Analysts at FSDH Research have said a combination of events played out in the global market in January, 2019, that should result in short-term stability in the Nigerian economy.
Speaking to Daily Trust at the weekend, FSDH Head of Research, Ayodele Akinwunmi, noted however, that the outcome of the February, 2019, general elections might determine the direction of the Nigerian financial market for the month.
Financial figures for December, 2018, showed the negative impact of the US-China trade war on the global economy and on the two economies: both countries made concerted effort to end the trade dispute.
The US trade sanctions on Venezuela crude oil exports and the commencement of implementation of the cut in the Organisation of Petroleum Exporting Countries (OPEC) crude oil output also helped the crude oil price to recover from the opening levels in January, 2019. On account of these developments, the crude oil price closed the month at $63p/b (Bonny Light) and $59.71/p/b (Brent) from the opening figures of $55.47p/b (Bonny Light) and $54.06p/b (Brent).
Meanwhile, the Federal Open Market Committee (FOMC) of the US Federal Reserve System maintained the interest rate in January, 2019. It said it would be “patient” regarding its short-term guardian on interest rate decision. The statement was interpreted to mean that the FOMC may not raise interest rate in the first half of 2019. Investors who had anticipated an interest rate hike in the US in the first half of the year may reconsider their investment strategy in the emerging and developing markets.
Akinwunmi said these developments were positive for the short-term outlook of the Nigerian economy and financial market.
He said there was a significant increase in capital importation via Foreign Portfolio Investors (FPI) in the Investors and Exporters Foreign Exchange Window (I&E Window) in January, 2019.
FPI’s contribution in January, 2019, stood at $1.32bn, accounting for 51.34 per cent of total inflows, the highest contribution since April, 2018. He said this might be a reflection of foreign investors taking advantage of higher yields on fixed income securities.
Akinunmi also said FSDH expected the January, 2019, inflation rate to drop to 11.40 per cent from 11.44 per cent recorded in December, 2018.
“We still, however, anticipate a hike in the inflation rate from June, 2019, due to adjustments to the price of Premium Motor Spirit (PMS) and electricity tariff,” he added.
The Nigerian Bureau of Statistics (NBS) will release the inflation report for January, 2019, on Friday, February 15, 2019. FSDH Research believes the CBN will continue to adjust its policies to keep yields above inflation rate.
