The Impact of CBN's Intervention on Commodity Prices Not Yet Seen


Thursday, April 13, 2017/ 6.28 PM FDC

Inflation numbers were released today and there was a unified decline in both core and food inflation in spite of an increase in monthly inflation. Base year effects remain a major contributing factor to the slowing inflationary pace.

The CBN continued its FX intervention this week, with $350m and $31m in the forwards and spot markets respectively. This fuelled an appreciation in the naira to N400/$ before falling to N407/$, posing the question of how much more the CBN has to intervene to stabilize the naira.

We are yet to see the impact of the CBN’s intervention on commodity prices as manufacturers await more clarity and sustainability in the market. Also these manufacturers have to sell off old inventory before FX cost advantages at the new rates can be passed on to consumers. 

The FDC Think Tank summarizes the impact of global and domestic developments on the commodity markets.

Burning Economic Issues

  • March inflation numbers expected this morning
  • CBN intervenes with $350m forwards for tradeables and $31m to BDCs
  • Naira appreciates to N400/$ before falling to N407/$
  • Brent Crude declines slightly but still trading above $55pb
  • OPEC production shrinks by 0.48% to 31.93mbpd
  • Tariff on imported tomato concentrate up to 50%
  • Diesel trading higher at an average of N205/ltr  

Economic News  

The Good   

  • High oil price environment will increase revenue  

The Bad

  •        Diesel prices are up 7.9%
  •     Power output down after one-day recovery   

Power Generation analysis & Impact

April 11th: On grid power output was 2950MWh/hour (down 254MWh/h)  

  •  Total Power constraints: 2,654MW, attributed to gas and high frequency constraints• Estimated loss: N1.274bn (annualised at N465.01bn /$1.16bn)
  • Shiroro, Olorunsogo 1, Odukpani and Omoku have restored turbine functionality
  • Diesel trading higher at an average of N205/ltr

Domestic Commodity Prices Movement

Stock Market

Oil prices 


  • Brent crude by 0.85% to $55.75pb

• Despite massive stockpile draw in the US

• EIA reports a stock draw of 2.17m barrels

• US production increased by 360,000 barrels

• OPEC cut production by 0.48% in March

• Production currently at 31.93mbpd   


Oil markets today   




Outlook – oil prices


  • Markets expected to rally post EIA report
  • Attributed to Saudi Arabia’s support for an output cut extension
  • Increased geopolitical tensions in high producing regions to support oil price rally

Outlook – agric prices


  • USDA monthly report to underpin relatively bearish trend in the grains market



  • Weather conditions in South America to support price


  •  Supply fundamentals to weigh on prices

Related News

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3.      Are The Economic Realities of 2016 to Persist in 2017?

4.      Increasing Consumer Resistance and Declining Income Is Taking Its Toll on Retail Prices

5.      Consumer Effective Demand Negatively Affected By Festive Spending

6.      Domestic Commodity Prices Have Reached Their Peak

7.      Prices of Christmas Sensitive Staple Foods Remain Sticky Downwards

8.     Domestic Commodity Prices Oblivious to a Falling Naira

9.      Domestic Food Prices May Have Reached a Plateau as Consumer Resistance Bites Harder

10.  Retailers Brace up for a Bleak Christmas

11.   The China Futures Association Signs MoU with Intnl’ Commodities & Derivatives Assn

12.  Militants Disrupt a Potential 400,000bpd from Forcados Export terminal; Food Prices Remain Flat

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