FSDH Research expects the April 2019 inflation rate to drop marginally to 11.23 percent from 11.25 percent in March, saying that Inflation rate may remain in the low double digit in the remainder of 2019.
“Possible adjustments to the Pump price of Premium Motor Spirit (PMS) and electricity tariff may shift the inflation curve by 2.5 percent, Akinwunmi Ayodele, head of research, FSDH Merchant Bank limited said.
The crude oil price (Bonny Light) rallied further to US$76.65/b on 25 April 2019, the highest prices since October 2018. The Organization of the Petroleum Exporting Countries (OPEC) production cut, insecurity in Libya and sanctions on Iran and Venezuela continue to drive the crude oil price high.
However, there are growing concerns about the negative impact of the U.S and China trade dispute on global economy and demand for crude oil. A slowdown in the global economy may reduce demand for crude oil and lower the crude oil price. These developments will have negative effects on the Nigeria’s fiscal position.
FSDH on the other hand raised concern over low savings and investment in the country despite the growth in the savings and investment products.
According to the firm, the ratio of Gross National Savings to the Gross Domestic Products (GDP) in Nigeria is one of the lowest among some selected countries including Nigeria, Kenya, South Afica, India, Malaysia, China, United Kingdom, and USA.
The ratio of total investment to GDP in Nigeria is the lowest among the selected countries. In addition, despite the impressive growth in the mutual fund in Nigeria in the last five years, the ratio of mutual fund assets to the GDP estimated at 0.5 percent as at December 2018 is still very low. These numbers show that there are a lot of growth opportunities for saving and investment in Nigeria.
Ayodele said this low savings in the financial system means low amount of money will be available for lending purposes and the available funds will command high interest rate.
Low savings and investment also limit the ability of a country to create wealth and lift its people from poverty, he said while presenting the monthly economic and financial markets outlook, titled ‘Investment Opportunities in the Nigerian Financial Market’.
“It also means that government at all levels will have limited access to raise tax revenue to embark on development purposes while corporates will have limited access to capital to expand their businesses”.
Some of the identified reasons for low savings and investment in Nigeria are: high unemployment, weak purchasing power and inadequate knowledge of investment products that are available and how they work for the benefit of investors.
The investment products include the Federal Government of Nigeria Bond (FGN Bond), FGN Savings Bond (FGNSB), Nigerian Treasury Bills (NTBs), Commercial Papers (CPs), Mutual Funds, Real Estate Investment Trusts and Stocks.