Oct 12 (Lagos) - Economists will be looking towards the latest inflation figures from Nigeria on Saturday, which will provide some clarity on how the nation is faring in this period of instability.
September’s inflation data could be critical as signs of stabilisation reconfirms that the Central Bank of Nigeria (CBN) may have taken the right decision to raise interest rates to the record 14% levels. If inflation exceeds August’s 17.6% high then the CBN could be prompted to take further action in the future in a bid to retain some economic stability.
The main theme in Nigeria still revolves around the nation entrapped in a technical recession with ongoing discussions of diversification presented as the cure for the illness known as oil reliance. Like many other oil-dependent nations, Nigeria has suffered heavily from prolonged periods of low oil prices while militancy in the south of the country that has seen output reduced simply enforced further pressures.
Naira weakness remains a dominant theme in the short term with external risks such as Dollar strength, renewed Fed hike hopes and low oil prices pressuring the local currency further.
Although there is optimism about the future of the nation as it embarks in this structural change, funding is needed and many are observing were the capital may come from.
Outside of Nigeria, investors will pay close attention to the latest FOMC Meeting Minutes on Wednesday evening with investors around the globe seeking clarity on the future pace of US interest rate rises. The markets will particularly look for guidance on whether the Federal Reserve will commit to raising US interest rates in December.
A possible US interest rate rise over the coming months is still seen as the major threat to the emerging markets in Q4, with the possibility of higher interest rates weighing on risk appetite and capital outflows.
reporting for easykobo.com on Wednesday, Oct 12 2016 from Lagos, Nigeria
Source - Written by Lukman Otunuga, Research Analyst at FXTM
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