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Pace of Inflation Increase to Reduce in September



Inflation - Investors King
  • Pace of Inflation Increase to Reduce in September

Following yesterday’s release of the data for Consumer Price Index (CPI) by the National Bureau of Statistics, which put the figures at 17.9 per cent (year-on-year), representing 0.24 percentage points higher than 17.6 per cent in August 2016, the pace of increase in inflation has further reduced.

This has confirmed the projections of analysts, who forecast the further narrowing of the gap of increase in CPI, which measures inflation, in the review month.

Earlier, analysts, in their estimations, had projected a slower pace of increase in the CPI in September. The projections were contained in the analyses done by Dunn Loren Merrifield Asset Management and Research Company Ltd (DLM) and Financial Derivatives Company Ltd (FDC).

For Dunn Loren Merrifield, CPI would increase to 17.93 per cent (year-on-year) in September 2016, representing an increase by 32 basis points from 17.61 per cent in the previous months, while FDC put the headline inflation for the review month at 18 per cent, an increase of 40 basis points. In fact, FDC has regarded the 18 per cent inflation rate as the highest in 11 years.

At 17.61 per cent, inflation for August had risen by 48 basis points from 17.13 per cent in July. When compared with the expected pace of increase in September, it is projected that the gap of increase would reduce.

According to DLM, “We estimate an increase in headline inflation to 17.93 percent year-on-year in September 2016; up by 32bps from 17.61 percent recorded in the preceding month.”

This in our view, DLM analysts explained, will be primarily driven by a faster rise in the food index. “Our model shows a movement in the food sub-index captured by “farm produce and processed foods” to 212.2 points in September 2016 up from 181.8 points in the corresponding period of the previous year. In addition, we expect a movement in the core sub-index to 204.0points up from 173.7points in September 2015. Hence, this translates into a food and core inflation of approximately 16.73 percent and 17.47 percent respectively in September 2016.”

They recalled that the increase in inflation in August was “supported by the rise in prices recorded in all classes of the Classification of Individual Consumption According to Purpose (COICOP) which contribute to the index.”

“In particular, the divisions which recorded higher inflationary pressures during the month include: housing, water, electricity, gas and other fuel, education and transportation services.

However, on a month-on-month basis, the pace of price increases slowed marginally to 1.00 percent from 1.30 percent in July 2016,” they added.

The analysts also noted that food inflation up by 63bps even as core inflation increased for the seventh consecutive month. “The food index was higher by 16.43 percent up from 15.80 percent recorded in the previous month. This was despite the slower rise in prices recorded in the fruits, potatoes, yam and other tubers as well as oils and fats classes which weighed considerably on the overall sub-index.

“On a month-on-month basis, the food sub-index remained relatively flat at 1.20 percent during the month.

Similarly, the core inflation index rose by 17.21 percent from 16.93 percent in July 2016 with the highest increases seen in solid fuels, vehicles parts, books & stationeries, clothing and other articles of clothing. On a month-on-month basis, the core sub-index rose marginally to 0.90 percent from 1.20 per cent in the previous month.”

Nevertheless, FDC analysts, in giving their own position, noted that, “If the estimates of our model are accurate, it will be the highest level in 11 years,” but added that, “a change of 0.4 per cent indicates that the rate of increase is slowing.” As such, they submitted that, “If this trend continues, the direction of inflation is likely to reverse.”

On factors that are responsible for pressure on inflation, FDC said: “Diesel prices eased in September to an average of N190/ltr from August’s average of N193.53/ltr partly due to heavy rains and reduced attacks in the Niger Delta due to a ceasefire agreement. However, on the 24th of September the NDA defied the cease-fire agreement with an attack on the Bonny crude export line. PMS prices maintained an average of N143/ltr with some filling stations selling as low as N140/ltr.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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IMF Staff Completes Virtual Mission to Lesotho




Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021



Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.


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Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF



IMF - Investors King

The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday  (October 13) in Washington, DC.

High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.

“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.

Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.

“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.

He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.

“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar

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