Nigeria and the United Kingdom are expecting August’s inflation data as the Fed meets on Monday for a potential rate cut whose decisions could lift emerging market economies from currency pressures and rising prices on imported goods.
“Nigeria’s annual inflation slowed for the first time in 19-months in July to 33.4 percent. This is as a result of a high base effect, giving relief to the Central Bank of Nigeria on further hike.”
Monday, September 16
NBS to release August inflation
The National Bureau of Statistics will be releasing Nigeria’s August inflation figures on Monday.
Nigeria’s annual inflation slowed for the first time in 19-months in July to 33.4 percent. This is as a result of a high base effect, giving relief to the Central Bank of Nigeria on further hike.
Analysts are projecting a further decline in August’s inflation due to some lower food prices. However, the new gasoline price may stoke prices, eroding the earlier gains from the high base effect.
“We expect headline inflation to taper further in August due to the impact of the positive base effect and the continued food harvest season,” analysts at FBNQuest Capital said in a note recently.
August’s expected fall in inflationary pressures may result in the CBN hitting the brakes on further interest rate hikes at its next meeting.
“Given the anticipated moderation in August’s inflation figure, the Monetary Policy Committee may be nearing the end of its rate hike cycle.
“As a result, we anticipate that the committee will adopt a wait-and-see approach during its meeting later this month to assess the effects of previous rate hikes on the economy and monitor price developments,” FBNQuest Capital said.
Read also: Nigeria eyes inflows on US inflation drop, imminent rate cut
Wednesday, September 18
Fed to meet for potential rate cut
Federal Open Market Committee (FOMC) members will be meeting to decide on where to set the target interest rate on Wednesday.
Federal Reserve officials are widely expected to make their first interest rate cut in more than four years next week, and recent inflation readings are within the Fed’s target. In August, inflation slowed further to 2.5 percent from 2.9 percent in July, moving sustainably toward 2 percent.
The US rate is currently 5.25–5.50 percent, and analysts have projected a likelihood of a cut of between 25 and 50 basis points in September.
Analysts have said that Nigeria is expected to be among the emerging markets that will attract significant foreign capital inflows.
“Nigeria’s carry trade is very appealing at the moment, one of the highest in Africa. A rate cut by the US Fed is likely to support capital flows to emerging and frontier markets, which Nigeria will certainly benefit from,” Samuel Gbadebo, fixed-income analyst at CardinalStone, said.
Matilda Adefalujo, fixed-income analyst at Meristem Securities, said that the rate cut in September will make borrowing cheaper in the US to invest in other countries.
“It will be cheaper for foreign investors to borrow some funds in the US and come and invest in Nigeria, and that way it’s positive for Nigeria through capital inflow,” Matilda said.
South Africa expects inflation report
The South Africa statistics agency is expected to release its inflation rate on Wednesday.
The country’s inflation dropped more than forecast to a three-year low of 4.6 percent in July from 5.1 percent it stood in June, nearing the level the central bank aims for and cementing analysts’ expectations for an interest rate cut on September 19.
The South African Reserve Bank likes to see inflation around 4.5 percent, the midpoint of its 3 percent to 6 percent target range, but it has been above that level since mid-2021.
The central bank had said at its July meeting that it expected inflation to dip below 4.5 percent over the next few quarters, mainly due to falling food and fuel costs.
July’s data showed inflation for food and non-alcoholic beverages fell to 4.5 percent from 4.6 percent in June, while fuel decreased to 4.5 percent from 7.6 percent in June.
Core inflation, which excludes food and fuel, came in at 4.3 percent in July versus 4.5 percent in June, Statistics South Africa added.
Read also: NBS to release debt stock for Q2 as US publishes inflation data
UK awaits July’s inflation rate
The Office for National Statistics (ONS) will be releasing the United Kingdom’s consumer price index on Wednesday.
Prices in the UK unexpectedly quickened to 2.2 percent in the year to July 2024, from 2 percent in June.
The Bank of England has a target to keep inflation at 2 percent. While inflation was well above that, the bank put interest rates up to 5.25 percent in a bid to slow price rises.
At its last meeting, the monetary authorities decided to cut rates to 5 percent as inflationary pressure eases.
According to the ONS, the rise in inflation was partly driven by a sharp increase in hotel prices. The costs of package holidays, cinemas, theatres, and concerts also rose.
Clothing and footwear prices fell, while food and drink inflation has also dropped back sharply from the highs of recent years.
Inflation has fallen significantly since it hit 11.1 percent in October 2022, which was the highest rate for 40 years.
Investors are betting that inflation will tumble through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.
The CPI measures price change from the perspective of the consumer. It is the official target for price stability by the Bank of England.
NBS to release diesel, petrol price watch
The National Bureau of Statistics will on Wednesday release the price watch for diesel and premium motor spirit (PMS).
The average retail price paid by consumers for petrol in July 2024 was N770.54, indicating a 28.35 percent increase when compared to the value recorded in July 2023 (N600.35).
Similarly, the average retail price of automotive gas oil (diesel) paid by consumers increased by 73.63 percent on a year-on-year basis to N1,379.48 per litre in July.
It rose from a lower cost of N794.48 per litre recorded in the corresponding month of last year (i.e., July 2023) to a higher cost of N1,379.48 per litre.
On a month-on-month basis, it dropped by 5.71 percent, from N1,462.98 in June 2024 to N1,379.48 in July.
This is the first time in three months Nigerians are experiencing some relief in the prices of diesel.
With improved production from the Dangote refinery, the world’s largest single-train facility, the price of diesel is expected to crash to about N900 per litre while long queues at filling stations are tapped to end.
Naira to stabilise in September as demand season ends
Nigeria’s naira is expected to stabilise in September as the season of high demand for the greenback comes to an end.
“The naira will start stabilising in September as the demand pressure that’s prevalent in the Q3 will die down and the CBN now has more support to intervene in the FX market,” Olaolu Boboye, head research analyst at CardinalStone, said.
On Wednesday, Nigeria’s naira rallied 5.06 percent against the dollar, marking its biggest gain in almost two months as a result of the debut domestic dollar-bond issue that had attracted strong interest from investors.
After trading, the naira appreciated by 5.06 percent as the dollar was quoted at N1,558.75 compared to N1,637.59 seen on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.
The federal government announced on Wednesday that it had raised over $900 million from its debut $500 million domestic dollar-bond offer that closed last month, August 30, 2024. With an interest rate of 9.75 percent per year for 5 years.
Boboye said it will give CBN more firework to support the naira; they’ll be able to intervene when needed.
