- Reserve Bank of Australia Leaves Rate Unchanged at 1.5%
The Reserve Bank of Australia once again left its interest rate at record low of 1.5 percent, citing low inflation rate, low growth in labour costs and strong retail competition.
According to the central bank, while the recent inflation data were in line with the bank’s expectations, inflation is likely to remain low in the near term due to weak wage growth and strong price competition in the retail industry.
However, the apex bank believes record-low interest rate will support the Australian economy and reduce unemployment rate even more while giving inflation the needed support towards its 2 percent target.
Despite steady job creation, strong commodity prices and growing Chinese economy amid improved global economic outlook, the central bank is finding it hard to substantially boost prices and curb retail price competition due to low demand and weak wage growth.
But with the Chinese economy, Australia’s largest trading partner, projected to slow towards the end of the year as credit control measures filtered through key sectors, the Australian economy may struggle even more, especially if the Fed raised rates as projected.
Still, the apex bank said low wage growth is likely to continue for awhile but hopeful that tight labour market will eventually force employers to start raising wages.
The Australian dollar gained slightly against the US dollar on Tuesday, that is partly because of the closed Chinese market. However, the price remained below the ascending channel as shown below and expected to dip even further towards the 0.7332 support level projected last week.
According to RBA, “An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”
Naira Plunges Against British Pound to N600 on Black Market
Naira Falls by N20 Against British Pound to N600
Economic uncertainties amid low oil prices weighed on the Nigerian Naira against its global counterparts.
The Naira plunged against the British Pound by N20 from N580 it exchanged two weeks ago on the black market to N600 on Thursday and remained at the same rate on Friday morning.
The local currency has remained under pressure since Coronavirus disrupted global economics and demand for global oil earlier in the year. Nigeria, an oil-dependent economy, was one of the nations affected by the low oil prices and disruption of global supply chain and logistics.
This coupled with a series of local challenges like the rising cost of servicing debt to revenue, weak manufacturing sector that depends on importation for most of its raw materials, unclear economic direction that deterred foreign investors and eventually weighed on the nation’s foreign direct investment and capital importation hurt the nation’s economic outlook and investment sentiment.
Against the Euro common currency, the Naira declined by N35 to N545 on Thursday, down from N510 it traded about three weeks ago.
This decline continues against the United States dollar as the local currency traded at N474 to a US dollar, down from N465 it was exchanged three weeks ago.
The inability of the Central Bank of Nigeria to support the local currency through sufficient dollar liquidity continues to impact the manufacturing sector and other key sectors that depend on importation for operations.
Also, the scarcity dictates the Naira exchange rate to its counterparts, especially after a recent report showed foreign investors are looking to access the US dollar to repatriate their funds.
Other factors, like the recent Shoprite announcement that it was pulling out of Nigeria, Africa’s largest economy, due to falling revenue and challenging business environment compounded the nation’s woes.
Naira Declines Slightly on the Black Market to N474/$
Naira Drops Marginally on the Black Market to N474 Against US Dollar
Nigerian Naira declined marginally on Tuesday on the parallel market, popularly known as the black market.
The local currency declined by N1 to N474 per US dollar, down from the N473 it traded on Monday.
This was coming after Shoprite announced it would be exiting Nigeria, Africa’s largest economy. The announcement further damped the nation’s economic outlook amid the already heighten economic uncertainties.
Nigeria continues to struggle with low dollar availability after low oil prices and weak global demand for the commodity eroded the nation’s foreign revenue generation.
On the Investors and Exporters Forex window, the Naira remained pressured at N389 to a US dollar, better than the N389.25 it exchanged on Monday but more than the N381 stipulated by the Central Bank of Nigeria.
Total turnover traded by investors rose from $18.83 million traded on Monday to $24.66 million on Tuesday.
Experts have said the series of bad news emanating from the country will continue to deter potential investors and hurt capital importation necessary to boost dollar liquidity.
Forex Scarcity Weighs on Manufacturing Sector
Manufacturing Sector Suffers from Lack of Dollar Liquidity
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has said lack of dollar availability continues to weigh on the manufacturing sector in the first half of the year as the sector recorded its third consecutive month of contraction in the month of July.
According to Yusuf, several manufacturers had to source for forex on the black market, increasing scarcity on the already stressed section of the forex even more. This, other experts have blamed for the high Dollar-Naira exchange rate on the black market.
On Monday, the Naira was exchanged at N473 to a US dollar on the parallel market popularly known as the black market. The local currency gained N2 from the N475 it was exchanged before the Sallah holiday to N473 on Monday when the market opened.
“Across, practically, all sectors, we are experiencing cost escalation, loss of credit lines enjoyed from foreign creditors, forex remittance challenges and many more. We need an urgent response from the CBN to calm the situation and restore confidence in our foreign exchange management framework,” Yusuf stated.
The Lagos Chamber of Commerce and Industry said most of its 2,000 members have been hit by the dollar shortage and wide foreign exchange rate that is presently eroding their profits.
“If the situation persists, it will lead to lay-offs. If you are not producing, there will be a shortage of goods in the market, prices will go up,” he added
News1 month ago
British High Commission to Start Accepting Visa Applications From Nigerians Soon
Business1 month ago
Seplat Appoints Emeka Onwuka as CFO, Executive Director
Finance1 month ago
DSS Arrests EFCC, Acting Chairman, Magu
Forex1 month ago
Naira-USD Exchange Rate to Hit N430 – Report
Government1 month ago
FG Puts School Resumption Plan on Hold as COVID-19 Cases Hit 30,000
Business2 months ago
Dangote, MTN Lead Africa’s Most Admired Brands in 2020
Business3 weeks ago
Nneka Ede Purchases Portuguese Football Club, Lusitano Ginasio Clube
Business1 month ago
West African Consumer Sentiment Reflects Global Uncertainty