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Nigerian consumers to enjoy reduced diesel prices via Naira appreciation —Rewane

*Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, explains how Nigeria’s inflationary trend  will remain elevated because of the Minimum Wage and other things, but the ‘Naira appreciation and diesel reduction will help it’

Isola Moses | ConsumerConnect

Nigeria’s fiscal measures will complement monetary control tools, and prices of diesel will fall further below N1,000 by May 2024, thanks to Alike Dangote, Mr. Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, has said.

ConsumerConnect reports  Rewane, who stated this in a recent interview on Channels TV, monitored in Lagos, disclosed with the commencement of diesel production at the Dangote Oil Refinery, located in Lagos, the prices of diesel per litre would fall below N1,000 from the current price of N1,500.

Bismarck Rewane, Managing Director of Financial Derivatives Company Limited

Describing Diesel as a major stocking factor in the Nigerian economy, the Managing Director of Financial Derivatives Company, noted that on the retail side, Diesel  is N1,500 currently.

He said: “Dangote Refinery has already started putting diesel in the market and people are buying that.

“If it stays at N1,100 and continues to go in that direction, this will help to bring down inflation significantly.”

Rewane further stated that  for bakers, who are funding their furnaces and their ovens with diesel, as well as cement manufacturers in particular, “this is good news.”

According to him, narrow weakness talking inflation, and this is where when the exchange rate went all the way up, it led to inflation coming down.

The expert said: “Now, that the inflation exchange rate is appreciating, it will come down.

“But you see in the economic state prices are sticky downwards. So we are going to see and appreciate a reduction in prices but much slower than when the prices went through the roof.”

He equally explained: “That pass-through contributes 50% to headline inflation. N1,950 to $1 in February.

“After the February MPC meeting, it came down to 1,600 Naira per Dollar.

“It’s 1,320 it could be heading towards 1,250 very soon.”

On food inflation

As regards whether the Naira, Nigeria’s currency, is going to tumble again? Rewane answered No.

He said the $7 billion of verified foreign commitments, which the Central Bank of Nigeria (CBN) announced it cleared recently.

Rewane further noted the Diaspora remittances of about $1.3 billion are likely to be coming in, but we keep that aside.

“Oil production is up at 1.4 million barrels a day and foreign portfolio flows have come in because of high interest rates at 2.3. “Crude oil price at $86 a barrel is good. Cocoa is now at a record high historical high $9,000 for a tonne,” he stated.

The expert said: “The average price last year was $2,000 and we are doing 250,000 tonnes this year.

“So, cocoa would bring about $3 billion if it stays this way. So it’s good. The wet floor is there, the naira is not going to tumble again.”

Insight into food inflation

Rewane said: “In February, a bag of rice was N80,000. It went up to N95,000 and now it’s down to N88,000 a bag.

“We expect by June, it will come down to N85,000 because Ramadan and fasting are over.

“Now, the price of a loaf of bread is 1,300 in February, it is now at 1,600. We expect it to drop to 1400.

In respect of the impact of exchange rate appreciation in the country’s economy, Rewane opined this is where it gets interesting, very interesting, international school fees. He noted: “Though the Naira has appreciated by 45%, your international school fees will not go down by more than 15%. But it’s good. It’s green. “The cost of medical tourism. Yes, it goes down by about 20%. If you are going outside or bringing international doctors here, 20%.”

He added: “Your airfares, international airfares. Yes, the Naira has appreciated but we expect airfares to reduce by 25%.

“So if you are travelling abroad, good news for you this summer. The diesel effect on intercity transport fares is still the same and actually, intercity transport fares will drop.

The only thing that doesn’t stay that stays the same is your house rent; your house rent remains the same.

So, what does a high interest rate mean? He explained: “The stock market is gonna dip some more.

“Higher borrowing costs, higher loan default rate and increased marginal propensity to save.”

He equally stated: “The next MPC meeting is May 20th and 21st. Inflation will remain elevated because of the minimum wage and other things.

“But the Naira appreciation will help it and the diesel reduction will help it. It will moderate towards the end of the year to 23 percent.”

Rewane added: “The MPC will maintain the status quo in May. Month-on-month inflation will reduce in March and a stable naira will attract more foreign portfolio inflows.

“Fiscal measures will complement monetary control tools and diesel prices will fall further below 1000 Naira, thanks to Dangote.”

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