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Nigerians Decry High Cost of Living as Rising Fuel Price, Inflation, Unemployment Weigh on Livelihood

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Petrol - Investors King

Nigerians Reject High Fuel Price, Demand Change

Nigerians have decried the persistent increase in prices despite the broad-based economic uncertainties that are about to plunge the nation into a second recession in four years.

The Buhari led administration had adjusted the fuel pricing template to reflect market price during the peak of COVID-19 pandemic when oil price plunged below $20 per barrel in April.

However, the rebound in fuel price to $45.2 per barrel as economies gradually reopen means Nigerians will now be paying more for the same fuel consumption. A situation Nigerians have rejected despite been the ones calling for the removal of fuel subsidy.

Again, the timing is also a big issue especially after recent reports from the National Bureau of Statistics (NBS) showed the nation’s unemployment rate rose to 27.1 percent with inflation hovering around 12.82 percent and the Naira exchange rate at a four-year low of N440 to a US dollar on the black market.

Other factors like the poor business activities in the manufacturing sector, VAT increase, additional charges imposed on flight tickets and imports at a time when Nigerians are struggling to stay alive forced many Nigerians to call for protests against an inconsiderate government.

Also, the lack of clear policy direction despite the numerous weak economic data continues to hurt economic sentiment and outlook as both foreign and local investors are holding back on new investments that would have helped ease the high unemployment rate and support consumer spending.

On Wednesday Nigerians finally said enough is enough after D.O Abalaka, the lead sales -Ibadan Depot, said Pipelines Product Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation, has adjusted pump price again.

Abalaka said, “Please be informed that a new product price adjustment has been effected on our payment platform”.

“To this end, the price of Premium Motor Spirit (PMS) is now one hundred and fifty-one naira, fifty-six kobo (N151.56k) per litre.

He added that “This takes effect from September 2, 2020.

The announcement was made a day after the electricity tariff was adjusted to reflect consumption and not the fixed rate adopted previously.

Some of the aggrieved Nigerians have taken to their Twitter handles to call out President Buhari led administration on the persistent increase in prices.

Reno Omokri, a social commentator, said “If anyone had told me that General @MBuhari would increase fuel price to ₦162 and:
* @ObyEzeks
* Mbaka
* Soyinka
* Tinubu
* Oshiomhole

“Would be silent, I would have called them a liar. Alas, those who shut down Nigeria in 2012, have today shut their mouths!.”

Motivated George said “Fuel price is up, Electricity fee is up, Inflation rate is up 13%, Our government still want to use tax to kill us. We are all tired. So, as Nigeria marks her 60th anniversary this October, what would you say to Nigeria if she was a person? Use #OrijinalTalk talk in your reply.”

However, one Adejumo Abayomi, a President Buhari supporter, disagreed. He blamed PDP that sold the nation’s power companies for signing a poor agreement with the buyers.

“They sold DISCOs to themselves, and keep receiving 40% electricity tariff subsidy,” Abayomi stated.

He added that “They closed d deal with condition that will cost us $8b should we cancel d deal. Many of these @OfficialPDPNig men who were active during the signing are now blaming @MBuhari. Are they okay?.”

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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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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