sachs sees naira extending world-beating rally

The naira could also extend gains in the official market in the coming days, provided policymakers stay on track, according to a Goldman Sachs Group Inc. economist.


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