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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21 Mar

South African Inflation Dips Deeper Below Midpoint of Target Range

South Africa’s inflation rate fell further below the midpoint of the target range in February, giving the central bank another reason to consider easing monetary policy next week.

Inflation slowed to 4 percent, the lowest level in almost three years, from 4.4 percent in January, Pretoria-based Statistics South Africa said Tuesday in a report on its website. The median estimate of 21 economists in a Bloomberg survey was 4.1 percent. Prices rose 0.8 percent in the month.

February’s data marks the eleventh consecutive month of price growth within the Reserve Bank’s target range of 3 percent to 6 percent, the longest run since 2015.

The Monetary Policy Committee, which was increased to seven members last month with the appointment of Fundi Tshazibana to the panel, will announce whether it’s changing its benchmark lending rate next week Wednesday.

An unchanged stance would mark the fourth straight meeting in which the rate is held at 6.75 percent.

“Some of the more hawkish members of the committee are likely to move onto the dovish side next week,” Jeffrey Schultz, a senior economist at BNP Paribas said by phone in Johannesburg. “As a result we think that there is scope for the SARB to cut by 25 basis points.”

The central bank expects inflation to remain within the government’s target band until at least the end of 2019.

South Africa’s rand was one of the most volatile currencies tracked by Bloomberg last year and has gained about 9 percent versus the dollar since Cyril Ramaphosa was elected to lead the ruling African National Congress after President Jacob Zuma’s tenure came to an end in December.

Core inflation, which excludes the prices of food, non-alcoholic beverages, energy and gasoline, was steady at a six-year low of 4.1 percent in February.

Traders are now pricing in a 25 basis point cut at the May MPC meeting. Forward-rate agreements starting in three months dropped two basis points to 6.87 percent, or 26 points below the benchmark Johannesburg Interbank Agreed rate.

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14 Mar

Nigerian Inflation Slows for 13th Consecutive Month in February

Nigeria’s inflation slowed for a 13th consecutive month in February, but may still be too high for the central bank to start cutting rates from a record.

Consumer-price growth in Africa’s most populous nation decelerated to 14.3 percent from 15.1 percent in January, the Abuja-based National Bureau of Statistics said in an emailed statement. The median estimate in a Bloomberg survey was 14.6 percent. Prices rose 0.8 percent in the month.

Governor Godwin Emefiele said last month the Central Bank of Nigeria may reduce its benchmark from a record-high 14 percent before July if inflation drops closer to single digits. Price growth has exceeded the target range of 6 to 9 percent for 2 1/2 years partly due to increasing fuel and food costs, as well as a weaker currency that raised prices of imported goods.

The cost of gasoline increased an average 15 percent to 172.5 naira ($0.48) in February from a year earlier, according to NBS, which collects data including pump prices that are above the government’s official cap of 145 naira per liter.

The Monetary Policy Committee is scheduled to meet March 19-20 if at all, having missed its January gathering because it had insufficient members to form a quorum. That’s because lawmakers refused to confirm new members amid a political stalemate with President Muhammadu Buhari.

The committee has kept the policy rate at 14 percent since July 2016 as it tries to balance fighting inflation, propping up the naira, and supporting an economy that the International Monetary Fund forecast will expand 2.1 percent this year, strengthening a recovery after contracting in 2016.

Source: https://www.bloomberg.com/news/articles/2018-03-14/nigerian-inflation-slows-for-13th-consecutive-month-in-february

05 Mar

Nigeria’s Sticky Inflation Threatens to Frustrate Rate-Cut Hopes

Nigeria’s long-awaited interest rate-cutting cycle risks being short-lived if it starts at all.

Governor Godwin Emefiele said last month the Central Bank of Nigeria may reduce its benchmark from a record-high 14 percent before July if inflation drops closer to single digits.

But with fuel costs surging and government spending swelling before next year’s election, he may struggle to reach that threshold at a time when the pace of price growth is still just over 15 percent.

“With inflation remaining sticky, it is unlikely that the CBN would want to cut rates so soon,” Gaimin Nonyane, London-based economic-research head at Ecobank Transnational Inc., said by email.

Further complicating the picture is the Senate’s refusal to approve President Muhammadu Buhari’s nominees to the Monetary Policy Committee, which means the panel lacks a quorum to hold meetings to formally set rates, further delaying any hope of cuts. The MPC didn’t sit in January, and it’s not clear if the March 20 decision will be made.

The inflation rate in Africa’s most-populous nation rose to 15.1 percent in January from a year earlier and has exceeded the target range of 6 percent to 9 percent for 2 1/2 years. The statistics agency is due to release data for February on March 14.

Africa’s largest oil producer imports almost all its refined-fuel requirements because local capacity can’t match demand.

While higher crude prices have increased Nigeria’s revenue, they have also raised the cost of processed products, with the average gasoline price surging 27 percent in January from a year earlier.

The resultant fuel shortages prompted retailers to boost pump prices above the official cap of 145 naira ($0.40) a liter, adding to inflationary pressures.

“Unless fuel pricing is resolved, bouts of fuel shortages could keep prices sticky, feeding into other items,” said Razia Khan, head of macroeconomic research at Standard Chartered Bank Plc in London.

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21 Feb

South Africa’s Inflation Rate Slows to 4.4% in January

South Africa’s inflation rate slowed in January, easing pressure on the central bank to maintain a tight monetary stance.

Inflation slowed to 4.4 percent from 4.7 percent in December, Pretoria-based Statistics South Africa said Wednesday in a report on its website.

The median of 14 economists’ estimates in a Bloomberg survey was for 4.4 percent. Prices rose 0.3 percent in the month.

Price growth has been within the Reserve Bank’s target range of between 3 percent to 6 percent for 10 months, the longest run since 2015.

The Monetary Policy Committee left its benchmark lending rate unchanged for the third straight meeting last month as the risk of a credit-ratings downgrade persists.

While the central bank has highlighted the rand as a key risk to price growth, it expects inflation to remain within the target band.

South Africa’s currency was one of the most volatile tracked by Bloomberg last year and has gained 8.6 percent against the dollar since Cyril Ramaphosa was elected to lead the ruling African National Congress in December.

Ramaphosa has since replaced Jacob Zuma as president of the country.

Core inflation, which excludes the prices of food, non-alcoholic beverages, energy and gasoline, slowed to 4.1 percent in January, from 4.2 percent.

Source: https://www.bloomberg.com/news/articles/2018-02-21/south-africa-s-inflation-rate-slows-to-4-4-in-january

19 Jan

South Africa Holds Rate as Rand, Inflation Risks Persist

The South African Reserve Bank kept its benchmark lending rate unchanged for a third consecutive meeting as the risks of a credit-rating downgrade persist, muddying the outlook for the rand and inflation.

The central bank’s Monetary Policy Committee maintained the repurchase rate at 6.75 percent Thursday, in line with the estimates by all but seven of the 20 economists surveyed by Bloomberg.

The bank cut the rate for the first time in five years in July to support an economy that entered its second recession in almost a decade in the first quarter of 2017 and has struggled to mount a strong recovery.

Inflation has been inside the target band for eight months and the rand — among the world’s most-volatile currencies — has strengthened since the ruling party elected Deputy President Cyril Ramaphosa as its new leader in December, spurring hope that policy uncertainty and political turbulence will dissipate.

“We do see an improved inflation and growth outlook thanks to a stronger performance in the currency but a lot of risk factors still exist, both on the political front as well as on the credit-ratings front,” said Jeffrey Schultz, BNP Paribas’s senior economist.

S&P Global Ratings and Fitch Ratings Ltd. cut the country’s debt to junk in 2017, and a reduction of rand bonds by Moody’s Investors Service could trigger an exclusion of the country’s rand debt from Citigroup Inc.’s World Government Bond Index.

The effect of this on rand bond yields “could be significant, but the extent to which a universal downgrade is already priced in remains unclear,” Governor Lesetja Kganyago told reporters in the capital, Pretoria. The government’s challenge is to “find ways to finance the deficit in a growth-positive manner, and at the same time convey a credible commitment to structural reforms.”

The bank expects inflation to remain within the target band of 3 percent to 6 percent until at least the end of 2019, reaching a low of 4.4 percent in the first quarter of this year.

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29 Aug

Microfinance banks make Sh377m loss as costs rise

loss

The 13 microfinance banks (MFBs) sunk into a collective Sh377 million loss in the year ended December 2016 from a Sh549 million pretax profit a year earlier.

The Central Bank of Kenya has attributed the slide to drying income streams as the micro-lenders struggled to secure funds for investments.

Revenue generated by MFBs fell 27 per cent or Sh3.9 billion year-on-year amid a 19 per cent rise in interest and fee expense on borrowing, the CBK said.

Income from government securities declined by 77 per cent, investments by 62 per cent while that from deposits and balances with banks and financial institutions contracted by 60 per cent.

“This was occasioned by the tight liquidity in the market especially after the placement of three commercial banks under receivership in 2015 and 2016, which affected distribution of liquidity in the sector. Net non-performing loans increased by 94 per cent as at December 31, 2016,” the CBK said.

The MFBs, which are shielded from the interest capping law, posted a marginal 3.27 per cent growth in loans year-on-year to Sh47.05 billion while deposits fell 0.8 per cent to Sh40.20 billion.

In Summary

  • The loss has attributed the slide to drying income streams as the micro-lenders struggled to secure funds for investments.
  • The MFBs, which are shielded from the interest capping law, posted a marginal 3.27 per cent growth in loans year-on-year to Sh47.05 billion while deposits fell 0.8 per cent to Sh40.20 billion.

Source from allAfrica

10 Aug

Weaker inflation ups real South African economic transaction activity

transactional activity

Cape Town – For the first time in 10 months, economic transactional activity in South Africa picked up in real terms on a year-on-year basis in July, according to the latest BankservAfrica Economic Transactions Index (BETI) released on Thursday.

According to the BETI report it was mainly due to weaker inflation.

At the same time the index reflected slow growth on a quarterly and monthly basis.

The monthly transactional activity – as measured by BankservAfrica’s national payment system – for July showed a 0.6% year-on-year increase in the actual value of transactions.

“This change is the result of a very weak July 2016 which saw the transaction values fall out of the current annual numbers. Therefore, the annual increase is a ‘base effect’ that lifts the actual index numbers above last year’s lows,” explained Mike Schüssler, chief economist at Economists dotcoza.

The quarterly numbers are negative due to the very low May 2017 BETI numbers and follow from the sovereign credit rate downgrades for SA by the global ratings agencies.

Schüssler told Fin24 that the BETI shows how the uncertainty in the SA economy is just dragging on. It makes consumers hesitant about spending. They might, for instance, rather opt to buy a cheap laptop, eat at fast food outlets perceived to be less expensive than restaurants and shop at general merchants rather than upmarket stores.

“They will buy cheap, because their outlook is rather shorter term,” said Schüssler.

The same tendency goes for businesses, where they would, according to Schüssler, rather buy stock in smaller quantities and more often than in big quantities.

“The uncertainty created in the run-up to the downgrades and the changing of the minister of finance, has grabbed hold of SA businesses and creates a problem for all of us. Everybody rather buys something they can pay off in two to three months than taking on long term repayments,” said Schüssler.

“They are watching their costs and do not want to take on more risk.”

Between June and July, the BETI declined by 0.2%. This, however, is minor in comparison to other monthly declines since 2015.

In July, the number of transactions increased by 6.7% on a year-on-year basis, but the average value per transaction declined by 1.3% on a year-on-year basis. The standardised value of transactions for July was R789.2bn, a 5.4% year-on-year upturn.

In the last 43 months, 21 of the monthly changes in the BETI have been declines and one month had no change, while the other 21 months showed increases. These are all indicative of a flat economy, according to Schüssler.

“There is hope that further interest rate reductions will boost consumer confidence and a better understanding of the economic situation by policymakers will help the SA economy,” he said.

07 Jul

S.African watchdog defends bid to weaken central bank inflation mandate

South Africa’s main public watchdog stood by its bid to force the central bank to target growth rather than inflation, dismissing a legal challenge that the move was unconstitutional.

The head of the Public Protector Busisiwe Mkhwebane, set off a political row last month when she said the South African Reserve Bank’s mandate should focus on growth rather than inflation and the currency – rattling investors and the rand.

The central bank has filed a court challenge to quash the recommendation, which is also opposed by Finance Minister Malusi Gigaba and parliament.

The Public Protector’s spokeswoman Cleopatra Mosana said Mkhwebane had filed a notice opposing the challenges to her recommendation.

“The Public Protector is empowered, by the constitution, to take appropriate remedial action with regard to any improper conduct in the state affairs or conduct, or conduct in the state affairs which may result in any impropriety or prejudice,” Mosana said.

Gigaba and opponents of the proposal say Mkhwebane was exceeding her mandate in making the recommendation. Critics say that Mkhwebane’s role is to confront maladministration, not make central bank policy.

Analysts say it is unclear what prompted Mkhwebane’s recommendation and that it would be up to the courts to decide whether her mandate extends to the central bank.

The row over the central bank has highlighted divisions in the tripartite political alliance of the ruling ANC, the country’s biggest union, Cosatu, and the South African Communist Party (SACP) over the role of the reserve bank.

Read More: Reuters Africa

30 May

Egypt announces $2.49 billion package to cope with inflation

Egypt on Monday announced a $2.49 billion package of income tax discounts, bonuses for state employees, increased pension payments and cash subsidies for lower and middle income Egyptians to cope with soaring inflation.

The package will go into effect July 1, the start of the fiscal year, according to a Cabinet statement.

The measures are partially designed to defuse discontent over steep price hikes resulting from reforms introduced in November, including floatation of the Egyptian pound, the introduction of value added tax and partial lifting of subsidies on fuel.

The reforms, part of a deal to secure a $12-billion loan from the International Monetary Fund, sent inflation soaring to more than 30 percent. More of the subsidies on fuel and electricity are expected to be lifted this summer.

“This inflationary wave is clearly not demand-driven, it was caused by a sudden increase in costs,” said Omar El-Shenety, managing director at Cairo-based investment bank Multiples Group to Bloomberg. That means that higher interest rates “will do little to contain it,” he said.

President Abdel-Fattah el-Sissi says the reforms, though biting, were the only way to revive the economy, battered by years of turmoil and high-profile terror attacks blamed on Islamic militants waging an insurgency in the north of the Sinai Peninsula.

With presidential elections due a year from now, el-Sissi risked his once sweeping popularity when he introduced the reforms. He has not said whether he would run for a second, four-year term, but he most likely would.

Monday’s package is welcome news to millions of Egyptians because it comes soon after the start of the holy month of Ramadan, when observing Muslims refrain from food and drink from dawn to dusk. During the month, Egyptians spend much more than they unusually do on food, feasting on large sunset meals along with traditional sweets. Food prices usually inch higher in response to Ramadan’s increased demand.