WHY RISING INFLATION MAY FORCE MPC TO MAINTAIN ECONOMIC RATES
Ahead of the 271st Monetary Policy Committee (MPC) of the Central Bank of Nigeria, there are strong indications that the surging inflation rate in the country may force members to maintain the status quo on Monetary Policy rates. The National Bureau of Statistics (NBS), Consumer prices in Nigeria was on the rise for the fourth straight month in December 2019, reaching its the highest level since April 2018 at 11.98 per cent as food prices continued to rise.
The National Bureau of Statistics (NBS), Consumer prices in Nigeria was on the rise for the fourth straight month in December 2019, reaching its the highest level since April 2018 at 11.98 per cent as food prices continued to rise.
This recent development has been, however, attributed to the on-going border closure by the federal government of Nigeria.
In fact, there are strong indications that taking cognizance of inflationary pressures making its way at the early stages of 2020 and moving further away from the CBN 9 per cent upper target band, the naira will continue to be volatile.
Although Godwin Emefiele, the central bank governor, said in November 2019 said, “the impact of the border closures on inflation is temporary”, this maybe questioned if inflation continues to escalate in 2020.
But with the recent twist of rising inflationary pressures, industry stakeholders believed that the MPC may be forced to maintain the status quo on at the close of its bi-monthly meeting, which comes up next week.
However, many will have their focus on the Loan to Deposit Ratio (LDR) for banks which has been set to 65 per cent.
Looking at the forecast for LDR, it has been speculated that the apex bank may increase the loan to deposit rate to 70 per cent in an effort to boost economic growth through investments in Nigeria’s real sector, but the apex bank had recently debunked the move.
CIBN SET TO RELEASE OUTLOOK FOR ECONOMY AND BUSINESS IN 2020
There is strong indication that activities in the banking industry will be upbeat when the Chartered Institute of Bankers of Nigeria (CIBN) will be unveiling the outlook for the economy and business in 2020.
Consequently, captains of the industry, administrators, business owners and thought leaders in the economy will convene in Lagos on Tuesday, January 28, 2020 in Lagos, as CIBN’s Centre for Financial Studies in collaboration with B. Adedipe Associates Limited will brainstorm on this.
According to the CIBN, the breakfast programme aims to examine the global and domestic economies in the past year and make projections for the current year.
This year’s theme of the event is “Economic outlook: Implications for businesses in Nigeria in 2020”, the forum will have Keynote Speaker and lead discussants including Niyi Adebayo, minister of industry, trade, & investment; Joseph Okwu Nnana, deputy governor, financial systems stability directorate, Central Bank of Nigeria (CBN) and Eme Essien, country director, International Finance Corporation (IFC).
Others include Samuel Egube, commissioner for economic planning & budget, Lagos State; Emmanuel Ijewere, Chief Executive Officer, Best Foods Global Limited; Kabir Tijjani, Executive Director, Business Development, North & Strategy, Premium Pension Limited; and Femi Awoyemi, CEO, Proshare, among others.
It is also to note that the programme aims to review the expectations of local businesses concerning global economic and political developments; analyses the implications of the developing economic and political tendencies for key business sectors in Nigeria; discussing feasible business survival strategies and chart, practicable ways of mitigating business’ risks and improve performances.”
Expected participants at the event are employees of financial institutions, regulatory bodies, commercial banks, development banks, microfinance banks, insurance companies, business owners and capital market operators.
Others are employees of academic institutions, government ministries, departments and agencies, NGOs and other key stakeholders in the Nigerian economy.
NSE ALL- SHARE INDEX REBOUND BY 0.45 PERCENT AMID RENEWED BUYING INTEREST
Transactions on the nation’s bourse closed northward on Thursday with the market indices appreciating by 0.45 per cent after dropping for two consecutive days.
Specifically, the All-Share Index (ASI) increased by 133.08 points or 0.45 per cent to close at 29,591.29 compared with 29,458.21 recorded on Wednesday.
Similarly, the market capitalisation of listed equities rose by N69 billion to close at N15.242 trillion against N15.173 trillion achieved on Wednesday.
The upturn was impacted by gains recorded in medium and large capitalised stocks, amongst which are; Seplat, Chemical and Allied Products, Dangote Cement, Unilever Nigeria and BUA Cement.
Analysts at Afrinvest Limited expected gains in the market to persist in the next trading session, on the back of renewed buying interest.
An analysis of the price movement table shows that CAP led the gainers’ in percentage terms, with 10 per cent to close at N27.50 per share.
Unilever followed with a gain 8.06 per cent to close at N19.45, while Chams rose by 6.45 per cent to close at 33k per share.
Transcorp increased by 4.85 per cent to close at N1.08, while Fidelity Bank appreciated by 4.55 per cent to close at N2.30 per share.
SEC SET TO RELEASE RULES ON ELECTRONIC OFFERING
The Securities and Exchange Commission, SEC has said it will soon unveil rules for electronic offering of shares, stressing that it will help solve the problems of unclaimed dividend in the country.
The Acting Director General, SEC, Ms. Mary Uduk revealed this in an interview in Abuja, saying the Commission is excited about electronic offering and is in full support hence the need to develop the rules to guide its implementation.
In a statement made available to Vanguard, the SEC boss said : “We believe that electronic offerings will help solve the problems of unclaimed dividends. So it’s something we are backing seriously. Through electronic offerings we will not have the problems of identity as we had in previous listings.
“It has a lot of advantages, it means that people who are not close by during an offering can invest, we are able to get the data we need for regulation, the offering is more efficient and it is cost saving. It is something we are working on; the rules will soon be out for everyone to use.”
The Acting DG said when it becomes operational, an investor in Ghana or South Africa can invest in the Nigerian capital market via electronic offering.
“That is the idea but when the Exchanges finish putting it together that is what will happen. Ours is to make the rules and regulate, but that’s the idea. We want to open up our market so that more people can invest from different parts of the world.
We want a deeper, bigger, more attractive market. We think our economy is big enough to have a much bigger market. The capital market makes up less than 10 percent of the GDP of the country. If you look at other countries even South Africa, it’s over 100 percent of GDP. We believe we have a large room for expansion and that is what we are pursuing” Uduk stated.
NIGERIA’S TERMS OF TRADE FALLS BY 2.7% IN Q3 ’19 – NBS
Nigeria’s Terms of Trade (ToT) weakened slightly in the third quarter of last (Q3’19) as it fell by 2.7 percent to 100.99 index points from 103.8 index points in Q2’19.
The National Bureau of Statistics (NBS) disclosed this in its latest Commodity Price Indices and ToT report for Q3’19.
According to the bureau, the 2.7 percent decline was as a result of 14 percent and 5.2 percent decreases recorded in the prices of trade with Africa and Europe respectively.
The TOT is the ratio between a country’s export prices and its import prices. An increase in the terms of trade between two periods (or when TOT is greater than 100 percent) means that the value of exports is increasing relative to the value of imports, and the country can afford more imports for the same value of exports.
The report stated: “The All Region group terms of trade stood at 103.39 in July, 102.56 in August and 100.99 in September. This represents decreases of 0.8 percent in August and 1.53 percent in September. On average, the terms of trade
decreased by 2.33 percent between July and September. This decrease is explained mainly by decreases in the prices of Trade with Africa (-13.90 percent) and Europe (-5.21 percent).
“The All region group export index, on average, rose by 0.12 percent between July and September. This was due to marginal increases in the export prices to Africa, America and Europe. The month on month changes showed that the All region group export index decreased (-0.12 percent) in September after increasing 0.24 percent in August.