Managing Director Financial Derivatives Company Limited, Bismarck Rewane has said that inflationary pressure experiencing in the country are unlikely to abate soon as the recent global upheaval with Houthi rebels at the Red Sea- a major shipping route has worsened.
The FDC recent report tagged FDC Whispers, stated the Red sea and Suez Canal handle around 12 per cent of global trade which International Monetary Fund (IMF) expected to rebound by 3.5 per cent in 2024. He said the Houthi attacks have had a profound impact on global trade, causing major shipping firms to temporarily halt shipments through the Red Sea.
He said as a result of these attacks, shipping companies have been forced to reroute their shipments around the Cape of Good Hope, adding thousands of miles to their journeys. This significant detour according to him has led to increased shipping costs, particularly for shipments from Asia to Europe.
He stated that the attack in the area is not good for the country as Nigeria is heavily reliant on the Red Sea rout for crude oil exports to Asia and Europe which account for 81 per cent of trade volume.
Speaking further, he said “these attacks have not only disrupted global shipping but also posed a threat to international trade and could have nontrivial consequences for the Nigerian economy as the IMF is projecting that global trade growth will rebound to 3.5 per cent in 2024, from 0.9 per cent in 2023, but the prospects are threatened by the Houthis war and lingering Russia-Ukraine tensions.” He said that essentially, the tension heighten the risk of lower dollar inflows and oil earnings into the country.
He said although inflation has continued the upward trend despite the previous MPC meetings, the Central Bank of Nigeria is yet to schedule a date for the January meeting, thereby raising additional concerns about monetary policy direction. He said persistent forex shortages have intensified pressure on the naira, leading to its depreciation to a record low of N1,365/$, despite the CBN securing a $2.2 billion loan from the Afrexim bank and attempting to clear its Forex backog.
