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Nigerian Inflation Sticky in September as Food Costs Rise



  • Nigerian Inflation Sticky in September as Food Costs Rise

Nigerian inflation was little changed in September as food prices continued to rise, limiting scope for the central bank to ease policy before the end of the year.

The inflation rate in Africa’s most-populous nation decreased to 15.98 percent from 16.01 percent in August, the Abuja-based National Bureau of Statistics said in an emailed report on Tuesday. That median of 13 economists’ estimates compiled by Bloomberg was 16 percent. Prices rose 0.8 percent in the month.

While inflation slowed for the eighth consecutive month, it has been outside the central bank’s target range of 6 percent to 9 percent for more than two years even as policy makers raised the key lending rate to a record high of 14 percent. A drop last year in the output and price of oil, Nigeria’s biggest export, caused a dollar shortage and led to a weaker naira and increased import prices. This contributed to the economy contracting for five straight quarters before expanding 0.6 percent in the three months through June.

While the inflation rate has decreased, it’s “still high for central bank to loosen policy,” Ayodele Akinwunmi, head of research at Lagos-based FSDH Merchant Bank Ltd. Said by phone from Lagos. “That will probably happen next year as inflation further decelerates.”

Dollar supply has improved since the central bank started easing currency-trade controls, and introduced a window where portfolio investors and importers can buy foreign currency at market-determined rates. Floods in Benue state last month have kept food prices high, negating some of the benefits of the increased availability of foreign exchange.

Food Inflation

Food prices rose 20.32 percent from a year earlier, compared with 20.25 percent in August, driven by the costs of potatoes, meat and oils and fats, the statistics office said.

“A spike in food price inflation, due to poor harvest in some parts of the country, offset the declining inflationary effect of the currency weakness,” the World Bank said last week.

The International Monetary Fund projects Nigeria’s economy to grow by 0.8 percent this year, and 1.9 percent next year from a contraction of 1.6 percent in 2016 and sees inflation staying above target through 2018.

The “central bank will continue to use open-market operations, and work with the debt management office to adjust Treasury-bill yields so as to encourage banks to increase lending to the private sector and support growth,” Akinwunmi said.

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.

Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts




Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin



Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges

Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.

The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.

The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.

We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.

Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.

Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.

In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.

The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.


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Crude Oil

Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting




Oil Prices Rise to $64.32 Amid Expected Output Extension

Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.

Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.

“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”

The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.

Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.

“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.

Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.

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