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Forex

Economic Slowdown: ECB Lowers Growth Projection for 2019

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Mario Draghi
  • Economic Slowdown: ECB Lowers Growth Projection for 2019

Growing uncertainty in the Euro-area has forced the European Central Bank to lower its 2019 growth projection and increased bank stimulus in an effort to boost growth in the region.

The ECB lowered growth forecast from 1.7 per cent predicted three months ago to 1.1 per cent, saying the region’s economic slowdown was bigger than previously estimated.

The central bank announced another loan assistance package for banks and planned to extend existing stimulus.

Mario Draghi, the President, ECB, explained that growing protectionism across the world and uncertainties from emerging economies are hurting growth in the Euro-area.

“The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment,” Draghi told journalists in Frankfurt on Thursday. “The risks surrounding the euro area growth outlook are still tilted to the downside.”

However, the economic slowdown in the Euro-area run deeper than just protectionism, business sentiment has plunged in recent months as businesses and investors were uncertain regarding Brexit negotiations. The region’s largest economy, Germany, grew at its slowest rate in five years in 2018, down from 2.2 per cent in 2017 to 1.5 per cent and narrowly escaped recession despite ECB assuring businesses of strong economic recovery and promising to start balance sheet normalization in 2019.

That has now changed as the same ECB has started adding to stimulus and admitted its projections were slightly off.

Also, the inability of the region to reach an agreement with the European Union on Brexit is weighing on business decisions. For instance, Germany and the United Kingdom alone trade about €200 billion worth of goods per annum, putting businesses that built their revenue around exports and imports from the United Kingdom in an uncertain situation regarding their business or future investment.

In Italy it is not different, Europe’s fourth-largest economy plunged into recession in the final quarter of 2018 and 2019 economic projection has also been slashed. Now Italy is looking towards China’s Belt and Road Initiative for future growth.

A fall-out between the U.S and Chinese delegates negotiating trade dispute could worsen both the region’s and global growth, especially after China adjusted its economic projections for the year and lowered tax by 3 per cent for manufacturers to aid slowing growth and facilitate exports.

While this might boost foreign inflows into emerging economies, South Africa and Nigeria may struggle to attract foreign investors with their current economic situations.

The euro single currency fell for a fifth day on Friday against the U.S. dollar to $1.1234 as traders continued to dump the single currency.

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.

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Naira

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

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Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

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Naira

Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

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The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

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Forex

CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

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Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

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