The surprise spike in US GDP growth to 3.2% as against an estimate of 2.5% means that the FED is now more likely to push up interest rates again this year. This will bring considerable pressure to bear on emerging and frontier economies in terms of their debt service burden. Also, the higher interest rates will lead to additional pressure on investment flows into these markets.
Nigeria has depended heavily on FPIs which are highly interest rate sensitive. Therefore an increase in US rates will result in a build-up in foreign exchange (forex) demand and may put the CBN under pressure to support the currency at the detriment of its buffers. The price of commodities such as Brent oil will also increase as the dollar strengthens.
FMCG space globally is usually a major theatre for merger and acquisition activity in most countries. That is why it was surprising to some when Olam made a play for Dangote Flour Mills and it was business as usual to others.
This edition of the FDC Bi-monthly Publication presents an in-depth assessment of these issues and their implications on businesses and investment decisions.
Enjoy your read.