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Economy

Poverty Biting Harder, Reps Tell FG

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SPEAKER of the House of Representatives, Yakubu Dogara
  • Poverty Biting Harder, Reps Tell FG

Members of the House of Representatives on Tuesday at a plenary session complained that poverty was biting harder in the country and urged the Federal Government to tackle the problem headlong.

They spoke as President Muhammadu Buhari wrote the House on his plan to present the 2018-2020 Medium-Term Expenditure Framework and Fiscal Strategy Paper to the lawmakers.

The President’s communication was read to members by the Speaker, Mr. Yakubu Dogara, thus setting the stage for laying the estimates of the 2018 budget before the National Assembly any time soon by Buhari.

The lawmakers’ worry about poverty came as they passed a motion to mark the World Poverty Day. The motion was sponsored by the Chairman, Committee on Poverty Alleviation, Mr. Muhammad Wudil.

They resolved to “call on the Federal Government to be more effective in implementing various programmes aimed at tackling poverty in the country.”

One member from Osun State, Mrs. Ayo Omidiran, described how poverty was biting most Nigerians, including lawmakers.

She stated, “There is no member here who is not feeling the pangs of poverty. Many of our constituents depend on us for their basic needs; they are feeling the pangs of poverty. People now go to their neighbours’ houses to seek help, which is embarrassing already. In turn, many of them run to us, asking for one favour or another.”

Buhari’s letter on the 2018-2020 MTEF/FSP was read just as the House passed the 2017 Federal Capital Territory statutory budget of N222.3bn for second reading.

The MTEF/FSP is a requirement of the Fiscal Responsibility Act, 2007 and sets out the Federal Government’s revenue and spending plans for 2018-2020.

The letter read partly, “Pursuant to provisions of the Fiscal Responsibility Act, 2007, the preparation towards the submission of the 2018 budget to the National Assembly is progressing well.

“The MTEF and FSP were prepared against the backdrop of a generally adverse global economic uncertainty, as well as fiscal challenges and recovery in domestic economy to ensure that planned spending is set at prudent and sustainable levels and is consistent with government’s overall developmental objectives and inclusive growth.”

It is anticipated that the 2018 national budget may be slightly higher than that of 2017.

The budget for the current year is N7.441tn and was signed into law on June 12 by Prof. Yemi Osinbajo, then as the acting President.

It was higher than the 2016 budget of N6.06tn by over 20 per cent. The MTEF will set the figures for 2018 and the oil and non-oil revenue projections for 2019 and 2020.

It will also set the crude oil benchmark for 2018-2020 and the expected oil production output. The oil benchmark for the 2017 budget was originally set at $38 per barrel, but it was later increased to $44 by the National Assembly. The dollar/naira exchange rate was set at N305/USD1.

The House Majority Leader, Mr. Femi Gbajabiamila, led the debate for the second reading of the FCT’s budget.

He said N52.5bn went for personnel spending, while N41.2bn was earmarked for overhead costs.

The lion’s share of N128.bn was provided for capital expenditure, particularly for completion of ongoing projects and satellite towns’ development in the FCT.

Although, some members applauded the budget, they called for more attention to be given to the satellite towns. For instance, the Chairman, House Committee on Ethics/Privileges, Mr. Nicholas Assai, observed that most of the infrastructure in the satellite towns had failed.

He also said some of the towns had no potable water and electricity supply, adding, “Let us give the people in these satellite towns a sense of belonging. Places like Jikwoyi, Kubwa, Dutse; there are no good roads there. Let us endeavour to cater for these people.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Economy

Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars

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Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Economy

Currency Drop Spurs Discount Dilemma in Cairo’s Markets

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Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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