We’re yet to see CBN’s FX intervention on commodity prices — Experts

With latest statistics released by the National Bureau of Statistics (NBS) showing that consumer price index recorded its second deceleration in fifteen months, analyst at Financial Derivatives Company have said Nigerians are yet to feel the impact of  CBN’s fx intervention on commodity prices.

According to the statistics, food inflation climbed by 2.21%, a faster pace than the 1.99% recorded in February, driven by notable increases in the prices of bread, cereals, milk, meat, fish, potatoes, cheese, and eggs. Meanwhile, the slowest increases in food prices were recorded by soft drinks, coffee, tea, and cocoa.

Core inflation increased at a slower pace in March, rising by 15.4%, versus 16.0% in February, with the highest increases reported in electricity, liquid fuels, solid fuels, dwelling, clothing materials, other articles of clothing and clothing accessories, and book and stationeries. On an m/m basis however, the core index increased at a higher rate of 1.32%, 22bps ahead of the 1.10% reported the previous month.

According to the analysts, CBN continued its FX intervention last week, with $350m and $31m in the forwards and spot markets respectively. This fuelled an appreciation in the naira to N400/$ before falling to N407/$, posing the question of how much more the CBN has to intervene to stabilize the naira.

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“We are yet to see the impact of the CBN’s intervention on commodity prices as manufacturers await more clarity and sustainability in the market. Also these manufacturers have to sell off old inventory before FX cost advantages at the new rates can be passed on to onsumers.”

The interventions following the CBN’s circulars on fx in late February brought about a convergence between the interbank and parallel market rates; last month the naira on the parallel market appreciated by about 20% to a high of N365/US$.

The Manufacturers Association of Nigeria suggests that sales within this special window should be 400% higher, at US$100,000. As it stands, the sales are not sufficient to meet the import requirements of most SMEs.

Regardless of these developments, there is still a backlog of unmet demand. “We note that fx demand has picked up considerably since the start of the CBN’s several interventions, particularly among institutional portfolio investors.” The analyst noted.