FSDH Merchant Bank predicts more decline in inflation
The nation’s financial system will record flurry of activities worth N2.02 trillion, courtesy of the money market transactions, ranging from various maturing government securities to Federal Accounts Allocation Committee Disbursements.
On the other hand, there are estimated outflows approximating N828 billion from the various sources, including the sale of government securities and statutory withdrawals, but leaving a net inflow of about N1.19 trillion.
According to the Head of Research at FSDH Merchant Bank Limited, Ayodele Akinwunmi, the development would keep the Central Bank of Nigeria busy with liquidity mop-up exercises in efforts to manage the excess money in circulation.
“We expect yields on government bonds may inch up from the current levels, as government begins the implementation of the 2018 budget and the yields in the international market increase. Consequently, yields on fixed income securities may trend marginally higher in July to attract investors, except those of Treasury Bills,” he said.
Akinwunmi advised that investors may choose to sell down a fraction of their bond investment portfolio to buy back later when the yield increases, while urging them to take advantage of the current yields on one year Treasury Bills.
Meanwhile, the bank’s research has shown an expectation of declining inflation rate (year-on-year) to 10.94 per cent in June, from 11.61 per cent recorded in May. According to the FSDH Research, while consumer prices increased in the month under review, it was at a lower rate than when compared with increases in May.
The prices of most of the food items that FSDH Research monitored in June 2018 increased, leading to a 1.1 per cent increase in our Food and Non-Alcoholic Index.“We also observed an increase in the prices of transport and housing, water, electricity, gas and other fuels divisions between May and June 2018.
“The Food Price Index that the Food and Agriculture Organization published for the month of June 2018, dropped by 1.3 per cent from the level recorded in May. The decline recorded in June was the first month-on-month decline in 2018.
“The general decline in the international food prices coupled with the appreciation in the value of the Naira muted the prices of imported consumer goods in Nigeria between the two months under review,” Akinwunmi noted.