FEBRUARY 15, 2017 – FIRST Securities Discount House (FSDH) Merchant Bank Limited said that the outlook of inflation rate in Nigeria is dependent on what happens to electricity tariff and price of the Petroleum Motor Sprit (PMS).
In its 2017 Economic and Financial Markets Outlook, the company said: “The outlook of inflation rate in Nigeria largely depends on what happens to electricity tariff and price of the Petroleum Motor Sprit (PMS). We expect these prices to increase in line with the economic realities. Although we expect inflation rate to drop, it would remain in double digits with increase in electricity tariff and PMS price.”
While commenting on the decision of the Organisation of Petroleum Exporting Countries, OPEC, and some non-OPEC countries on crude oil production cut, the company said that it has led to a significant boost to oil prices, adding, “The intention is to influence a sharp draw down from the existing global supply glut and influence an upward bias; thus allowing oil price to rise to stimulate investment in the sector.
“Oil prices in the international market trended up for most part of 2016, with even a more significant increase recorded since November 2016. The OPEC Reference Basket (ORB) fell sharply by 39.10 percent to US$22.48/b as at January 20, 2016 from US$31.27/b as at the end of December 2015.
“In 2016, the ORB also increased by 70.45 percent to close at US$53.30/b as at December 30, 2016. The Bonny Light also increased by 51.71percent to US$56.01/b at end December 2016, from US$36.92/b at the end of December 2015.”
The report also noted that external reserves dropped consistently between 2013 and 2016, with the drop in oil price, oil production, and crude oil exports being responsible for the consistent drop. As a way forward, the Outlook report stated: “The following factors should lead to accretion to the external reserves; increase in oil production, export and price, capital inflows, expected drop in imports and growth in non-oil exports.”
