The improved foreign exchange (FX) supply by the Central Bank of Nigeria (CBN,) through stepped-up special intervention auctions, has given rise to greater optimism over the likely trajectory of FX policy, as well as the inflation outlook in Nigeria, a report has stated.
Standard Chartered Bank in a report titled: “Nigeria – A checklist for FX liberalisation,” noted that the improved FX availability was seen as key to any sustained deceleration in inflation.
It pointed out that the spreads between the official interbank market and the parallel FX market have already narrowed considerably.
“With the release of Nigeria’s Economic Recovery and Growth Plan in early March, which broadly endorses currency flexibility, attention has shifted to the conditions that might need to be in place before Nigeria proceeds with meaningful FX liberalisation,” the report added.
It showed that the Standard Chartered-Premise Consumer Price Tracker (SC-PCPT) for Nigeria rose 1.6 per cent month-on-month (m/m) in February.
The SC-PCPT revealed a far more modest pace of monthly price rises than we have seen in recent times, the lowest m/m rise since August 2016, when food prices were likely impacted by Nigeria’s main harvest. In addition, many sub-categories have already started to show a year-on-year (y/y) deceleration, as a strong base effect kicks in.
“In y/y terms, the SC-PCPT rose 30.15 per cent, less than the 30.5 per cent recorded in January. The evidence from the SC-PCPT supports the view that we may see a turning point in official CPI when the February data is released.
“As a result of the base effect, we expect y/y inflation to decelerate in the months ahead. This is despite some concern, still, around the extent of Central Bank of Nigeria (CBN) financing of the government’s budget deficit.
“The publication of November and December money-supply data suggests that reliance on the CBN for deficit financing is still significant,” it added.
Source: ThisDay
https://www.thisdaylive.com/index.php/2017/03/22/improved-fx-supply-raises-optimism-about-nigerias-outlook/
