12 Apr

Nigeria Rate-Cut Hope Lives as Inflation Slows to Two-Year Low

Nigerian inflation slowed for a 14th straight month in March, taking consumer-price growth below the benchmark interest rate for the first time in two years and opening the door for a rate cut.

Consumer inflation in Africa’s most-populous nation decelerated to 13.3 percent from a year earlier, the lowest rate in two years and below the benchmark rate of 14 percent.

 Nigeria’s central bank left its main lending rate at a record high of 14 percent when policy makers met April 4 to continue fighting inflation that’s been above the target range of 6 percent to 9 percent for more than 2 1/2 years. Governor Godwin Emefiele said the bank would consider cutting rates from where they have been since July 2016 when inflation slows closer to single digits.
“Absolutely, they now have more scope to cut rates because of the pronounced drop in inflation,” Razia Khan, head of macroeconomic research at Standard Chartered Bank Plc, said by phone from London.
The median estimate in a Bloomberg survey was for annual price growth to slow to 13.6 percent. Inflation slowed from 14.3 percent in February, the Abuja-based National Bureau of Statistics said in a statement.
Food-price inflation decelerated to 16.1 percent in March the weakest rate of growth since July 2016, it said.
The cost of gasoline climbed to an average 9.4 percent in March to 163.4 naira ($0.46) a liter (0.3 gallon) from a year earlier, said the bureau, whose data includes unofficial pump prices. Nigeria currently caps gasoline retail prices at 145 naira per liter.

Food-price inflation decelerated to 16.1 percent in March the weakest rate of growth since July 2016, it said.

The cost of gasoline climbed to an average 9.4 percent in March to 163.4 naira ($0.46) a liter (0.3 gallon) from a year earlier, said the bureau, whose data includes unofficial pump prices. Nigeria currently caps gasoline retail prices at 145 naira per liter.

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04 Oct

Lions (still) on the move: Growth in Africa’s consumer sector

Just a few years ago, consumer spending in Africa passed the US$1tn mark. The continent’s impressive growth trajectory at that time – in particular, the robust growth in Africa’s 30-largest economies – caught the attention of consumer businesses worldwide. Indeed, the consumer-facing sector has been pivotal in Africa’s growth story, accounting for almost half of the continent’s GDP growth between 2010 and 2014.

But because of the recent slowdown, some executives have begun to question whether Africa’s once-roaring economy and burgeoning consumer sector still hold promise. Is Africa truly worth investing in? Can multinational companies succeed in the region? Is the African consumer opportunity still as attractive as it once seemed? Our unequivocal answer is yes – but companies will need to adopt increasingly sophisticated approaches to compete effectively. In this article, we share our latest perspectives on Africa’s outlook to 2025 and what it will take for consumer-goods companies to thrive in the region.

A temporary slowdown

Consumer spending across the continent amounted to $1.4tn in 2015, with three countries – South Africa, Nigeria, and Egypt – contributing more than half of that total. Food and beverages still constitute the largest consumption category, accounting for as much as one third of Africa’s household spending in 2015 (and close to 40% of household spending in lower-income countries such as Ghana, Kenya, and Nigeria), but discretionary categories already make up a substantial share of consumption. Spending on nonfood consumer goods – including clothing, motor vehicles, and household goods – accounts for a further 15% of consumption.

However, due in part to currency devaluations and a sharp downturn in oil-exporting economies, spending growth has slowed. Out of the 15-largest consumption markets in Africa, which constitute 90% of the continent’s total consumption, 12 experienced a slowdown in consumption growth between 2014 and 2015 – the exceptions being Ethiopia, the Democratic Republic of Congo, and Tanzania.

Clearly, the African consumer is under financial pressure.

Read more: Lions (still) on the move: Growth in Africa’s consumer sector

02 Aug

South Africa Should Consider Help From the IMF to Fix Its Economy

South African economy

The prognosis that the South African economy is in dire straits is pretty obvious even to the untrained eye. The solution to the country’s present predicament is also pretty much understood. The International Monetary Fund (IMF) has recently produced a comprehensive view which deserves to be considered.

The IMF identifies three key ailments as causes of the country’s anaemic economic growth. These are low consumer and investor confidence and policy uncertainty.

Continued slow growth should be a matter of grave concern and ought to be treated as an emergency.

Thus far the short and medium term outlook suggests that growth outcomes will continue to be pedestrian. What is even more worrying is that over the past four years global economic growth has gained momentum, suggesting that the solution to South Africa’s vanishing growth lies in the country.

The new minister of finance, Malusi Gigaba, recently hinted that South Africa may be compelled to seek assistance from the IMF. I think the conditions are right for serious consideration of the proposal even though IMF programmes are not very popular with politicians.

There are a number of reasons for this. Requests for IMF assistance suggest that those who manage the domestic economy have failed. The fund’s programmes also come with clearly defined milestones, often described as “conditionalities”. But in most instances, these are well-intentioned and aimed at success.

It’s better to enter an IMF programme early before the situation becomes frantic. As medical doctors might argue, it is easier to deal with an ailment in the earlier stages before it reaches an advanced stage.

Desperate situation

The alternative to asking for help now would be continued poor growth outcomes which would have serious social and economic costs.

The country’s poor economic growth record spawned a number of problems.

A shrinking economy means tax revenue shortfalls. The fiscal policy response would be higher taxes or bigger budget deficits.

And then again, interest payments, the fastest growing government expenditure item, would grow even faster. Already, about 11 cents out of every rand goes into servicing public debt.

As the economy shrinks, more and more income would have to be spent on interest payments. Government’s ability to provide a social safety net in the form of social grants and other services, like education and health care, would be much more constrained. The service delivery protests that have become increasingly the norm would become even more widespread as the fiscus comes under serious strain.

Ultimately, the brigade of the unemployed would bear the brunt. Of course, the employed would also suffer because slow growth affects incomes.

Low and anaemic growth dries out consumer confidence. Job losses and subdued growth in incomes as a result of poor growth outcomes and prospects chips away at consumer confidence.

South Africa’s growth performance post 2008 has been very low. Over the past 10 years, the economy recorded an average of 2% growth per year. If this continues it will take more than 30 years to double average incomes in South Africa.

But if the country can increase growth to 5% as projected by the National Development Plan, it would take only 14 years to double average income. The higher the growth rate the shorter the time required to double incomes and bring people out of poverty.

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[source from allAfrica]