The positive development in international price of crude oil and the producers’ cut agreement have continued to strengthen Nigeria’s external reserves buffer and supporting the currency defense of the Central Bank of Nigeria (CBN).
The commodity has now recorded improved global demand on the back of optimistic growth outlook and sustained by the production cut deal of the Organisation of Petroleum Exporting Countries (OPEC), as well as Saudi Arabia’s vow to cut more oil output.
Last week, Nigeria premium crude, gained Brent Crude gained 7.5 per cent week-on-week to close at $72.28 per barrel and the development overtime has sustained the recent momentum of reserves’ accretion, with the gross level reported at $46.8 billion as at April 9.
The rising accretion has also reinforced CBN’s capacity to uphold the level of foreign exchange interventions needed to support the local currency.
Consequently, CBN, in line with its trend, continued the weekly foreign exchange intervention, offering $210 million through the Wholesale Secondary Market Intervention Sales (SMIS), resulting to stable exchange deals by the naira.
Specifically, while the CBN’s spot rate opened the week at N305.60/$ and appreciated to N305.55/$ on Monday, it maintained the rate till the end of the week.
At the Investors and Exporters’ (I&E) Window, the NAFEX opened the week flat at N360/$ and closed at the same rate by week-end, while activity level in the autonomous window improved, following a 6.8 per cent increase in turnover to $1.1 billion from US$1 billion traded in the previous week.
Meanwhile, the Nigerian Bureau of Statistics affirmed that the economy recorded the 14th consecutive decline in the general prices of goods and services, indicating improved purchasing power.
But FXTM’s Research Analyst, Lukman Otunuga, said the falling consumer prices in Africa’s largest economy for 14 consecutive months, suggests that inflationary pressures are slowly becoming a theme of the past.
For him, the decline to 13.34 per cent compared to last year’s figure, which dragged the general prices of goods and services below 14 per cent benchmark interest rates for the first time in two years, is significant and signals imminent monetary tweak.
“With inflation steadily cooling and economic conditions constantly improving, the central bank of Nigeria is on route to cut interest rates.
While an interest rate cut at the next policy meeting in May could be premature, the central bank may surprise markets by taking action in the third quarter of 2018,” he said.
For analysts at Afrinvest Securities Limited, the new inflation level, which is in line with their projection of 13.4 per cent and 99 basis points decline, implies a positive surprise compared with four consecutive months, decelerating faster than other analysts’ median estimate of 13.6 per cent.
The Managing Director of the company, Ayodeji Eboh, said with strong base effect still in play, headline inflation is expected to continue to descend in the near term, printing at 12.6 per cent in April and 10.7 per cent by year end.