A report by FSDH Research team has predicted inflation rate to drop to single digit in July 2018, provided there is no adjustment to the price of Premium Motor Spirit (PMS) and electricity tariff, while government resolves to stop the rising crises in some parts of the country quickly.
Besides, the team expects the inflation rate to decline further to 13.49 per cent in March, mainly on account of base effect of previous year, stating that the declining inflation rate may lead to a further drop in the yields on fixed income securities, particularly at the short-end of the yield curve.
In its monthly economic and financial markets outlook, titled, 'Growth prospect improves but uncertainties remain', it revealed that the rising foreign capital inflows into Nigeria; favourable crude oil price; and increased oil production have led to significant accretion to the external reserves.
Speaking at a press briefing yesterday to unveil the report, Head Research, FSDH Merchant Bank Limited, Ayodele Akinwunmi, said the positive outlook for the Nigerian economy also adds an impetus for further accretion to the external reserves.
According to him, the 30-day moving average external reserves increased by 8.76 per cent to $46.21 billion as at end-March 2018, from $42.49 billion at end-February.
The inflows through the Importers and Exporters Foreign Exchange Window (I&E Window) between April 2017 and 05 April, 2018 stood at $41.97 billion.
Akinwunmi said the result is the highest monthly amount recorded since inception in January 2018 at $6.04 billion while the amount record in March 2018 at $5.15 billion was higher than the highest amount recorded in 2017 at $4.53 billion.
The current external reserves position continues to provide short-term stability for the value of the Naira, he added.
However, FSDH research notes that the current strategies of the Debt Management Office (DMO) to reduce the interest expense on the debt of the Federal Government of Nigeria (FGN) is working, stating that the DMO plans to achieve a debt mix of 60 per cent and 40 per cent for domestic and external debt respectively.
It observed a relative increase in the revenue accrued to the FGN from the Federation Account Allocation Committee (FAAC).
These two factors have led to a drop in the ratio of the interest expense to the FAAC revenue which stood at 20 per cent in December 2017.
On its financial market analysis and outlook the Akinwunmi said: "We expect a total inflow of about N1.85 trillion to hit the money market from the various maturing government securities and FAAC in the month of March.
"We estimate a total outflow of about N594 billion from the various sources such as government securities and statutory withdrawals, leading to a net inflow of about N1.25 trillion.
We expect the market to remain relatively liquid in April. This may necessitate the issuance of Open Market Operations (OMO) to mop-up the liquidity in the system".