Dear subscriber,
Too little, too patchy
The naira has continued on a slippery slope, weakening further to N1,698/$, despite efforts by the CBN. In September, the CBN sold $543.5 million to banks, following a retail Dutch auction of $876.26 million, diaspora bond proceeds of $900 million reflecting an 80% oversubscription, and forex sales to Bureau de Change operators. However, analysts argue that these interventions have been too little and irregular, limiting their impact on stabilizing the naira. A more structured and consistent approach is needed for long-term stability. To achieve lasting results, addressing the underlying weaknesses in the external sector to boost forex supply is crucial.
Petrol price hike heightens inflation risks
The naira crude sales to Dangote, which began early in October, is not a cure-all. With the exchange rate remaining a crucial determinant of petrol prices in Nigeria, a weaker naira is likely to trigger further petrol price increases. Recently, the NNPCL raised petrol prices for the second time in two months to N1,030/litre, marking a 15% hike from the previous N897/litre. As petrol prices rise, so do inflation fears.
FDC projects inflation to rise to 32.37% in September, primarily driven by renewed price pressures from the petrol hike. This trend is expected to continue, as the latest increase will inevitably affect transportation and logistics costs, further driving up food prices. For businesses, particularly those in manufacturing and logistics, this surge in operational costs could result in higher prices for consumers and tighter profit margins. Households already struggling with elevated inflation levels may face even greater difficulties as disposable income shrinks due to rising living expenses.
Zooming in on Nigeria’s hidden treasures
Beyond the challenges lie opportunities! Artisanal and small-scale mining (ASM) employs over two million Nigerians, providing vital livelihoods in rural areas. While currently informal and fraught with risks, properly managed ASM could become a cornerstone of Nigeria’s economic diversification. By learning from Tanzania’s successes, Nigeria can transform this sector into a sustainable engine for job creation and foreign investment.
In this latest edition of Whispers, the FDC Think Tank takes a deep dive into recent economic developments and their impact on your business and corporate strategy.
Enjoy your read!
