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Inflation: Experts’ perspectives on single digit target



In the last six months, the headline inflation has been subdued, trending down consecutively month after month; though still within double-digit circle, the Central Bank has promised to crash it to a single digit by 2018, just as experts offer their perspectives on the target. ABDULWAHAB ISA reports


The Consumer Price Index (CPI), which measures inflation, has been trending down, going by monthly inflation data from the National Bureau of Statistics (NBS).
The latest in the series was the October figure released recently. The headline inflation decreased to 15.91 per cent (year-on-year), lower than 15.98 per cent recorded in September.
On a month-on-month basis, the headline index, the bureaus said, increased by 0.76 per cent in October 2017, 0.02 per cent points lower from the rate of 0.78 per cent recorded in September.
However, food index increased by 20.31 per cent (year-on-year) in October, down marginally by 0.01 per cent points from the rate recorded in September (20.32 per cent).
“On a month-on-month basis, the food sub-index increased by 0.85 per cent in October, down from 0.87 per cent recorded in August.
This represents the fifth consecutive disinflation in month-on-month inflation since a 2017 high of 2.57 per cent in May 2017. October 2017 also represents the lowest recorded month-on-month inflation since September.
Keeping the price of goods and services relatively stable is at the heart of macroeconomic policy of all central banks.
When price of commodities is unnecessarily high above affordable level of average citizens, purchasing power is eroded; it poses grave danger to the economy, inflation sets in. In a lay man’s understanding, inflation is a phase in any economy when much money fetches fewer items or services.

Inflation control
Since 2014, the economy has been battling with high price of commodities and services. This was occasioned by fall in price of Nigeria’s major commodity, crude oil. Drastic fall in crude oil price also affected the acreages into foreign reserves and added to the economic misfortune.
The Central Bank of Nigeria, in line with its core mandate of maintaining price and exchange rate stability, rose to the challenge of reining in inflation by applying tight monetary policy measures to subdue it.
For example, when it was apparent that headline inflation was picking up in 2016, moving to 11.4 per cent in February 2016 from 9.6 per cent in January, the Monetary Policy Committee of the CBN had in March 2016 voted to review the
MPR upward from 11 per cent to 12 per cent as well as the CRR from 20 per cent to 22.5 per cent while maintaining the liquidity ratio at 30 per cent.
However, the inflation uptick remained adamant. Month after month, it added percentage, got to boiling double digit figure last year. The economy slipped into recession with major sectors positing negatives.
The situation spurred CBN to introduce maximum tightening of its key policy. The apex bank increased MPR to 14 per cent this year just as it introduced reforms in foreign exchange targeted at achieving stability in forex window.
Reviewing inflation outlook recently at the last Monetary Policy Meeting in Abuja, the CBN Governor, Godwin Emiefele, noted that “inflationary pressures in the economy continued to moderate with headline inflation (year-on-year) receding for the ninth consecutive month to 15.91 per cent in October 2017 from 15.98 per cent in September 2017. Food inflation fell marginally to 20.31 per cent from 20.32 per cent in September, while core inflation increased slightly to 12.14 per cent from 12.12 per cent during the same period.
“These developments were attributable to the contraction in money supply, favourable but dwindling base effects, and the relatively stable naira exchange rate. In spite of the marginal decline in food inflation in October, the Committee noted that the rate remained high, traceable to cross border sales, distribution bottlenecks, high prices of farm inputs and supply shortages.”

Single digit target
Though still on relatively high side, headline inflation has a been decelerating on monthly basis. It came down to 15.98 per cent in October, according to NBS.
However, Emefiele has given 2018 as deadline to return the economy to single digit economy.
He said that given the consistency in the current trend, single digit target by 2018 is feasible.
“Between early 2013 and 2014, and around 2015, the CBN set inflation target of 6-9 per cent and this was substantially adhered to.
“We must realise that those were periods from 2012 and we keep saying five straight years from 2009 to about 2014, crude prices averaged $110 per barrel. Reserve accretion at a time in 2008 stood at $62 billion. Exchange rate stability was taken for granted during those periods but unfortunately beginning from the Q1 of 2014, we got hit by three external shocks: the drop in commodity prices, and for us crude price; the geopolitical tension along various trading routes across the world, as well as the US normalisation policy.
“These had tremendous adverse consequences on our economy and we could see that inflation moved from nine percent in January 2016 to 18.7 per cent in January 2017. And that is the reason most members of policy committee meeting think it is too high and we are working very hard, thinking very seriously and manage for price and monetary stability and see to the fact that inflation is brought down to the traditional level where we have our target of between 6-9 per cent.
“We are working hard at it and I am very optimistic that with the focused and tenacity of the monetary policy committee that this will be achieved,” the governor noted.

Experts’ views
Experts have, however, differed on CBN’s assurance of subduing inflation to a single digit by 2018. They are of the view that key fundamentals that shape economy on strong footing are yet to be replicated in Nigeria and expressed doubt about apex bank’s single digit inflation target.
Professor Uche Collins , of Economics department, Nnamdi Azikwe University, noted: “Let’s look at our real sector. Is production driven from within? Especially with employment, domestic manufacturing, service. Let’s look at import profile, food import, especially rice, apparels. How much comes from outside? Then money supply and its derivatives, how much influence has CBN over these? What are the positions of monetary policy committee on interest targeting? With these issues, you will find that CBN is just hypothesising despite the infrastructure within her disposal. Oil is still driving the economy. CBN’s projection may eventually not be realistic.”
In his view, Developmental Economist, Odilim Enwegbara, said he was not excited by CBN’s single digit inflation target.
“I can’t really see this as good news given that this blind fighting of inflation is coming through mopping of liquidity. Since low inflation means a stronger naira that means more imported goods.
“That is why lowering inflation rates at this stage is simply anti-investment, anti-growth and anti-jobs, especially with inflation fought blindly. That’s why for me, it is better to have high inflation if that could mean more liquidity in system at lower interest rates than low inflation, which is causing illiquid problem, crowding out the real sector firms from the debt market.
“I will propose fighting interest rates rather than fighting inflation, especially when artificially doing that gives naira the kind of high value that imports take advantage of, at the detriment of local producers of the same goods.
“To truly determine the true value of the naira, the CBN should stop injecting billions of dollars into the forex markets through intervention simply in an effort to subside imports. The CBN should participate in the forex markets since that is what it’s supposed to do in floating currency like the naira, which its value ought to be determined by market forces.
“Let the record be set straight here. Without any form of ambiguity, it has since been established that in supposed dynamic economies like ours, there should be no cause for alarm if the inflation rate goes as high as 25 per cent, so long as the economy is fast growing and fast replacing most of its imports with locally made ones,” said Odillim.

Last line
With consecutive five months of steady decline in headline inflation spurred by various reforms initiatives of the apex bank, it is safe to conclude that Emefiele’s target of single digit inflation is feasible by 2018 given that forex reforms, current revolution in agriculture value chain are sustained.

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Stock market opens week bearish



Trading activities on the floor of the Nigerian Stock Exchange (NSE) market yesterday opened this week on  the negative territory as the overall performance measures, NSE ASI and market capitalisation, both fell by 1.53 per cent.


The downswing according to market watchers, was due to profit taking by investors after recent bullish rally.


Consequently, the All-Share Index dropped by 651.09 basis points or 1.53 per cent from 42,638.83 index points last Friday to close at 41,987.74, while the market capitalisation of equities depreciated by N234 billion or 1.53 per cent to close at N15.067 trillion from N15.301 trillion.


Further analysis of the day’s trading showed that Linkage Assurance Plc topped the day’s gainers’ table with 9.09 per cent to close at 96 kobo per share, while Livestock Feeds Plc followed with five per cent to close at N1.05 per share. Fidson Healthcare Plc added 4.92 per cent to close at N4.69 per share.


On the flip side, PZ Cussons Nigeria Plc led the losers’ chart with a dip of 8 per cent to close at N23.00 per share. Lasaco Insurance Plc shed 6.06 per cent to close at 31 kobo per share. Enamelwa Nigeria Plc followed with 4.95 per cent to close at 22 kobo per share.


Market turnover closed negative as volume moved down by -64.80 per cent as against +32.62 per cent uptick recorded in the previous session. Skye Bank Plc, Diamond Bank Plc and FCMB Plc were the most active stocks that boosted market turnover while Zenith Bank Plc and Guinness Nigeria Plc topped market value list.

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Nigeria mulls 700,000 barrels daily oil output surge



…envisages 250,000 barrels from local producers


Nigeria is planning an increase of 700,000 barrels a day in her oil production. Data from the Ministry of Petroleum Resources sighted by New Telegraph showed that indigenous producers from the country aim to pump almost 250,000 barrels per day additional crude by 2020 as part of a wider plan for the nation to lift output to 2.5 million a day.

“We are on course,” Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who confirmed the data, said in Abuja last weekend, just as he intimated newsmen of the goal to pump 2.5 million barrels a day by 2020. “Capacity-wise, the volumes are there. Infrastructure-wise we suffer a little bit in terms of being able to deliver.”

There are at least a dozen small to mid-sized Nigerian producers pumping between 5,000 and 100,000 barrels each day. Together, they plan to add incremental supply of at least 150,000 barrels a day this year. Aiteo E & P Ltd., Nigeria’s largest independent, didn’t immediately comment about its expansion plans. Shoreline Group, the third-biggest independent, the data showed, wants to double output by December with Seplat Petroleum Development Company, the second-largest, also intending to produce more.

” In all, the country’s total planned increase, a report adapted from the data showed, is 700,000 barrels a day. “Just over a third will come from the state-run Nigeria Petroleum Development Co., a third from independents, and the remainder from oil majors.

The expansion depends, among other things, on peace being maintained in the Niger Delta. A militant group said last month it would attack oil and gas facilities,” the data adapted by Bloomberg showed. “One probability is at least some of the extra Nigerian supply will end up feeding the Dangote oil refinery, the continent’s largest, which is due to start operating next year. While doing that would help rid Nigeria of its dependence on fuels produced overseas, it wouldn’t extricate the country from its commitments to OPEC.

“Back in 2016, Shoreline had to cancel a planned $500 million Eurobond. With oil prices rallying, the company is making a comeback. It agreed a $530 million deal with financiers led by Vitol Group, the world’s biggest independent oil trader, as it seeks to double crude output to 100,000 barrels a day by year end.

“It represents a massive vote of confidence in the future growth of our operations and of Nigerian upstream producers,” Kola Karim, chief executive officer of Shoreline, said in an interview.

“Shoreline’s progress mirrors that of other Nigerian independents.Seplat, said to be among companies bidding for Petroleo Brasileiro SA’s African oilfields, expects to ramp up drilling this year after output recovered from militant attacks and low prices, according to company statements,” the report said. Half a decade ago, these producers were hailed as the future of Nigeria’s production because of their potential to pump 40 percent of the OPEC member’s output. They had bought oilfields that hold at least a third of the West African nation’s 37.5 billion barrels of crude reserves from companies including Royal Dutch Shell Plc, Total SA, and Eni SpA. Their day may still come.

The OPEC deal is currently in place until the end of this year and global demand is rising fast. The International Energy Agency this month revised up its growth estimate for world oil consumption by 100,000 barrels a day, taking it up to 1.4 million.

“As the oil market rebalances in the years ahead, OPEC will have to lift its production cap,” Pabina Yinkere, an energy analyst at Lagos-based Vetiva Capital Management, said by phone, adding that a lot of extra Nigerian crude could be used to feed the Dangote refinery.

“Moves to raise production are in view of expected demand growth.” The oil producers in Nigeria are planning to add barrels at the same time as Nigeria participates in a global pact to restrict oil supply that’s being led by the Organization of Petroleum Exporting Countries and non-member nations including Russia. If any one country relents – and similar internal pressures are bubbling up elsewhere – then the entire deal could come under strain.

“If they can pump more in Nigeria, I don’t see why they wouldn’t,” Warren Patterson, a commodity strategist at ING Bank NV, said. “If you get Nigeria exceeding the cap, then you’re going to get others who pump a little bit more. The longer the deal goes on for, the more likely it’s going to fall apart.”

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2018: Experts predict vibrant real estate



As oil prices stabilise at 17 per cent higher than 2017 average and direct foreign investment increases, experts see surge in real estate activities in 2018. DAYO AYEYEMI reports


Following improvement in the economy, things are beginning to look up in Nigeria’s real estate sector with market operators getting set to tap into the opportunities, which exist in various segments of the market.

They were, however, particular about the low and middle income residential, millennial and student accommodation sections. Apparently equipped with the dynamism of happenings in the economy, they stated that investors (both local and foreign) were prepared to launch into pockets of opportunities in real estate market. Investors’ hope has been further boosted by the latest Bismack Rewane-led Financial Derivative Company (FDC)’s report on review of third quarter of 2017, which showed that Foreign Capital Inflows (FCI) to Nigeria increased by 148 per cent to $4.15 billion.

This positive trend, analysts said, happened as a result of renewed investor confidence in the economy. Also, the experts noted that oil prices had climbed to 17 per cent higher than 2017 average, expressing confidence that if the situation persists, oil revenues might help mitigate consequences of capital flight.

Current development

This newspaper gathered that while some developers are entering into Joint Ventures (JV) with the government to provide affordable housing units for citizens, others are currently repackaging their products to attract financiers and buyers.

In exclusive neighbourhoods such as Ikoyi, Victoria Island and Lekki, where landlords can no longer wait without getting tenants and buyers for their dormant properties, they have been converting their vacant houses to smaller apartments such as one-bedroom, studio and condos to attract people in need of smaller accommodation. This innovation by landlords, according to experts, has caught the attention of working-class singles who want to live very close to their workplaces.

Experts’ view

Taking a look at what 2018 holds for the sector, experts, which comprised developers, institutional investors, mortgage providers, media practitioners, property consultants and brokers at Fine and Country West Africa’s investors series, agreed that the outlook was bright and promising for real estate, hinging their prediction on improved economic climate. According to them, the economy has started looking up with pockets of opportunities emerging in the residential segment of the market.

They observed that low to middle income market remained strong all through the recession period while the upper market struggled. “But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business,” they said.

Setting the pace, Sales Consultant, Fine and Country in Lagos, Mr. David Mba, said that he saw a more vibrant residential market coming as a result of an improved economy in 2018, adding that what were considered challenges in the past have become opportunities. According to him, developers in their bid to share risk and also raise more capital were going into joint ventures, citing Brains and Hammers Limited’s example.

“Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State Government,” he said. This move, he explained, is believed to be the company’s response to pressing demands from its clients who wanted to acquire property in Lagos.

He said: “The move will see the company developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu area of Lagos.

“The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of one bedroom, 24 units of two bedroom, and 24 units of 3-bedroom maisonette.”

Other market trends, Mba said, included increase in demand for good value three or four bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units. Publisher/CEO, BusinessDay, Frank Aigbogun, is of the view that improvement in the economy means increased business activities that will in turn trigger more demand for real estate products such as commercial office, retail and residential buildings.

Fine & Country’s CEO/Vice Chair, Udo Okonjo, stated that the sector’s positive outlook would come with opportunities for only investors who are ready to understand that the market had changed.

From market survey, she stated that there would be opportunities across various segments of the real estate’s market including residential, commercial office and retail. “Lifestyle communities are the new face of residential real estate.

These communities have the advantages of economies of scale and security,” the Fine and Country’s CEO said. She hinted that opportunity currently existed in millennial and student housing, adding that many investors were tapping into these areas.

Dean, Faculty of Environmental Sciences, University of Lagos, Professor Timothy Nubi, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.

In a bid to maximise the value of their property, a recent Northcourt Real Estate report 2018 outlook, noted that land owners looked more favourable to joint ventures with developers.

This newspaper also discovered that many developers and investors have been taking advantage of the ongoing construction of Dangote Refinery in Ibeju-Lekki, Lagos to acquire more lands in the axis for housing estate development.

Last line

As the business investment climate gets betters, necessary actions must be taken by the government to improve ease of doing business in the country.

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