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Is Nigeria’s FPI play raising economic prospects?
Governor of the Central Bank of Nigeria, Olayemi Cardoso says hope for economic revival remains positive following Foreign Portfolio Investors’ renewed interests, spurred by a raft of policies. Victor Aluyi, the Head of Investment at Sankore Global Investment, joins CNBC Africa to examine the policies introduced this year and the prospects for Foreign Direct Investment.
Thu, 28 Mar 2024 12:21:37 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The first quarter saw significant developments in Nigeria's economic landscape, with a focus on creating price stability through tight monetary policies and rate hikes.
- The Naira has shown signs of recovery, with a depreciation of 36 percent from over 70 percent at the end of February, supported by policy interventions.
- Inflation, although still a concern, is expected to decrease gradually, while the convergence of exchange rates and improved policy coordination signal a positive outlook for Nigeria's economic recovery.
The first quarter of the year has been marked by significant developments in Nigeria's economic landscape, with a focus on creating price stability to revive the ailing economy. Two Monetary Policy Committee (MPC) meetings were held, resulting in a 600 basis points hike in the benchmark rate, impacting various sectors of the economy. The fixed income market experienced significant yield expansions, with bond yields increasing by over 600 basis points at the short end, 400 basis points at the midpoint, and 250 basis points at the long end of the curve. Similarly, treasury bill rates saw hikes across all tenors, indicating a tightening of monetary policy to combat inflation and stabilize the Naira. The Nigerian currency, which had depreciated by 70 percent by the end of February, has shown signs of recovery, now down by 36 percent. The equities market has also performed well, with a 39 percent return on the broader index. However, concerns remain about the impact of the higher interest rate environment on the wider economy and key sectors such as agriculture, manufacturing, and services. While tight monetary policies may temporarily slow down growth, they are seen as necessary steps to achieve price stability and lay the foundation for future growth. Inflation, although still high, is expected to gradually decrease as policies take effect, supported by fiscal measures and infrastructure improvements. The convergence of the official and parallel exchange rates is anticipated, with the Naira poised for further appreciation under the current monetary policy framework. The outlook for inflation is cautiously optimistic, with expectations of disinflation in the second quarter, bringing relief to consumers facing rising living costs and shrinking purchasing power. Looking ahead to the second quarter, the focus remains on sustaining price stability through continued policy discipline. The establishment of the Presidential Economic Coordination Council signals a commitment to sound economic governance and policy coordination to drive Nigeria's economic recovery. Despite the challenges ahead, stakeholders remain optimistic about the country's economic prospects, as renewed interest from foreign investors and strategic policy interventions pave the way for sustainable growth and stability in the coming months.
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