Consumer demand is likely to remain weak for the rest of the year due to an expected rise in the rate of unemployment, a decline in wages, as well as diminished fiscal capacity of the three tiers of government- federal, state and local government, analysts at Cowry Asset Management Limited have said. The analysts made the prediction in the firm’s, “H1’20 rlReview; Expectations and Investment Strategies in H2’20,” re-port obtained by New Telegraph yesterday. They also forecast that inflation would continue to head north in the remaining part of this year, a development, they said, would be “driven by depreciating local currency, increasing cost-reflective fuel (PMS) prices, electricity tariff, transport and food costs.”
Predicting further devaluation of the naira and possible exchange rate unification in H2’20, the analysts said: “We have seen the official exchange rate devalued from 307 NGN/USD to 360 NGN/ USD in March and 380 NGN/USD in July at the Secondary Market Intervention Sales (SMIS).
We do not expect much inflow from FPIs, until global economic activities improve further and the uncertainty around FX rate is cleared – CBN is expected to eventually unify exchange rates from all FX windows.” “For external reserves, we note that ongoing concessionary foreign borrowings should partly cushion the eroding foreign reserves,” the analysts added. The analysts also said they were expecting “increased demand for Eurobond as investors struggle to hedge against Naira devaluation.” “We recommend rebalancing of portfolios to include or increase Eurobond instruments.