Tuesday, 19 November 2019

LUKMAN OTUNUGA, FXTM SENIOR RESEARCH ANALYST COMMENTS ON NIGERIAN INFLATION

Lukman Otunuga, FXTM Senior REsearch Analyst
HOT TOPIC COMMENT ON NIGERIAN INFLATION
Lukman Otunuga,
FXTM Senior Research Analyst

Any remaining hopes over the Central Bank of Nigeria cutting interest rates in the near term have been quashed by signs of rising inflationary pressures.

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Nigeria’s inflation rate jumped to a 17-month high at 11.6% in October, from the 11.24% seen in September thanks to rising food prices. The CBN is unlikely to cut interest rates from 13.5% this month due to the uptick in inflation and this sentiment is likely to roll over into 2020. Although one of the central bank's objectives is to achieve price stability, an interest rate cut has the potential to stimulate consumption which accounts for roughly 80% of GDP. Given how the Federal Reserve has signalled a pause on further rate cuts, this may complicate the CBN’s efforts to ease monetary policy in 2020.

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The next major economic release from the Nigerian economy will be the third-quarter GDP figures scheduled for release on Monday 25th of November. Markets are predicting growth to expand 2% during Q3. Should the report disappoint, the CBN could be forced to take action despite the threat of rising inflation.

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