According to the Central Bank of Nigeria, the primary market recorded a rise in interest rates for the first time in 3 months. The rise was recorded in the recent 13th May auction as interest rates rose to 2.5% (+35%) and 2.85% (+16%) for the 91-day and 182-day tenor respectively when compared to the preceding auction1. The rise in interest rates can be attributed to lower demand given that investors are seeking for safer assets in more stable currencies in these unprecedented times. Bearing in mind that the government aims to mobilize domestic funds following a shift in debt sourcing, this will increase the cost of borrowing for the government. In addition, considering that the interest rate on T-bills is the benchmark interest rate, the rates of other commodities including bonds and equities are expected to rise. The rise in interest rate will increase the need to save for households, thus lowering consumption and increase the cost of borrowing for firms, thus reducing investment. The overall effect will be a negative impact on economic growth.
June 3, 2020
Nigeria Economic Update (Issue 20)
Nigeria Economic Update (Issue 2)
International rating body, Fitch, has projected higher economic growth for Nigeria in 2018. The body estimated that Nigerias economy will grow by 2.6 percent, slightly higher compared to projections from the International Monetary Fund (2.1 percent) and The World Bank (1 percent). A myriad of factors may have driven the projected increase: improved availability of forex for the non-oil sector, higher government capital expenditure capability driven by more oil revenue, and fiscal stimulus. However, the relatively strong economic growth projected by Fitch and IMF may be hampered
Nigeria Economic Update (Issue 6)
The nations foreign reserves have been on a steady rise. In the review week, reserves increased by $415.2 million from $28.3 billion on February 3, 2017 to $28.8 billion on February 10, 2017. The increase is likely the reflection of a sustained crude oil revenue complemented by moderating global crude oil price and increasing domestic production. This should help strengthen the ability of the CBN to foster forex liquidity, and thus help maintain stability in the domestic forex market. If sustained, it should also help improve the value of the naira overtime. Hence, the government should implement proactive and effective policy strategies to, not only, sustain improvements in oil revenue but also boost non-oil revenue.