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Will the Central Bank of Nigeria Cut Interest Rates in November?

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By Lukman Otunuga, senior research analyst at FXTM,

Rising inflationary pressures in Nigeria will certainly complicate the Central Bank of Nigeria’s efforts to cut interest rates to stimulate growth.

The nation’s annual inflation edged up to 11.24% in September 2019, its highest level in three months after falling to a three-and-a-half-year low of 11.02% in August.  Given how the CBN governor has already made it clear that inflation must hit single digits before a rate cut could be considered, it remains uncertain whether the central bank will cut interest rates before year end.

A rate cut could inject the Nigerian economy with a welcome boost, as it stimulates consumption which accounts for roughly 80% of GDP. But However, cutting the MPR when the inflation rate is at 11.22 percent risks further overheating prices. Like other economies, Nigeria may be exposed to the impacts of a global slowdown but its economy is very different from the US’ which is currently experiencing anemic price inflation. This may be why the Central Bank of Nigeria decided to prioritize reducing inflation to single digits and said it is in no hurry to reduce its key rate.

In the absence of cutting interest rates, the CBN has raised the country’s loan to deposit ratio for banks to 65% from 60%. Making sure money is in circulation instead of being tied up in government bonds sounds like a logical way to keep the economy on the road to recovery. However, it remains to be seen whether this will be enough to promote growth.

Trade hopes lift risk mood; Brexit drama continues

There is a mood of optimism and hope across financial markets on Tuesday morning thanks to upbeat comments from President Donald Trump regarding the progress of trade talks with China.

Given how the President said China has signaled that negotiations over the initial trade deal are moving in the right direction, expectations remain elevated over both sides signing an agreement at a meeting in Chile next week. This positive sentiment is supporting Asian stocks during early trading and is likely to trickle down to European markets later this morning. While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour.

Pound volatility expected as Brexit drama continues

The past few days have been volatile for the British Pound due to ongoing uncertainty and constant drama revolving around Brexit.

Sterling seems to be catching its breath early this morning as MP’s prepare to vote on Boris Johnson’s Withdrawal Agreement Bill later this afternoon. If the deal hits a brick wall, the ball then gets hurled back to Brussels as we await confirmation of the Government’s Brexit extension request. Should MPs back the Prime Ministers deal, a programme of motion will take place shortly after, followed by a debate on amendments of the bill on Wednesday. Regardless of what happens today, the British Pound is set to remain volatile.

 With regards to the technical picture, GBPUSD has broken above the bearish channel on the weekly timeframe. A solid daily close above 1.30 should inspire a move towards 1.3160 in the medium term. Should 1.30 prove to be a stubborn resistance level, I see Sterling declining back towards the 1.2700 support.

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Dollar Index poised for further declines?

There has not been much action in the Dollar Index (DXY) since the start of the week with prices trading around 97.76 as of writing.

The heavy selloff witnessed last week has placed bears in a position of power. The DXY is under pressure on the daily charts with prices trading under the 200 Simple Moving Average. Sustained weakness below the 97.50 level should encourage a decline back towards 97.00 in the short to medium term.

Commodity spotlight – Gold

Gold is likely to remain on standby in the absence of a fresh directional catalyst.

The precious metal is waiting for the next big theme or market-moving event that will influence global sentiment and risk appetite. Until something fresh is brought into the picture, Gold is positioned to trade within a modest range in the short to medium term.

Looking at the technicals, all eyes will remain on the psychological $1500 level. Sustained weakness below this point should inspire a decline towards $1470. Alternatively, a solid breakout above $1500 will most likely open the doors towards $1515 and $1525, respectively.

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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University. Dear Reader, Your support matters. But we believe that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world. That is why, we have devoted our energy to independent reportage of technology and finance and how they affect lives. Our incisive and analytical view of how technology news affects the daily life help individuals and organizations make up their minds. Quality journalism costs money. Today, we're asking that you support us to do more. Kindly support our effort to deliver technology and finance journalism to everyone in the world. Donate as little as N1,000. Bank transfers can be made to: UBA Plc 1017156876 Communication Week Media Ltd

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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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