Speculations about Naira appreciation, higher inflation, interest rates in 2019

In spite of the increasing risk to the naira exchange rate from declining crude oil prices, which dropped below $50 per barrel last week, consumers across the country expect the naira to appreciate in 2019. They, however, expect the inflation rate, interest rate and unemployment rate to rise in the New Year. Meanwhile, the Manufacturing and Non Manufacturing Purchasing Managers Indexes of the Central Bank of Nigeria, CBN, hit an all time high of 61.7 percent in December, indicating economic expansion occurred at a faster pace during the month. On the other hand, the CBN last week intensified its liquidity mop activities, as it mopped up N1.07 trillion from the interbank money market.

Consumers anticipate naira appreciation Prompted by expected increase in net household income, improvement in Nigeria’s economic conditions, the consumers’ overall confidence outlook rose to 28.4 percent for the next 12 months, from 9.7 percent recorded for fourth quarter of 2018 (Q4’18), with consumers across the country expecting the naira to appreciate in 2019. Consumers, however, expect inflation rate, interest rate and unemployment to rise in the New Year. These were highlights of the Consumer Expectation Survey, CES, report for the fourth quarter of 2018 released by the CBN at the weekend. The report stated: “The consumers’ overall confidence outlook improved in Q4 2018, as more consumers were optimistic in their outlook. The index at 9.7 points was 8.7 points higher than the index in the corresponding period of 2017.

“Respondents attributed this favourable outlook to improved family income, family financial situation and economic condition. The consumer outlooks for the next quarter and next 12 months were positive at 33.2 and 28.4 points, respectively.