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Finance x TEch: Blockchain technology; a deep dive
The article is a deep dive into blockchain technology and the convergence of other innovative platforms
The Finance Professionals Network
Aug 23, 2022 · 6 min read
Issue #76: The CBN raised deposit rates to rein in 17-year-high inflation
Subscribe and share for more in-depth Economic and Business Analysis Analyst Corner The minimum interest rate payable on savings deposits has been increased by the Central Bank of Nigeria (CBN) from 1.4 per cent to 4.2 per cent. This represents a 66.7% increase in percentage terms. This year's deposit rate increase, which took effect on August 1, was made after considering current macroeconomic conditions. Recall that to combat inflation, the CBN recently raised the MPR (Monetary Policy Rate) from 13% to 14%. Yet, Nigeria's headline inflation rate worsened to 19.64 per cent year-on-year in July 2022, the highest level in 17 years. Likewise, from the National Bureau of Statistics CPI report released last Monday, we saw that annual food price growth accelerated to 22% in July, up from 20.6% in June, and core inflation, which strips out food costs, quickened to 16.26% in July, compared with 15.75% in the previous month. These figures clearly explain why the apex bank is unleashing all the weapons in its arsenal! What does the deposit rate increase mean for the inflationary economy? Bank customers in the country will now be paid more interest on their savings; they can earn up to 4.2 per cent, which is 30% of the 14% MPR, as opposed to 1.4 per cent, which was 10% of the MPR. This increase is expected to encourage savings while also acting as a form of contractionary monetary policy. Deposit rates have proven to be an effective policy tool in the hands of the CBN. To encourage spending, the CBN reduced the minimum interest rate payable on local currency savings deposits in September 2020 as part of efforts to mitigate the impact of the COVID-19 pandemic. However, because inflation has surpassed the new deposit rate, any money saved gradually loses purchasing power. As a result, the initiative will not deter Nigerians from seeking safer assets as the naira continues to fall. Going forward... Cost pressures are being exacerbated by a high import bill as a result of rising commodity prices, supply shortages, and the naira's drop to record lows against the dollar. This situation is also worsened as the Nigerian economy relies heavily on imports and the US dollar. However, tight restrictions and policies by monetary authorities have made obtaining dollars difficult for importers. For instance, we saw that the Central Bank stopped selling dollars to retail forex traders in July 2021 to relieve pressure on its dollar reserves and to support its artificially low exchange rates. The lack of dollar funds by the central bank has increased the cost of importing goods, causing businesses to raise prices. Moving forward, we expect commodity prices to rise in the coming months as a result of ongoing security concerns in the country's food-producing regions, high diesel costs, and currency weakness. These inflationary pressures appear to be unabated, which may compel Nigeria's Monetary Policy Committee (MPC) to raise the country's key interest rate for the third time in three meetings on September 27. Headlines Nigeria’s inflation rate hits a 17-year all-time high The National Bureau of Statistics has said Nigeria’s headline inflation rate increased to 19.64 per cent on a year-on-year basis in July, the highest since 2005. We saw food inflation rise to its highest level in 14 months, standing at 22.02% in July 2022, representing a 1.42%-point increase compared to 20.6% recorded in the previous month. Likewise, core inflation stood at 16.26% in July 2022, compared to the 15.75% recorded in the previous month. Russia is China's top oil supplier for 3rd month of July Russia held its spot as China's top oil supplier for a third month in July, as independent refiners stepped up purchases of discounted supplies while cutting shipments from rival suppliers such as Angola and Brazil. Imports of Russian oil, including supplies pumped via the East Siberia Pacific Ocean pipeline and seaborne shipments from Russia's European and Far Eastern ports, totalled 7.15 million tons, up 7.6% from a year ago. From the data released by the Chinese General Administration of Customs, we also saw that China's crude oil imports in July fell 9.5% from a year earlier, with daily volumes at the second lowest in four years, as refiners drew down inventories and domestic fuel demand recovered more slowly than expected. UK consumer sentiment hits record low as inflation soars The surging cost of living has pushed consumer sentiment in the U.K. to its lowest since at least 1974, according to the country's longest-running survey of household finances. The GfK consumer sentiment index sank to a record-low -44 in August from July's reading of -41, which was already the lowest since the survey began. The rise in food and energy prices, the cost-of-living crisis, and the fall in the value of the British pound (GBP) is suspected reasons for the steady fall in the country. Did you know Warren Buffet's net worth at age 52 was only 0.3% of the current value. Box office Banger Thor: Love and Thunder ( 2022 ) is another banger from Marvel Studios. In this God of Thunder story, we see Thor enlist the help of Valkyrie, Korg and ex-girlfriend Jane Foster to fight Gorr the God Butcher, who intends to make the gods extinct. While the movie is still in the theatres and will debut its exclusive streaming this week, it is an excellent movie, and one to see. IMDb rating: 6.7/10 Quote of the week “2023 is 4 months away” Subscribe and share for more in-depth Economic and Business Analysis
The Finance Professionals Network
Aug 22, 2022 · 5 min read
Issue #75: The U.S. Inflation: A Peak, Or a temporary respite?
Subscribe and share for more in-depth Economic and Business Analysis Analyst Corner In July 2022, annual headline inflation in the US slowed down to 8.5% , lower than the annual rate of 9.1% in June, according to the Labor Department. Generally, the slowdown in inflation is good news as the effect of rising prices on consumers across the economy is dire, and the systemic importance of the US economy underpins a ripple effect on the movement of prices across the global markets. Some analysts believe this decline may be sign inflation may have peaked in the US, which printed lower than the multidecade record high of 9.1% recorded the previous month. The report also indicated core inflation – all items less energy and food – remained flat at 5.9% from June. This was offset however by increases in the shelter, medical care, motor vehicle insurance, household furnishings and operations, new vehicles, and recreation. Now the question remains, do we expect future downward trends in inflation? Maybe not. Despite the decline in headline inflation, largely attributed to the fall in gas prices (a volatile component), evidence that inflationary pressures have filtered across various sectors in the economy can be attributed to the increase in non-oil or gas-related goods and services which registered upticks in prices. Additionally, the release of the positive US non-farm payrolls data and the strong jobs report, where the economy created 528,000 jobs relative to the forecasts of 250,000 jobs underpins a strong US economy. Investors typically watch inflation data closely ahead of the US Fed’s monetary policy meetings to gain a sense of the extent of possible interest rate hikes, which raises borrowing costs and curbs price growth. The Fed has lifted interest rates by 0.75 percentage points in the previous two meetings. Primarily due to the Fed’s primary mandate of bringing the inflation rate to the target level of 2%, and the current strong US economy, it is widely expected the Fed will hike rates by another 75 basis points. Key takeaways Due to the interconnectedness of the US markets, US inflation is typically filtered into global markets. While the imported inflation by other economies is more long-term, the effect on the capital markets is often more immediate. Following the report, stocks in the US and European markets rallied as investors continue to weigh new economic information with the likelihood of a recession. In Nigeria, the impact is often minimal as local capital markets are often insulated from these short-term shocks. Headlines Buhari reverses approval for Mobil acquisition by Seplat President Muhammadu Buhari on Wednesday reversed his authorisation for the acquisition of the entire share capital of Mobil Producing Nigeria Unlimited by Seplat Energy Offshore Limited. On Monday, a statement by the Special Adviser to the President on Media and Publicity, Femi Adesina, revealed that President Buhari consented to the acquisition of Exxon Mobil shares by Seplat Energy Offshore Ltd. However, the presidency Wednesday withheld his initial approval. Speaking on the issue, the Senior Special Assistant to the President on Media and Publicity, Garba Shehu says Buhari had reversed the decision and the previous misunderstanding was because the “agencies involved in (the) decision had not coordinated well among themselves.” Ghana’s inflation rate rises to 31.7% in July 2022 Ghana’s inflation rate rose further in the month of July 2022 after the headline rate surged to 31.7% from 29.8% recorded in the previous month. The government statistician, Professor Samuel K.Annim, who disclosed this in Accra yesterday attributed the increase in July inflation rate to the increase in the prices of transportation, housing, water and electricity. Food inflation rose from 30.7 per cent in June to 32.3 per cent with month-on-month inflation of 3.3 per cent, while non-food inflation recorded 31.3 per cent and a monthly rate of 3.0 per cent. US inflation falls to 8.5% in July but is still close to a multi-decade high The pace of price rises dipped in the US in July as gas prices eased, bringing down the annual rate of inflation to 8.5%, still close to a multi-decade high but lower than the four-decade peak it hit in June. July’s figure, while still high, represents a significant fall from the annual rate of 9.1% recorded in June and will raise hopes that inflation has finally peaked in the US. It follows other indicators that have suggested price rises are moderating. Gas prices dropped from $5 a gallon, on average, in mid-June to $4.20 by the end of last month, and were just $4.01 on Wednesday, according to AAA. Oil prices have also fallen, and cheaper gas will likely pull down inflation in August as well, economists said. Did you know There's a town in Norway called Hell. Ironically, it never gets very warm there at all. In fact, the temperature regularly dips below zero degrees. Box office Banger The Dark Knight (2008); This is the second Movie in the Dark Knight Trilogy of the Batman Franchise is a superhero film directed by Christopher Nolan from a screenplay he co-wrote with his brother Jonathan. The film grossed over $1 billion worldwide, making it the second film in the Batman film series to earn $1 billion, and the highest-grossing Batman film to date. The Dark Knight has been assessed as one of the greatest superhero films ever made, one of the best films of the 2000s, and among the best films ever made. Quote of the week “Even if you’re on the right track, you’ll get run over if you just sit there” Will Rogers Subscribe and share for more in-depth Economic and Business Analys
The Finance Professionals Network
Aug 15, 2022 · 5 min read
Finance x TEch: Cyber security and the digital economy
As more business processes and customer data is generated and taken online, cyber security is the Priority of all Digital economies
The Finance Professionals Network
Aug 12, 2022 · 4 min read
Analyst Opinion: Chips and Science bill signed into Law, amidst tension with China
The US has signed the Chip and Science Act in the midst of its stand-off with China.
The Finance Professionals Network
Aug 10, 2022 · 3 min read