Nigeria, UK eye inflation rate as DMO auctions N300bn FGN bonds
Nigeria and the United Kingdom are expected to release their countries’ consumer price index for June, while the Debt Management Office is selling FGN bonds worth N300 billion across three tranches today.
The country’s consumer price index rose from 33.69 percent in April to 33.95 percent in May for the 17th consecutive time, driven by food and non-alcoholic beverages.
However, month-on-month headline inflation slowed to 2.14 percent in May 2024 from 2.29 percent in April 2024, which is the second broad-based decline since October 2023.
Inflation has continued to rise due to high energy costs, the impact of exchange rate fluctuations, and persistent insecurity concerns in the country, which are affecting agricultural activities and pushing food inflation up the roof.
To fight inflation, the monetary policy committee (MPC), led by Olayemi Cardoso, the governor of the central bank, hiked the country’s benchmark interest rate by a combined 750 basis points to 26.25 percent from 18.75 percent it stood last July.
The CBN is dishing out inflationary targeting measures to rein in inflation to 21 percent by the end 2024.
However, PwC, a London-based professional firm, projects that Nigeria’s inflation rate may drop to 29.5 percent by the end of the year due to sustained monetary tightening conditions.
DMO to auction N300 billion in FGN bonds
The Debt Management Office is selling FGN bonds worth N300 billion across three tranches today.
It is reopening the five, seven, and nine-year bonds and offering N100 billion for each of them.
It raised N297 billion through its June FGN bond auction, as investor demand fell below the offered amount.
The amount sold was less than the N450 billion FGN auctioned yesterday across three tranches. It included a reopened nine-year bond and five and seven tenures at N150 billion each.
This falls short of the N378 billion sold from the N450 billion offered at the previous auction.
Sales have steadily declined since April’s N626.6 billion, which itself was higher than March’s N475.7 billion. February saw a record-breaking auction of N2.5 trillion, with N1.5 trillion sold. In January, sales also reached N523 billion.
“The CBN is dishing out inflationary targeting measures to rein in inflation to 21 percent by the end 2024.”
The National Bureau of Statistics will release its price watch for premium motor spirit (PMS) gasoline for June on Wednesday.
The average retail price paid by consumers for petrol in May 2024 was N769.62, indicating a 223.21 percent increase when compared to the value recorded in May 2023 (N238.11).
With the removal of the petrol subsidy in May 2023 by President Bola Tinubu, petrol prices have tripled from about N238 to over N700, causing public transportation providers to hike fares and pushing inflation up to a 28-year high of 33.95 percent in May.
Though available data shows that the federal government still subsidies gasoline, the presidency has vehemently denied returning to the fuel subsidy regime.
“As Nigeria’s oil production is yet to see a significant boost, and considering the scarcity we’re currently witnessing, petrol prices for May are expected to increase.
“However, given that Dangote refinery commences its sale of PMS, oil production will be improved, thereby leading to a significant decline,” an energy expert said.
UK to release June inflation report
The UK inflation rate was 2.0 percent in May 2024, the lowest inflation rate in the country since April 2021.
Between September 2022 and March 2023, the UK experienced seven months of double-digit inflation, which peaked at 11.1 percent in October 2022.
The UK’s annual inflation rate is expected to remain near 2 percent over the remainder of 2024. The average forecast among economists polled by Reuters showed.
Investors are betting that inflation will tumble further 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 set by the Bank of England.
The average retail price of automotive gas oil (diesel) paid by consumers increased by 66.29 percent on a year-on-year basis to
N1,403.96 per litre in April.
It rose from a lower cost of N844.28 per litre recorded in the corresponding month of last year (i.e., May 2023) to a higher cost of N1,403.96 per litre.
On a month-on-month basis, it fell 0.78 percent from N1, 415.16 in the preceding month of April 2024 to an average of N1, 403.96 in May 2024.
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.
The NBS said the average price of 5 kg of cooking gas increased from N6,521.58 recorded in April 2024 to N7,418.45 in May 2024.
The May price represented a 13.75 percent rise, compared to what was obtained in April 2024.
The NBS said the average price of 5 kg of cooking gas increased on a year-on-year basis by 70.12 percent, from N4,360.69 recorded in May 2023 to N7,418.45 in May 2024.
Also, the NBS said the average retail price for refilling a 12.5 kg cooking gas declined by 0.07 percent on a month-on-month basis from N15,637.74 in April 2024 to N15,627.40 in May 2024.
On February 22, 2024, the federal government announced the immediate suspension of LPG exports to curb the rising cost of cooking gas.
Prior to the ban, cooking gas prices had skyrocketed to a staggering N1,500 per kilogramme.
However, the export halt made the prices drop significantly to between N900 and N1,000 per kilogramme.
This translates to a potential saving of N500 or more per kilogramme for Nigerian households.
Read also: CBN to auction N166bn T-bills as US, India await inflation data
FX calmness spurred investors’ confidence
The Central Bank of Nigeria governor, Olayemi Cardoso, said the relative stability the foreign exchange market has gained in the past few months restored the integrity of the apex bank and brought back investors.
Cardoso, speaking at a CEO forum organised by BusinessDay on Thursday, said the CBN is committed to ensuring more stability as it continues to deploy monetary tools to ramp up liquidity.
However, the naira still remains within the N1,490–N1,530 band against the US dollar despite improved liquidity.
Many analysts believed that the currency had reached its price discovery level, stating that it may straddle between N1,450 and N1,500 till the end of the year.
Other Major Financial News Headlines today July 15, 2024:
Dangote Refinery eyes petrol sales in August, NGX listing in Q1 2025
How manufacturers can survive in Nigeria’s high interest rate environment
Increase in minimum capital requirements for Nigerian banks (Part II)
For more details on the above and other headlines either get a printed copy of business day newspaper or better still visit their website