Overview

May saw Nigerian monetary policy continue to tighten with a rise in the Central Bank of Nigeria’s policy rate by 1.5 percentage points to 26.25% and consistently high rates achieved at auctions for Treasury bills (T-bills) – generally over 26.0% per annum. This took place against a rise in annual inflation reported for April to 33.69%, albeit a small rise from April’s 33.30%. The CBN is determined to keep market interest rates high, and we believe this will persist for several months, with no let-up in prospect until Q4.

The Naira weakened again in the foreign exchange markets. The weakness was associated with a large redemption of forward positions. The drop in the value of the Naira was not cataclysmic (about as much as its percentage fall in April) but puts a question mark over currency stability going forward.

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