Nigeria Central Bank Holds amid Transitory War Impact

Nigeria’s CBN held rates at 26.5% as April inflation rose to 15.7%, describing the energy-driven pressure on prices as transitory.  The UK surprised with CPI cooling to 2.8% and softer services inflation, even as fuel costs climbed. South Africa’s inflation jumped to 4.0%, raising SARB hike odds. Meanwhile, crude oil supply disruption and falling inventories keep oil markets tight. Nvidia reported better than expected revenue and forecasts and is returning $80B in buybacks and boosting dividend. Plus trade deals from EU-US tariff talks and UK-Gulf states. 

0:00 Introduction

0:05 CBN Holds rates

9:01 Other Business Headlines

13:41 Global Markets (Nvidia Results)

Transcript

In Nigeria, the monetary policy committee kept the benchmark rate at 26.5% in Abuja. Although inflation rose to 15.7% in April, Governor Yemi Cardoso said the central bank remains focused on bringing it back to single digits, arguing that the current rise in energy prices is transitory and the disinflation trend should soon resume. Oil prices jumped more than 50% since the war between the Israel, US and Iran began over two months ago, pushing up global fuel, food and transport costs.

Brendon Verster, senior economist at Oxford Economics Africa said that in Nigeria, the uncertainty over the timing  and nature of the ceasefire and duration of any further escalations are all unknowns implying the central bank could be keeping rates steady for the foreseeable future. In Nigeria the official borrowing costs have held above 20% since the start of 2024. Cardoso also said the reforms have “significantly bolstered the economy’s ability to absorb external shocks as a result, the pass through of global commodity and energy price shocks to domestic inflation has been significantly mitigated” 

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In the UK,  it came as a surprise that inflation sank to its lowest rate in more than a year, at a time analysts expected price pressures to be returning. Consumer prices index rose 2.8% in the year to April, down from 3.3% the previous month, also lower than forecasts of 3% by the Bank of England. Also, while higher oil prices pushed inflation up, weaker consumer demand from tighter household budgets has softened the surge, making inflation spikes more manageable. Household cutbacks, less travel, and more remote work are also all reducing energy demand.  Services inflation, a key sign of underlying price pressures, was 3.2%, also the lowest since January 2022. Analysts expect higher inflation from the next print.

South African inflation however jumped in April, raising the chance of a rate hike at next week’s policy meeting. Headline inflation rose to 4.0% year on year from 3.1% in March, its highest since August 2024. The central bank targets 3% inflation, with a 1 percentage point band on either side.

On oil markets … major producers are doing all they can to address the supply disruption.  UAE ADNOC chief Sultan Al Jaber said work is advancing on a new pipeline to bypass the Strait of Hormuz, with the project now 50% complete. The existing Habshan–Fujairah pipeline carries up to 1.8 million barrels a day from Abu Dhabi’s Habshan oilfields to Fujairah on the Gulf of Oman. The Fujairah hub has faced several Iranian drone attacks since the war began. The new pipeline is expected to double export capacity by next year.

Still on supply, the International Energy agency said global oil inventories are falling and warned the market would stay severely undersupplied until October, even if the conflict ends next month.   Energy prices remain supported by the US-Iran war, which has effectively shut the Strait of Hormuz, a route for about a fifth of global oil and LNG trade. Goldman Sachs says Persian Gulf crude output is down about 14.5 million bpd, while the disruption has wiped nearly 500 million barrels from global stockpiles, a figure that could reach 1 billion by June. Regional producers have also cut output by about 6% as storage fills, and the IEA says more than 80 energy facilities have been damaged, and recovery could take up to two years. Oil prices fell more than 2% yesterday after Trump said the Iran war would end quickly. Even so, investors remain cautious as peace talks continue and Middle East supply disruptions persist.

Beyond Iran, transatlantic trade tensions remain unresolved. The European Union has provisionally agreed to lift import duties on some American goods to avoid a trade clash with Mr Trump. The European Parliament and Council backed the measure as part of a July trade deal. Under the agreement, which some European lawmakers say is unbalanced, the US will impose 15% tariffs on most EU goods.

The UK has signed a trade deal with six Gulf states that it says will add £3.7 billion to the economy. According to the government, the agreement with Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates will eliminate around £580 million a year in tariffs on British exports once fully in force.

Despite geopolitical tensions, business activity and dealmaking continue. James Murdoch, Rupert Murdoch’s second son, has agreed to buy a 50% stake in Vox Media. The deal includes New York magazine, once owned by his father. It is also his biggest acquisition since he and his siblings completed a $3.3 billion deal for control of the family’s media empire, which includes Fox News.

Wall Street's main indexes closed higher yesterday in anticipation of decent quarterly results from Nvidia, after the bell.  Nvidia, the centerpiece of the global AI boom, later reported better-than-expected financial results. Earnings per share came in at $1.87 better than $1.75 expected with sales of $81.6B also better than $79B expected.   Nvidia forecasts second-quarter revenue above Wall Street expectations and also announced an $80 billion share repurchase ‌program. The stock was initially flat in after-hours trading yesterday.

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