New season, new costs
While some consider the commencement of the rainy season as “showers of blessings” others might not as they are experiencing the biting/pinching effects of the costs that accompany it. The prices of major food items, such as bags of beans, pepper, tomatoes, eggs amongst others have witnessed a significant surge in markets across the country, while the price of local and foreign rice record a slight decrease. A recent survey showed that a big bag of brown beans that was initially sold for an average of N33,500, rose by 3.7% to sell for an average of N34,750. Also, the price of a big bag of honey beans increased by 7.02% to sell for an average of N24,750. A big basket of round shaped tomatoes now sells for an average of N8,000. A 33.3% increase, when compared to an average of N6,000, recorded two weeks ago.
The price of a medium-sized basket of round shaped tomatoes also surged by 50% to sell for an average of N4,500 while a small basket sells for an average of N2,500. A big bag of pepper now sells for an average of N117,000 compared to an initial average of N7,250 recorded in the last survey. The price of a medium-sized bag of pepper also increased by 114%% to sell for an average of N7,500. A nylon of Crayfish that was initially sold for an average of N14,750 has now increased by 13.6% in Lagos markets to sell for an average of N16,750. A 50kg bag of white garri now sells for an average of N11,625 from an initial average of N10,750. This represents an increase of N8.14% in price. Also, a bag of yellow garri of the same size increased by 2.25% to sell for an average of N11,375. Meanwhile, the price of local and foreign rice has eased off, compared to the price recorded two weeks ago as Royal Stallion rice (foreign) now sells for an average of N24,500 as against an initial average of N25,375 while Mama’s Pride rice sells for an average of N22,625.
The increase in the price of food items according to market traders was attributed to seasonal fluctuations. In a recent interview with some of the traders, they stated that “normally the price of tomatoes always spikes during raining season, and it is not a surprise to see the price go up as it has begun to rain in most parts of Nigeria.”
In a nutshell, the week ahead is going to see spikes in a number of food commodities as a result of the commencement of the rainy season and this could have ripple effects on subsequent inflation rates.
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More of the same for the naira
The Naira appreciated against the US Dollar at the Investors and Exporters window on Thursday to close at N409.67 to a dollar. This represents an 8 kobo gain when compared to the N409.75 to a dollar that was recorded on Tuesday, March 17, 2021. The highest rate recorded during the intra-day trading was N412 before it closed at N409.67/$1. It also sold for as low as N400/$1 during intra-day trading. Forex turnover at the Investor and Exporters (I&E) window dropped by 33.9% on Thursday, 18th March 2021. Forex turnover declined from $148.54 million recorded on Wednesday, March 17, 2021, to $98.20million on Thursday, March 18, 2021. The week ahead may not be any different as the Naira is anticipated to fluctuate between N408/$1 and N415/$1.
Cryptocurrency watch
Bitcoin, the world’s most popular and largest cryptocurrency dropped by 3.77% on Thursday evening to trade at $56,878.47 after trading at about $59,000 earlier in the day following an optimistic forecast by the Federal Reserve Bank.
The Federal Reserve had reaffirmed its expectation to keep interest rates close to zero at least throughout 2023 potentially bolstering the cryptocurrency’s appeal as a hedge against faster inflation. A lot of analysts have said that a key reason why bitcoin’s price has doubled this year is that very few holders are willing to part with the cryptocurrency, meaning you have more buyers than sellers. The price is also partly boosted because of demand from institutional investors who are looking for an asset that might hold its worth if the dollar’s purchasing power declines. In light of this fact, Bitcoin is anticipated to hold its position within the threshold of $55,000 and $61,000.
Meanwhile, investors remain relatively bullish on Ethereum, as lately, they have been eager to acquire Ether at above the $1,500 mark. Ethereum has had sustained outflows over the last 3 weeks and now we have more than 3.5 million Ethereum staked in 2.0. The exchange reserve on Ethereum is declining constantly. This reflects accumulation and confidence in the market. It’s also critical to note that miners remain more attracted to Ethereum as they earn almost four times more than those in the Bitcoin network. Ethereum’s fees which amount to the total dollar value spent on the Ethereum blockchain — are at record levels, with over $8 billion in annualized fees.
Oil prices continue to decline
Brent Crude oil on Thursday 18th March 2021 dropped for a fifth consecutive trading day by 6.64% to close at $63.28, as oil sees the biggest single-day loss since April 2020 (WTI Crude closed at $64.28 (+0.32%), OPEC Basket $66.89 (-.89%), Bonny Light $66.20 (-1.05%), and Natural Gas $2,508 (-0.79%).
Despite initial positive prediction during the recent price rally, some analysts have been more cautious in their outlooks, having warned for a couple of weeks that the present optimism in the oil markets was unjustified. The recent rally was largely due to production cuts by OPEC+ or rather, the fact that they agreed to hold production steady in April, instead of ramping up production as the market had anticipated. The passing of the 3rd round of stimulus in the United States had also bolstered oil market sentiment. But a rising dollar, increased crude inventories in the U.S., growing fears of a resurgence in coronavirus cases and vaccine safety concerns in Europe have proven worthy adversaries. These indicators are pointers to the fact that oil prices would decline further in the coming week but would not fall beyond $55 per barrel.
External reserves decline persists
Nigeria’s external reserve declined by 0.09% on Wednesday, 17th March 2021 to stand at $34.44 billion, the lowest in 10 months. The country’s external reserve declined from $34.48 billion recorded as of Tuesday, 16th March 2021 to stand at $34.44 billion as of 17th March 2021. Nigeria’s current external reserve position indicates a total drop of about $560 million in the month of March 2021. In December 2020, when the external reserve was $36.4 billion the CBN claimed it could finance 8.4 months of import of goods or 6.3 months of import of goods and services. This infers that at $34.48 billion, the external reserve can now service about 7.9 months of imports of goods and 5.99 months of imports of goods and services. The coming week is envisaged to experience a further decline in the country’s external reserve considering the unattractive investment position of the economy.
