Macroeconomic Report & Economic Updates

February 5, 2019

Nigeria Economic Update (Issue 3)

Inflation rate rose in December 2018 for the second consecutive month to 11.44 percent, 0.16 percentage points higher than the 11.28 percent recorded in November 2018.1 The rise in inflation was driven by the food component of inflation which increased to 13.56 percent from 13.30 percent within the same period. Further disaggregated data shows that […]

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Inflation rate rose in December 2018 for the second consecutive month to 11.44 percent, 0.16 percentage points higher than the 11.28 percent recorded in November 2018.1 The rise in inflation was driven by the food component of inflation which increased to 13.56 percent from 13.30 percent within the same period. Further disaggregated data shows that the highest increments were recorded in the price of basic food items such as bread, cereals, fish, meat, potatoes, yam and other tubers. Core inflation experienced no increment from the previous month, stagnating at 9.80 percent. Seasonal demand effect is closely linked to the rise in inflation given that the holiday season is associated with a rise in the price of food items. In the coming month, we expect the inflation rate to continue on the upward trend considering the increase in election-related spending. The current monetary policy parameters should remain unchanged until a clearer picture of the effect of the election on economic indicators is known




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Portfolio Diversification Between Developed And Less Developed Economies

This study examines the hedging effectiveness of portfolio investment diversification between developed and developing economies; with focus on the Nigerian stock asset vis--vis the stock assets of the United States (US) and United Kingdom (UK). Its main contribution is in the analysis of optimal portfolio diversification using optimal portfolio weight (OPW) and optimal hedging ratio (OHR). Empirical findings show that the OPW and OHR are low, which indicates impressive potential gains from combining Nigerian stock assets in an investment portfolio with US and UK stock assets. In addition, exchange rate volatility is found to pose stern limitation on the potential benefits of this portfolio diversification arrangement. It is therefore recommended that the monetary authority in Nigeria should pursue policies towards reducing exchange rate volatility to the barest minimum. This will possibly attract more investors from developed economies who might be willing to combine Nigerian stock in their investment portfolio to minimize portfolio risk.

Nigeria Economic Update (Issue 29)

OPEC weekly basket price decreased marginally from $45.95 on June 24, 2016 to $45.26 on July 1, 2016,while Nigerias bonny light fell by $1, from $48.90 to $47.91. The apparent decline in crude oil price was driven by lingering market demand uncertainty, following the unexpected Brexit referendum. More so, ease in supply disruptions in Nigeria and Canada may have contributed to the downward pressure on prices. Going forward, until there is greater regulatory precision on global oil output levels, prices may likely remain stuck or continue to exhibit a downward trend. Although, Nigerias fiscal constraints slightly relaxed with oil production increasing in the review week (following repairs on sabotaged pipeline channels), potential global crude oil oversupply threatens governments revenues. However, oversupply threats could be reduced if there is a consensus on oil production quotas in the upcoming OPEC meeting.