E-Financial
Cooling Inflation Opens Doors to Rate Cut in the Distant Future
By Lukman Otunuga, Research Analyst at FXTM,
In an encouraging development, Nigeria’s inflation eased to 11.31% in February, down from the 11.37% recording in January, despite increased government spending.
While it remains too early to suggest the possibility of a rate cut anytime soon, consistent signs of cooling inflation this year should encourage the CBN to act by the final quarter of 2019. The initial argument against a CBN rate cut was the fact that the Federal Reserve was on an aggressive hiking path. A potential rate cut by the Central Bank of Nigeria was seen to be widening the interest rate differentials between the Naira and Dollar. However, with the Fed seen leaving rates unchanged for an extended period of time and even possibly cutting rates by year-end, the CBN may be offered a window of opportunity to stimulate economic growth further by cutting rates.
Will the Fed provide a further boost to equities?
U.S. stocks posted their best weekly performance last week, sending the S&P 500 above the critical resistance level of 2,815. Equity bulls may see the break of the technical resistance as an indicator of further expected gains, especially given the CBOE’s Volatility Index “VIX” has fallen to its lowest level since October 2018. Two factors have driven equity investors’ optimism: hopes of a resolution in the ongoing U.S.-China trade discussions and central banks’ pledge to keep supporting waning economies.
Bonds markets however, seem to disagree. If the outlook is as rosy as equity investors suggest, yields on the longer run of the Treasury Curve should have been climbing. Instead, U.S. 10-year yields have fallen below 2.6% for the first time since early January, suggesting that growth and inflation expectations will remain weak for the foreseeable future.
Another concern for the 3-month bull market is liquidity. The recent rally has not been supported by strong inflows, indicating that fewer investors are participating in this bull market. It remains to be seen whether equity or bond markets are right; however, it doesn’t seem this is the most loved bull market.
Will the Fed’s patience reflect in the dot plot?
The Federal Reserve’s monetary policy meeting is likely to be the most significant risk event for the week.
While it is not expected to see changes in interest rates, investors are hoping for an announcement to end the central bank’s balance sheet reduction. Such a move could prolong the recovery in equity markets.
According to Fed Fund Futures, markets do not just expect a zero chance of rising interest rates on Wednesday, but are indicating a 26% chance of a rate cut by year-end. It will be interesting to see if the Fed agrees with current market views. If the dots on the dot plot are going to be dragged lower, this could attract new selling opportunities for the USD, but Powell’s tone and his assessment of the U.S. economy will also drive the currency.
Deal or no Deal?
The Bank of England is also meeting this week, but this session is likely to be a non-event, with the central bank not expected to make any changes to policy. In fact, it’s the E.U. summit on March 21 – 22 that traders will need to keep an eye on. Will E.U. leaders agree on extending the Brexit deadline, or will they provide some further compromise before the March 29 deadline? If no agreement is reached at this summit, the U.K. will be left with one option. A no-deal Brexit!
Titan Trust Bank has selected Oracle FSS for its core and digital banking technology, it is understood.
The start-up bank recently obtained its license by the Central Bank of Nigeria (CBN).
It’s understood that Temenos and Infosys also competed for the deal.
The shortlist came down to the two most widely installed international core systems in Nigeria, Infosys’ Finacle and Oracle FSS’s Flexcube.
The Nigerian banking sector has seen a great deal of upheaval over the years, with many mergers, start-ups and closures. Flexcube is a well respected name since the late 1990s (the pioneer was Access Bank, now one of the country’s top five banks) and has been a commonly selected platform since then.
The new bank is believed to be one of five to have gained regulatory approval of late (Globus Bank is another).
Local media sources say the new licences stem from the Central Bank’s desire to attract new investments into the sector and better serve the country’s 50 million+ unbanked and under-banked citizens.
Titan Bank is said to be headed by a former executive director of Heritage Bank (which is a Finacle user).
Oracle FSS did not respond to request for comment.
International Monetary Fund (IMF), has appointed Tony Elumelu, Nigerian billionaire and group chairman of Heirs Holdings, owners of United Bank of Africa, to its advisory council on entrepreneurship and growth, convened by Kristalina Georgieva, the fund managing director.
The announcement was disclosed in a statement on Friday.
According to the statement, the IMF advisory council comprises global business leaders, policymakers, and academics dedicated to identifying and addressing regulatory barriers to entrepreneurship.
The IMF said Elumelu will be instrumental in ensuring that Africa’s entrepreneurship is central in policy making.
“Elumelu, Africa’s leading advocate of entrepreneurship and whose Foundation has funded, mentored, and trained over 25,000 African entrepreneurs since 2015, champions entrepreneurship as the engine for the economic transformation of Africa,” the statement reads.
“A self-made entrepreneur, Elumelu’s embracing of entrepreneurship is fundamental to his concept of Africapitalism, his belief that Africa’s private sector can and must play a leading role in the continent’s development, making long-term investments that deliver social and economic value.
“Elumelu will be instrumental in ensuring that Africa’s entrepreneurial potential is central to global economic policy making.”
Speaking at the inaugural meeting of the advisory council on March 26, Georgieva said the appointees would share their experiences on how macroeconomic and financial policies “can provide a supportive environment for innovation, entrepreneurship, and productivity — key ingredients for a thriving private sector and strong economic growth”.
Africa’s Micro, Small, and Medium Enterprises, fintech industry, scaling remittances, and cross-border payments will be the driving forces behind the continent’s digital ballooning payments system, which is estimated to reach $1.5 trillion by 2030.
This is according to a MasterCard-commissioned study by Genesis Analytics, which states that the digital payments economy is growing faster on the continent.
This comes as the World Bank says Sub-Saharan Africa has shown significant growth in financial inclusion over the past decade, much of it driven by mobile money account adoption.
Dimitrios Dosis, president, Eastern Europe, Middle East and Africa at MasterCard, comments: “Africa is filled with immense possibilities, and its people have the potential to shape the global economy in the decades ahead.
“MasterCard remains deeply committed to driving digital transformation across the continent, working closely with entrepreneurs, merchants, banks, start-ups, telcos, and governments. By increasing our investments, expanding innovation, and fostering inclusion, we are helping build a more connected and accessible digital future.”
The payment technology company went on to say as a longstanding technology partner to Africa, its continues to strengthen its commitment to the continent’s digital growth through strategic investments, public-private partnerships, and innovation initiatives that drive financial health and economic growth.
In addition, it says trends in Africa signal a strong shift towards digital transactions, with businesses and consumers increasingly embracing contactless solutions, further accelerating economic participation and financial accessibility across the region.
“For over five decades, MasterCard has worked alongside African governments, businesses, and communities to advance financial inclusion and economic development.
“With Africa projected to host nine of the world’s 20 fastest-growing economies, we are focused on leveraging our expertise and a technology to support the continent’s continued digital transformation.
“Our investments today will help build a more resilient economy for the future,” says Mark Elliott, division president, Africa, MasterCard
By fostering collaboration with key stakeholders, MasterCard says it aims to enhance digital connectivity, expand economic opportunities, and enable millions of people and businesses to thrive in the digital economy.
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