The long-awaited Headline Inflation Index for the month of July was unveiled today by the National Bureau of Statistics, according to the report, in the month of July, the Consumer Price Index (CPI) which measures nation’s inflation increased by 17.1% (year-on-year), this is 6Bpts above the rate recorded in June (16.5%).
In another report by the bureau, the nation’s Gross Domestic Product (GDP) for the Second Quarter of 2016, reportedly declined by -2.06% (year-on-year) in real terms. This is lower by 1.70% from the -0.36% recorded in the last quarter, and also lower by 4.41% points from the growth rate of 2.35% recorded in the corresponding quarter of 2015, Quarter on quarter, real GDP increased by 0.82%. By this, it becomes more glaring that the nation is in a recession.
In line with the increase, we anticipate more sell offs of lower yielding instruments on the Fixed Income market in anticipation of higher yielding instruments. Meanwhile, during this period, the equities market will remain attractive as investors will gun for higher returns on investments. Another point of discussion that will arise is the possibility of increase in Monetary Policy Rate at the next MPC meeting. Until all this takes shape, the equities market remains a safe haven for intelligent investors.
Nevertheless, the declining GDP growth rate will further dampened investment in the nations economy. Except the Nigerian government comes up with workable policies to woo investors in spite of the declining economy, more institutional investors will exit the system. It should be noted that at the moment, regulations should be moderated to soften the pains of the investing public, especially in the manufacturing system.
Defacing the system further is the already downed purchasing power which will now be depressed further. More employers will be forced to either downsize or adopt salary reduction to cut cost and maintain position among pairs. Cost of funds will invariably go up as businesses are dealt huge blows. As noted above, equities market remains the only place to attempt better returns against the negative indexes.