Emefiele we are still weighing options on forex
The expansion in the core index reflected increases in the Transport sub-index by 22bps to 0. While the impact of the border closure continues to fade, the breakup in supply chain and higher transportation cost of both manufactured products and farm produce due to the restriction of inter-state movements have further triggered uptrend in inflation. Analysts stated that in April, headline inflation expanded by The expansion emanated from a much faster increase in the core index, which combined with a modest increase in the food index.
The core index surged 25bps to 9. Most of the increases in processed foods were attributed to higher prices of bread and cereal, and oil and fats. Relative to same period in the prior year, the food index is bps higher than the April level of While the government implemented a gradual reopening of the economy earlier in May, interstate travels is still restricted, resulting in higher prices of essential items.
Analysts at Nova expects the consumer price index to expand by 1. Analysts explained that while the apex bank has refrained from conducting special OMO auction stabilization securities , the Merchant bank understands the moral suasion to banks to bid at single digit rates, is similar to conducting a stabilization security. Total fixed income maturity between April and May summed to N1.
Going into the rest of the year, Nova believes the exchange rate pressure and higher government borrowings will dictate the trend in fixed income yields and primary market stop rates. However, the bountiful liquidity occasioned by the exclusion of corporates and individuals from OMO will further moderate the uptrend in yields that would have been occasioned by the FX pressure and higher borrowings.
Also, delay in the repatriation of maturing offshore holdings of fixed income securities could further compound the liquidity pressure. For OMO rates, given the delay in the repatriation of matured offshore holdings of fixed income instruments, we see the CBN adopting a soft approach to retain such funds.
With the paucity of dollars for repatriation and limited avenue to attract FPI funds due to the lower inflows to emerging markets , the apex bank might not be aggressive in raising OMO rates from current levels. Instead, the CBN could be more inclined to lower it further, with a strict directive to banks to either comply or get sterilized at zero, Nova stated.
The apex bank chief said following several policy measures, including a tighter monetary policy regime; the establishment of the Investors and Exporters Window in April ; the restriction of access to forex for some imported items; and some agricultural intervention programmes, the country has made economic progress. Consequently, Emefiele said the CBN will provide financial intervention to textile manufacturers at single-digit rate. He said the intervention will enable textile firms to refit, retool and upgrade their factories to enable them produce high quality textile materials for the local and export market.
He said part of the CBN's intervention will entail supporting local growers of cotton to enable them to meet the needs of the textile industries in the country. These efforts, he said, will boost jobs and help in restoring the lost glory of the textile industry. I , Texlon, Aba Textiles, Asaba Textile Mills Ltd, Enpee and Aswani Mills, amongst others — was the largest employer of labour in Nigeria after the public sector, contributing over 25 percent of the workforce in the manufacturing sector, according to Emefiele.
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