Brent has lost 6.55% to $39.53pb after reaching a 3-month high of $42.30pb on June 5 th. The prices are higher than the $26.63pb average in April but Nigeria still faces the problem of cutting back its oil production to comply with the OPEC quota. Analysts fear that a second wave of infections could lead to another global lockdown. This could slow oil demand and limit the gains from the oil supply cuts by OPEC+.
As if this is not bad enough, the 20.4% contraction of the UK’s economy is expected to adversely affect inward diaspora remittances and the thin forex supply. It is no surprise that commercial banks are now adopting a forex rationing strategy by discouraging customers from opening new confirmed letters of credit.
Despite the stability in the exchange rate (N455/$) at the parallel market, the resumption of international trade and travel is likely to increase demand pressures. This could cause the naira to weaken and trigger a spike in domestic inflation.
In the slides, the FDC Think Tank discussed these and other burning issues on Channels TV Business Morning programme.
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