In a development for Nigeria’s economy and the petroleum sector, Bismark Rewane, the Managing Director of Financial Derivatives Company Limited, has projected a notable decrease in diesel prices following the initiation of diesel production at the Dangote Refinery. Speaking on Channels Television’s “News At 10,” Rewane reviewed the implications of the Central Bank of Nigeria’s (CBN) recent hike in interest rates amidst a turbulent economic landscape.
Rewane provided insights into the CBN’s decision to increase interest rates to 24.75%, following a previous hike to 22.75%. He clarified that these adjustments were necessary catch-ups after a period of stagnation and emphasized that while the economy is tightening, it is not being choked. The focal point of his analysis was the anticipated impact on inflation, particularly food and core inflation, which shows signs of improvement.
Addressing the significant appreciation of the naira by 45% in just six weeks and its implications for inflation, Rewane pointed out the complex relationship between a weak naira and inflation rates. He also highlighted the substantial growth in Nigeria’s money supply, which has expanded by 79%, posing a challenge to inflation control.
Further delving into the effects of the naira’s strength on the economy, Rewane painted a hopeful picture for the diesel market. With Dangote Refinery starting diesel distribution, he predicts diesel prices will drop below N1,000 per liter, a significant reduction from the current N1,500. This shift is expected to positively impact various sectors, particularly baking and cement manufacturing, due to reduced operational costs.
Rewane also touched upon the broader implications of exchange rate fluctuations on inflation, noting that while the exchange rate has appreciated, the reduction in prices might be slower. He reassured that the naira is unlikely to tumble again, bolstered by cleared foreign commitments, increased oil production, and high crude oil prices.
The discussion then shifted to the everyday impact on Nigerians, with Rewane detailing the expected changes in the prices of essential commodities like rice and bread following the naira’s appreciation and the commencement of the Dangote Refinery’s operations. He offered insights into how the exchange rate’s improvement would affect costs related to international school fees, medical tourism, and airfares.
Rewane concluded his analysis by looking ahead to the next Monetary Policy Committee (MPC) meeting and the expected trends in inflation and the naira’s value. He optimistically noted that diesel prices could fall even further below N1,000, attributing this potential to the commencement of operations at the Dangote Refinery.
This in-depth discussion with Bismark Rewane sheds light on the intricate dynamics between monetary policy adjustments, the naira’s value, and inflation, offering a nuanced understanding of Nigeria’s current economic conditions and the promising role of the Dangote Refinery in alleviating some of the pressing economic challenges.
