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U.K. 42-Year Low Unemployment Rate Fails to Spur Wage Growth

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  • U.K. 42-Year Low Unemployment Rate Fails to Spur Wage Growth

U.K growing job creation pushed the unemployment rate to more than four decades low but failed to spur wage growth enough to maintain workers’ standard of living.

According to the Office for National Statistics, ONS, inflation adjusted wage fell 0.4 percent, while basic wages grew 2.1 percent year-on-year in the three months through July. This is below the 2.2 percent projected by economists.

The figures further highlight the challenges facing the Bank of England policy makers over interest rate decision. Those arguing to leave the benchmark rate at a record low of 0.25 percent point to the growing stress on consumers due to the pound-driven increase in prices.

While the few others pushing for rates hike are doing so to curb surging inflation rate that is now running close to 3 percent. Almost 1 percent more than the 2 percent target of the Bank of England.

The unemployment rate improved to 4.3 percent, the lowest in 42 years and below the Bank of England’s equilibrium rate, said the ONS.

Experts believed businesses are not raising wages due to Brexit uncertainty and companies trying to maintain current wage level to offset rising production costs.

The number of employed people surged 181,000 to 32.1 million in the last three months, representing the biggest jump in job creation since the end of 2015. Unemployment rate plunged by 75,000 to 1.46 million, the lowest drop in two years. Also, inactivity declined.

The odds of the Bank of England raising rates this week surged after data showed inflation rate surged to 2.9 percent year-on-year in August.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial market.

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Forex

Naira Plunges Against British Pound to N600 on Black Market

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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.

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Naira Declines Slightly on the Black Market to N474/$

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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.

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Business

Forex Scarcity Weighs on Manufacturing Sector

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Steel Manufacture At Evraz Plc West-Siberian Metallurgical Plant

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

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