IT’S A YEAR ALREADY! – The Nigerian Government and Accompanying Reforms


Dear Esteemed Investors,
This is another edition of the Mainstreet Capital Newsletter, where we explore global and local happenings and economic changes, so you can make quality decisions swiftly.
Let’s begin with a look at the global landscape.
Fed Rate Cuts and Economic Outlook

Whether you know it or not, interest rates, inflation, and currency exchange rates impact everyone. In early May, the Federal Open Market Committee decided to keep the Fed fund rate unchanged at 5.5%.
A quick narrative!
Imagine a bunch of folks in a meeting, surrounded by comfy brown chairs. They’re like the economy’s supervisor, always looking out for its health. Their job is to decide on a special interest rate, like a secret handshake for banks, to keep things running smoothly. This rate is called the Fed funds rate, and it determines how much interest you must pay on your loans! In May, the Feds decided to hold off on changing interest rates, keeping things steady.
So, what does this mean?

It means that borrowing money from US banks will not be more expensive that it currently is. It also means that the interest earned from fixed income instruments in the US (think Bonds and Treasury Bills) will not increase.
US investors may look to the equities market or markets in other countries that offer higher fixed income rates (like Nigeria).
Meanwhile, crude oil indices (WTI & Brent Crude) have been fluctuating this month on account of several factors including the Israel and Gaza conflict, US job data, and geopolitical jitters in oil producing countries like Iran and Saudi Arabia.
Ultimately, the market is lower on concerns that the Fed will keep interest rates higher for longer.
Get ready, June might shake things up a bit.
Here’s a quick look at what happened to the Nigerian Naira in May. The value of the Naira slid against the US dollar, reflecting demand pressure that still exits despite the CBN’s chokehold policies, some of which include:

  • Stopping fees on cash deposits.
  • Approving international money transfer operators.
  • Setting rules for currency exchange businesses.
  • Raising interest rates.

Why raise interest rates?

Normally, higher interest rates lead to lower inflation (prices going up) because borrowing money becomes more expensive, so people spend less. However, this is not the case as both inflation and interest rate are on an uptrend. There’s still work to do to ensure Nigeria’s economy keeps growing in a healthy way.
Want to know more on explore global and local happenings and economic changes? Follow us on social media (Mainstreet Capital Limited) or sign up for our daily market updates and blog posts!
Reader’s Corner

Investing comes in many forms, and just like chess, it’s a game of strategy.
Think of yourself as a chess player wielding a rook. This powerful piece can move freely across the board, offering both defence and attack. In the game of investing, your strategic plan is your rook.
This is not about those forgotten New Year resolutions. It is about taking a decisive action – “The Move” – to position yourself for a smooth and profitable second half of the year.
Remember to stay informed. Until next time, happy investing!