Election jitters to raise pressure on forex demand
By As elections draws near, the naira is seen at risk due to expected outflow in forex market amidst culminating pressures.
The Nigerian economy is to experience an increase in forex demand by foreign portfolio investors who want to exit the country amidst election uncertainties and due to developments in the developed market such as the increasing yield on US. Treasuries, according to Financial Derivatives Company CEO, Bismarck Rewane.
In lights of this President Buhari is expected to sign the 2018 budget which will see the disbursement of funds expected to run into 2019. The proposed 2018 budget as reviewed by the Senate committee will see the budget running on a 2 trillion naira deficit. The deficit is expected to be serviced by both domestic and foreign borrowing with a 40 percent to 60 percent budget deficit allocation.
The federal government is making more plans to raise more Eurobonds.
FDC predicts that there would further be a decline in inflation rate to 11.8 ahead of NBS publication for the month of May which is expected to be the fourth successive decline in inflation rate in the year 2018.
Food inflation, according to Rewane is expected to reach its inflection point. Planting periods are here and the Ramadan fast is currently been observed which makes commodities surplus due to lack of purchase, thereby making food purchase cheap but after the fast the cost of food will spike due to the number of demands in the market.
The likely risks to inflation would bring about an upward review and signing of the 2018 budget and also increase election spending, Rewane said.
Abimbola Hassan and Jonathan Aderoju