We’re back with your favourite Market Roundup for Week 18! For some of us who don’t love long reads, here’s everything you need to know about key market events for the previous week, starting with how to deal with Nigeria’s inflation rate!
Nigeria’s Inflation Rate
Inflation in Nigeria continues to rise. The year-on-year inflation rate increased from 11.02% in August 2019 to 18.17% in March 2021. It should be noted that the inflation rate in March 2021 was 18.17%, the highest level since February 2017.
As confirmed by the Central Bank of Nigeria in its economic report for the fourth quarter of 2020, the main driver of current inflation in Nigeria is food price inflation, which is 22.95% (March 2021). This is the highest level of food price increases in the past 15 years.
The Nigeria Bureau of Statistics (NBS) has released the “Selected Food Price Watch”, which provides more background information on the price changes of certain foods. Interestingly, the prices of popular foods such as Garri, corn, rice, vegetable oil, and beans have risen by more than 20% year on year.
This Spike in food prices is significant, especially if you think that food accounts for 57% of Nigerian household expenditures.
In other words, Nigerian households allocate N57 of every N100 consumption to food-related items, which means that a 22.95% increase in food prices now will lead to expectations that Nigerians will spend more than N70 items on every N100 expenditure.
Dealing with Nigeria’s Inflation Rate
For investors, it is keen to ensure that investments are optimally allocated to continually earn real returns to protect existing wealth and grow wealth if possible. From the perspective of consumption, the loss/erosion of purchasing power simply means that the number of goods and services that consumers can purchase in a certain amount will continue to decrease over time. The decline in purchasing power will affect the living standards of individuals and force them to shrink their commodities.
The best way to prevent loss of purchasing power is to actively increase your income. You can do this by negotiating a salary increase, carrying outside activities (such as online retail, tutoring, etc.), changing jobs, or obtaining other qualifications to enhance your skills and enhance your personal brand.
In order to increase income, you should add as many options as possible within the scope, because doing nothing is not a viable option.
All Currency Rates, Fixings, Prices, and Indices were obtained as of Value date, Monday, May 10, 2021.
***BDC Rates: (Bureau De Change)This refers to the FX rates obtainable for valid transactions at the Parallel market i.e Black Market or local Licensed BDC operators in Nigeria
I & E Rates: The Investors’ & Exporters’ FX Window (I&E FX Window) is the market trading segment for Investors, Exporters, and End-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances, thus ensuring efficient and effective price discovery in the Nigerian FX market. The I&E FX Window was established by the Central Bank of Nigeria (CBN) via a circular dated April 21, 2017
NAFEX – (The Nigerian Autonomous Foreign Exchange Fixing) is the reference rate for Spot FX operations in the Autonomous FX Market which comprises recognized FX trading segments, including but not limited to the Inter-bank market, the I&E FX Window and any such approved and recognized trading segment as may be defined from time to time. NAFEX is used in the daily valuation and settlement of the OTC FX Futures Contracts.
CBN Official Rate: This is the official rate at which direct transactions can be carried out with the CBN. This rate can only be obtained when direct deals or FX trades are done directly with the CBN
Sources: FMDQ, Flutterwave Treasury Team, Abokifx, Proshare,.Bloomberg.com, Reuters, Nairametrics, FMDQ, Guardian
Disclaimer- This report is based on information obtained from various sources believed to be reliable and no representation is made that it is accurate or complete. Therefore, all rates shown here are mark-to-market rates being published for guidance purposes only. Reasonable care has been taken in preparing this document. Flutterwave Technology Solutions Ltd shall not accept responsibility or liability for errors of fact or any opinion expressed herein. This document is for information purposes and private circulation only and may not be reproduced, distributed, or published by any recipient for any purpose without the prior written consent of Flutterwave Technology Solutions Ltd.