18 July 2017, Sweetcrude, Lagos — The local and international financial market products and services update.
NIGERIA: For the fifth consecutive month, the inflation rate dropped further from 16.25% in May to 16.10 % in June 2017, indicating a 0.15% decline.
The National Bureau of Statistics (NBS), in its latest report released Monday, said the Consumer Price Index (CPI), which measures inflation, increased by 16.10% (year-on-year).
The fifth consecutive decline in the rate of inflation since January 2017 showed that on a month-on-month basis, the headline index increased by 1.58% in June 2017, 0.30% points lower than the rate of 1.88% recorded in May 2017.
Also, month-on-month, inflation has cumulatively risen by 9.28% since January 2017. The food index increased by 19.91% (year-on-year) in June 2017, down by 0.64% points from the rate recorded in May (19.27%), indicating continued pressure on food prices.
FX: The week in the I&E window kicked off on a bid tone with few offers seen on the day, bids were in the 350 – 364 range. Last week the window saw $363m traded in the range of $/N 306 – 386.00. CBN announced a wholesale auction yesterday with $100mio on offer.
FIXED INCOME: Nigeria Inflation fell to 16.10% (largely in line with expectations). This was not enough to spur the bond market into action Yesterday. Bonds remained mostly quiet while bills continue to track liquidity conditions closely. 19 Oct bill though to be tapped Wednesday is looking expensive because existing supply is limited (currently trading at 15.27% yield). This should correct in the coming weeks as we currently approach resistance levels. O/N closed c.5%. The money market is long N125bn and is expected to be fairly liquid this week even after debts for FX and OMO auction(s).
U.K.: U.K. inflation unexpectedly slowed in June, giving respite to Bank of England policy makers concerned that price growth was getting out of hand.
The inflation rate slipped to 2.6%, the Office for National Statistics said on Tuesday. It’s the first drop in the annual rate since October, and economists had forecast that it would hold at the four-year high of 2.9% reached in May.
The data weakens arguments for an immediate interest-rate hike that a minority of policy makers supported at the last BOE decision as inflation looked set veer further above the 2% target. There are also signs economic growth is cooling as consumers, the engine of growth for the past year, start to rein in spending.
U.S.: When Federal Reserve policy makers were debating the adoption of an inflation target five years ago, the hawks pushed for a 1.5% goal as the best way to meet the central bank’s price stability mandate. Then-Chair Ben Bernanke and his lieutenant Janet Yellen resisted the arguments of the inflation-phobes, winning agreement for a 2% objective already in vogue at other central banks. Yellen won that battle but may be losing the war.
COMMODITIES: Oil traded near $46 a barrel as crude production rebounded in Libya, an OPEC member exempt from output curbs.
Futures gained 0.3% in New York after sliding 1.1% Monday. Libya has increased output to 1.1 million barrels a day, according to a person familiar with the matter. The country will attend a meeting with some OPEC members as well as Russia to share its production plans. The output from major U.S. shale plays will reach 5.58 million barrels a day in August, an all-time high, the Energy Information Administration said in a report.
Macro Economic Indicators
Inflation rate (Y-o-Y) for June 2017 16.10%
Monetary Policy Rate current 14.00%
FX Reserves (Bn $) as at July 11, 2017, 30.362
Money Market Highlights
30 Day 18.9905
90 Day 21.3721
180 Day 23.3793
USD 1 Month 1.22611
USD 2 Months 1.25667
USD 3 Months 1.30361
USD 6 Months 1.45600
USD 12 Months 1.72400
Tenor Maturity Yield (%)
91d 19-Oct-17 15.27
182d 18-Jan-18 20.13
364d 05-Jul-18 22.54
2y 12-Jul-19 16.61
3y 14-Jun-20 16.33
5y 27-Jan-22 16.12
Indicative Currency Exchange Rates
USDNGN 314.50 315.00
EURUSD 1.1462 1.1664
GBPUSD 1.2928 1.3130
USDJPY 112.13 112.16
GBPEUR 1.1168 1.1372
USDZAR 12.8423 13.0462
EURNGN 362.99 364.35
GBPNGN 409.16 410.56