Nigeria’s inflation moderates further to 17.75% in June

Nigeria’s headline inflation for the month of June decreased by 0.18 percentage points to 17.75 per cent. The country continues to grapple with economic challenges, including security issues and infrastructure problems, which have contributed to the inflation rate. Ifeoma Onyejekwe, a Fixed Income Trader at UBA, sheds light on the implications of these economic indicators. According to Onyejekwe, the Central Bank of Nigeria (CBN) is not expected to change its monetary policy rates in response to the inflation data. Despite the marginal decrease in inflation, the rate is still on an upward trajectory, albeit at a slower pace. Investors are closely monitoring the market to assess the impact of this inflation data and to gauge future CBN actions. Moving on to the recent bond auction, Onyejekwe highlights that 20 billion was both offered and sold at rates of 7 per cent for short-term, 8.5 per cent for medium-term, and 10.1 per cent for long-term bonds. These rates have remained unchanged for the past eight weeks, indicating a consistent trend in the market. Liquidity in the market has surged, with approximately 500 billion entering the market recently. The influx of liquidity has led to a decrease in money market rates, dropping from double digits to single digits. This surplus liquidity has left investors in a holding pattern, awaiting opportunities to deploy capital. Looking ahead to the upcoming bond auction, Onyejekwe predicts increased rates, as market expectations point towards higher yields. The uncertainty surrounding the auction has resulted in wide bid-offer spreads, complicating trading strategies. With the government planning additional borrowings and discussions with the Bank of China for a 1 billion dollar loan, investors are bracing for higher rates in the medium term. Both the Debt Management Office (DMO) and the CBN may need to offer elevated rates to attract investors and meet budgetary demands. Overall, the outlook for yields is expected to trend upwards due to government borrowing plans and increasing financial obligations.