Earlier in June however, Central Bank of Nigeria (CBN)
decided to reverse exchange rate peg in favour of a free float (in
theory). Since then over $1 billon have come into the country but the
exchange rate has continued to plummet amidst persistent shortage of
supply of the US dollar.
Nigeria officially fell into recession as GDP shrank by
2.06 percent year-on-year in the second quarter of 2016, compared to a
0.36 percent drop in the previous period. Inflation rate as of August
stands at 17.6 percent, which marks the ninth consecutive rise in
inflation since December 2015.
Below is the Ventures Africa Weekly Economic Index, giving
you a glimpse into the recent activities in Nigeria’s economy as well as
changes that could affect the economy:
Exchange rate
The naira dollar rate appreciated by 2 percent this week on
the parallel market, up from N470/$ to N460/$. The interbank market has
however remained steady throughout the week at N306/$. Huge forex
supply ($45 million) sourced through foreign remittances/inflow by a
global forex dealer (Travelex) may have been behind the currencies
strong performance. Travelex is expected to facilitate similar amounts
of money supply in subsequent weeks and this could reduce dollar
hoarding activities of some speculators. A continued appreciation of the
naira will reduce the cost of imported raw materials for manufacturers
which should enhance productivity.
What happened to price of crude oil?
Despite the fall in prices on Friday, oil prices ended the
week up 1.08 percent. Marking the fourth consecutive week of gains and
the longest weekly winning streak since April. U.S. crude settled down 9
cents at $50.35 a barrel, closing the week up 1.1 percent. Crude prices
fell Friday amidst skepticism that major oil producers will be able to
coordinate the production cut they agreed to last month. Markets may be
concerned about the persistent over supply of oil. OPEC is expected to
meet again in late November to agree on details of the proposed
production cut to cap total output under 33 million barrels a day, from
the current 33.39 million barrels. Even in the face of this oil cut It
may still take months for the markets to adjust.
What happened with Inflation?
The inflation rate rose for the 10th consecutive months
Consumer Price Index revealed that Inflation rate for the month was
17.9% compared to 17.7% In August. The NBS attributed the rise to a
higher increase in the prices of fashion related items as well as
electricity and energy related prices. The rate of increases However,
moderated for the second month running indicative of a slowdown in the
rise of across board.
Nigerian Stock Market Summary
NSE All Share Index closed on a positive note at 27,861.03
up 0.02% from the previous day. Market capitalization closed at N9.57
trillion. The figure represents a 0.09 percent increase from last week’s
close when the NSE All Share Index was 27,835.22.
This week the value of shares traded on the Kenyan stock
exchange surpassed Nigeria’s for the first time on record in September,
as foreign investors shunned the West African economy, battered by
militant attacks on oil facilities and shortages of foreign exchange.
Changes In monetary policy
The Central Bank of Nigeria issued a new circular
indicating that it will undertake a one off intervention in the foreign
exchange (forex) market by selling forex to the following industries
using Forwards:
Raw materials and machineries for manufacturing companies;
Agricultural chemicals; and
Airlines
Agricultural chemicals; and
Airlines
Below is a snapshot of relevant economic indicators
GDP Growth Rate| -2.06% (2016Q2)
Inflation Rate| 17.9% ( September 2016)
Unemployment rate| 13.3% (2016 Q2)
Underemployment rate – 19.3% (2016 Q2)
MPR – 14% (July 2016)
CRR – 22.5% (July 2016)
Liquidity ratio – 30% (July 2016)
Inflation Rate| 17.9% ( September 2016)
Unemployment rate| 13.3% (2016 Q2)
Underemployment rate – 19.3% (2016 Q2)
MPR – 14% (July 2016)
CRR – 22.5% (July 2016)
Liquidity ratio – 30% (July 2016)
