FTXM, an Online financial trading and investing firm, has said the persistent rise in Nigeria’s inflation figure and monetary policy rate was risky to the country’s fragile economy.
Senior Market Analyst, Lukman Otunuga, who disclosed this in the firm’s weekly outlook report, said while the combination of mounting geopolitical risk and US Fed rate expectations rocked global financial markets in the previous week, the volatility is likely to intensify over the next few days as investors not only focus on these key themes, but top-tier economic reports from across the globe among other high-risk events.
Part of the report stated: “In Nigeria, the CBN’s recent removal of FX restrictions on 43 items sparked some optimism as dollar supply surged. This development offered an opportunity for the Naira to fight and was also welcomed by the IMF which acknowledged the series of reforms aimed at fixing Nigeria’s economy.
“Nevertheless, inflation remains piping hot in Africa’s largest economy while interest rates are currently at their highest levels since the monetary policy rate was adopted in 2006.
“It is worth keeping in mind that, the inflation menace continues to draw strength from the removal of fuel subsidies, devaluation of the official Naira and security issues in food production regions.
“Given how inflation is projected to jump in September, the CBN is likely to raise interest rates at its policy meeting this week for the fifth consecutive time. This vicious cycle of rising inflation and interest rates certainly presents a risk to Nigeria’s fragile economy.
“The question is whether the central bank will move ahead with a 25bp hike or opt for a larger move to tame inflation”.