Emefiele Foresees Single-digit Inflation by June 2018

• CBN injects $286m into forex market  Fitch says high Treasury Bill yields helping banks to maintain 

Obinna Chima  with agency report

Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele yesterday projected that inflation rates in the country would fall at a faster pace and hit high single-digit rates by mid-next year.

 “We are very optimistic that food prices will come down, and as they come down, it will help to complement the reduction in core inflation,” Reuters quoted Emefiele to have told journalists on the sidelines of the launch of the Afrinvest 2017 Banking Sector Report at the London Stock Exchange, adding he expected a “more aggressive moderation.”

“We are hoping that by the middle of next year, we should begin to approach the high single digits,” he said. Around nine per cent would be a good target,” he said.

Annual inflation in Nigeria slowed for an eighth month in September, easing to 15.98 per cent.

Nigeria, which has Africa’s largest economy, emerged from its first recession in 25 years in the second quarter as oil revenues rose.

But the slow pace of growth suggests the recovery remains fragile.

However, the central bank held interest rates at 14 per cent in September to keep liquidity tight, saying it felt that loosening would worsen inflation and drive bond yields negative which could lead to capital flight and hurt the currency.

Emefiele said as the economy began to hit thresholds on inflation and other gauges, he expected the monetary policy committee would begin to look at interest rate cuts a bit more favourably and think about easing.

“I would like to see low interest rates and I would like to see low inflation and I would be happy to see it as quickly as possible. When? I cannot categorically say.”

Asked about the outlook for unifying the country’s multiple exchange rates, Emefiele said Nigeria needed to see more foreign investors coming and was analysing the situation on which further steps to take.

In April, Nigeria introduced the Investors’ & Exporters’ FX Window, which allows investors and traders to swap Naira for dollars at market-determined rates.

“We are beginning to get it right, and all I want to do is to continue to enforce what we are doing, and we will not want to take any action that …will upset any gains that we have seen so far.”

The World Bank forecast Nigeria’s economy to grow by one per cent in 2017 – 0.2 percentage points below its forecast in April.

Meanwhile, Fitch Ratings has stressed that very high Nigerian Treasury Bill yields were helping banks to maintain their margins.

Banks have been investing heavily in treasury bills since the second half of 2016, boosting interest income and maintaining margins.

But the rating agency pointed out that the “boost to net interest income may be temporary, as treasury bill yields have reduced in recent weeks, falling to about 15.5 per cent from their mid-year levels of just over 18.5 per cent, and they may decline further.”

According to Fitch, high yields on treasury bills were part of the central bank’s attempts to control inflation and manage demand for foreign currency.

“By providing a remunerative, relatively low-risk, Naira-denominated investment (interest payments are tax-free), they hope to encourage Naira retention and dampen demand for US dollars,” it added.

CBN Injects $286m into Forex Market 

In a related development, the Central Bank of Nigeria (CBN) yesterday injected $285,759,449.10 into the interbank foreign exchange market to meet requests in four sectors of the economy. 

Details obtained from the CBN indicated that the agricultural, airlines, petroleum and raw materials were the four sectors that received various sums of allocation forex allocation from the CBN based on requests put forward by their respective banks.

Confirming the figures, the Acting Director, Corporate Communications Department, CBN, Isaac Okorafor, said the intervention underlined the high levels of transparency of the Bank in foreign exchange management.

According to him, the CBN would continue to play its role in easing the foreign exchange pressure on manufacturing and agricultural sectors through sales under the new flexible Foreign Exchange regime.

The CBN has consistently injected funds into in the interbank foreign exchange market to ensure liquidity, thereby easing pressure on the local tender currency.

Meanwhile, the naira closed at N360 to the dollar on the Bureau De Change segment yesterday. margins