, inflation spikes, local economy in tatters
Thank you for reading this post, don't forget to subscribe!Neoliberal imperial economists at Bank of America has said the Naira is set to weaken further next year as its current exchange rate to the dollar is well above fair value, a report by Bloomberg indicated.
Three indicators — the widely-used black-market rate, the central bank’s real effective exchange rate, and “our own currency fair value analysis” — shows the naira is 20% overvalued, economist Tatonga Rusike said in a note to clients on Tuesday.
“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD,” Rusike added.
Daily Trust findings revealed that the exchange rate between the naira and the US dollar at the blackmarket remained yesterday sold for N742/$1
Meanwhile, the exchange rate between the naira and the US dollar at the I&E official window closed at N441.25/$1 on Monday, 17th October 2022, representing a slight gain of 0.03% compared to N441.38/$1 recorded in the previous trading session.
While the naira will come under increasing pressure “due to limited government external borrowing,” devaluation is unlikely to happen until after the February 2023 presidential elections, the bank said.
Africa’s largest economy operates a multiple exchange regime dominated by a tightly controlled official exchange rate and a parallel market where the currency is freely traded.
Nigeria’s inflation rate rises to 22.22%
inflation rate spikes
Meanwhile Naija247news recently reported that Recent inflation report published by the National Bureau of Statistics has revealed that in April 2023, the headline yinflation rate rose to 22.22% relative to March 2023 headline inflation rate which was 22.04%.
Looking at the movement, the April 2023 inflation rate showed an increase of 0.18% points when compared to March 2023 headline inflation rate. Similarly, on a year-on-year basis, the headline inflation rate was 5.40% points higher compared to the rate recorded in April 2022, which was 16.82%. This shows that the headline inflation rate on a year-on-year basis increased in April 2023 when compared to the same month in the preceding year (i.e., April 2022).
Nigeria economic growth slows
Nigeria’s annual economic growth rate slowed to 2.3% in the first quarter, data showed on Wednesday, hurt by a government plan to swap old banknotes for newly designed ones that disrupted trade and payments.
The gross domestic product (GDP) data came hours before a central bank interest rate announcement and next week’s swearing-in of President-elect Bola Tinubu, who has pledged to revive growth.
Africa’s largest economy has now grown for 10 consecutive quarters after a severe recession in 2020 linked to the COVID-19 pandemic.
GDP posted annual growth of 3.1% in the first three months of 2022.
“The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter,” the National Bureau of Statistics (NBS) said.
Nigeria launched the newly designed banknotes with the aim of controlling liquidity, curbing inflation and moving towards a cashless economy.
But the move disrupted payments in a country where cash is dominant. Full implementation of the policy has been moved to the end of the year.
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The NBS said first-quarter growth was driven by the services sector, which grew 4.4% year on year.
The oil sector which accounts for around two-thirds of government revenue and 90% of foreign-exchange reserves, contracted 4.2%.
Nigeria, Africa’s top oil producer, recorded average daily oil output (NGOIL=ECI) of 1.51 million barrels per day (mbpd) in the first quarter, up from the daily average of 1.49 mbpd registered in the same quarter of 2022.
Analysts said the slowdown in the growth rate could prompt the central bank to hold interest rates at its policy meeting on Wednesday, despite double-digit inflation.
