January inflation’ll drop to 11.40% – FSDH

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January 2019 inflation rate is expected to drop marginally but remained in double digits,  the FSDH Merchant Bank has said.

It stated this in its ‘Monthly economic and financial markets outlook: Global Developments in January positive for Nigeria. How sustainable?’, recently released.

In the report, the FSDH Research expected the January 2019 inflation rate to drop to 11.40 per cent from 11.44 per cent recorded in December 2018.

“We still, however, anticipate a hike in the inflation rate from June 2019 due to adjustments to the price of Premium Motor Spirit and electricity tariff,” it added.

While stating that the NBS would release the inflation report for the month of January on 15th February, 2019, the FSDH Research stated that the CBN would continue to adjust its policies to keep yield above that inflation rate.

The FSDH Research observed downward movement in the external reserves in early February.

It stated, “This may be a pointer to demand pressure at the foreign exchange market. This may lead to depreciation in the value of the Naira. This in the short-term is in line with our expectation.”

The current position of external reserves continued to provide short-term stability for the value of the naira, it stated.

However, the medium-term stability in the foreign exchange market would depend on the country’s foreign exchange receipts from both crude oil and non-oil products, it added.

The 30-day moving average external reserves increased by 0.13 per cent, from US$43.12bn at end-December to US$43.17bn at end-January 2019.

It stated that the increase in the external reserves, supported by the increase in foreign portfolio investors, led to an appreciation in the foreign exchange rate in January.

The premium between the inter-bank and parallel markets narrowed in January 2019 compared with December 2018.

It stated, “However, FSDH Research expects the CBN to maintain the current tight monetary policy stance to ensure continued stability in the foreign exchange market. We maintain our foreign exchange rate forecast of N390/US$ for 2019.”

The increase in the external reserves, supported by the increase in foreign portfolio investors, led to an appreciation in the foreign exchange rate in January.

The premium between the inter-bank and parallel markets narrowed in January 2019 compared with December 2018.

However, FSDH Research expected the CBN to maintain the current tight monetary policy stance to ensure continued stability in the foreign exchange market.

It added, “We maintain our foreign exchange rate forecast of N390/US$ for 2019.

“Crude oil price recovered in January 2019 compared with the position as at the close of December 2018.

“This provides some temporary fiscal relief in Nigeria.”

Despite the increase, FSDH Research believed Nigeria needed to adjust the budget benchmark.

The report stated, “It also needs to build a strong structure for non-oil exports. Crude oil price is forecasted to be lower in 2019 compared with 2018, mostly as a result of expected oversupply in the face of a weak demand occasioned by fragile global economic growth.”

According to secondary data available from OPEC’s report for the month of January 2019, the daily crude oil production in Nigeria increased by 0.63 per cent to 1.75mb/d in December 2018, from 1.74mb/d in November. This is above the production quota from OPEC of 1.685mb/d but below the benchmark in the 2019 budget of 2.30 mb/d.


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