Navsari:Prime Minister Narendra Modi will lay the foundation stone of the country's first PM Mega Integrated Textile Regions and Apparel (MITRA) Park at Vansi Borsi village in Gujarat's Navsari on February 22. The establishment of the 'PM MITRA' Park aims to bolster the textiles sector. "It will obviously benefit Navsari, Surat, and the entire state of Gujarat. Surat is considered to be the hub of textiles. 60pc of the MMF is done in Surat, " said Ramesh Vaghasia, President of the Southern Gujarat Chamber of Commerce and Industry, while speaking to ANI. "So, in order to expand and make the textiles industry more effective, a PM MITRA park will be dedicated to Surat. If this is established, the units through the value chain of the industry will get new infrastructure. It will also pave the way for sustainable development. It will also benefit our market reach," he added. Vaghasia further said that the establishment of the 'PM MITRA' Park is a huge value addition to the economy of Gujarat. "This is a huge value addition to the economy of Gujarat. It is a step towards the government's 'Viksit Bharat' vow. The 'PM MITRA' Park will be sprawling across a land area of 1,100-1,200 acres in the Vansi Borsi village of Navsari. It will widen employment opportunities," he said. The central government, earlier last year, announced the sites for setting up seven 'PM MITRA' Parks for the textile industry. The parks will come up in Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh, and Maharashtra. The PM MITRA Parks are a major step forward in realising the Government's vision of making India a global hub for textile manufacturing and exports. It is expected that these parks will enhance the competitiveness of the textiles industry by helping it achieve economies of scale as well as attract global players to manufacture in India. These seven sites were chosen out of 18 proposals for PM MITRA parks which were received from 13 states. Eligible States and sites were evaluated using a transparent Challenge Method based on objective criteria, taking into account a variety of factors such as connectivity, existing ecosystems, textile/industry policy, infrastructure, utility services, etc. PM Gati Shakti-National Master Plan for Multi-modal Connectivity was also used for validation. 'PM MITRA' Parks will help in creating world-class industrial infrastructure that will attract large scale investment, including foreign direct investment (FDI), and encourage innovation and job creation within the sector.
The Ministry of Textiles will oversee the execution of these projects.
Source: Shipping News
India and Oman are close to finalising a trade agreement and officials from both sides have already started the process of legal vetting of text of the proposed free-trade agreement (FTA), two people aware of the matter said. “The trade deal is almost final. Legal scrubbing of the FTA text is already on,” one of the persons cited above told Business Standard. India is keen to finalise the trade pact before the model code of conduct (MCC) kicks in ahead of the general elections, making the timing of a proposed deal crucial. MCC can be announced any time now. A trade deal with the West Asian nation is a part of India’s efforts to improve relations with Gulf nations, with Oman being India’s strategic partner, having trade links of about 5,000 years. That apart, Oman is also a part of the six-member Gulf Cooperation Council (GCC). These nations include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). While India and the UAE signed a comprehensive FTA two years ago, the official launch of negotiations with GCC is awaited. After walking out of China-backed bloc Regional Comprehensive and Economic Partnership (RCEP) in 2019, India has now revamped its foreign trade strategy. Over the last three years, India has signed FTAs with Mauritius, UAE and Australia. A pact with United Kingdom (UK) and European Free Trade Association (EFTA) nations is being eyed by the government before the general elections.
Progress of talks
At least four rounds of talks have taken place so far between India and Oman. Normal commencement of the negotiations started in November. Negotiations on the text of most chapters were concluded by India and Oman by January. Government officials said the India-UAE agreement is expected to be replicated in the case of Oman. This made it easier for the two sides to negotiate.
Source: Business Standard
Synopsis "I can assure you that India negotiates with fairness, with an open mind... India also takes care of its wider and larger interest in the long run," he said at the CII India-Europe conclave. FTAs or Bilateral Investment Treaties (BITs), or agreements on geographical indications, will have to stand the test of fair, equitable, and balanced agreements as the level of economic developments varies, he said. Commerce and Industry Minister Piyush Goyal on Wednesday said India negotiates trade and investment agreements with fairness and open mind and takes care of the interest of people. He also said countries that are negotiating Free Trade Agreements (FTAs) and investment pacts with India should keep in mind that New Delhi offers a huge market to them in terms of demand and business opportunities. "I can assure you that India negotiates with fairness, with an open mind... India also takes care of its wider and larger interest in the long run," he said at the CII India-Europe conclave. FTAs or Bilateral Investment Treaties (BITs), or agreements on geographical indications, will have to stand the test of fair, equitable, and balanced agreements as the level of economic developments varies, he said. "We will have to respect the very different opportunities that are offered by India vis-a-vis the offer on the table from other countries," he said, adding that India is one of the fastest growing economies of the world. The young population, demand for goods and services, opens up huge opportunities for businesses across the globe, the minister added. The remarks assume significance as India is negotiating such agreements with countries such as the UK, Oman, and the European Union. Speaking at the conclave, the UK's minister Lord Ahmad of Wimbledon said that British businesses are major investors in India and bilateral trade is growing between the two countries. He also said the two nations are working on an ambitious free trade agreement and bilateral investment treaty. "This will boost our trading partnership further... and (would) show the world that India and the UK are serious about trade and very much committed to prosperity at a global level," Ahmad said adding huge business opportunities are there for Indian firms in the UK. With the negotiations for the proposed India-UK free trade agreement reaching its last leg, a high-level Indian official delegation is in London to iron out the differences on remaining issues. India and the UK launched the talks for a FTA in January 2022. There are 26 chapters in the agreement, which include goods, services, investments and intellectual property rights. in 2022-23 from USD 17.5 billion in 2021-22. Tobias Lindner, Minister of State at the Federal Foreign Office, Germany, said the India-EU free trade agreement holds immense potential to amplify trade and foster trade-economic integration. He added that the agreement would benefit private sector investments in Indian manufacturing and services sectors and provide access to Indian businesses to the world's largest single market. The seventh round of India-European Union talks is underway here. In June 2022, India and the EU restarted the negotiations for the long pending trade and investment agreement after a gap of over eight years
Source: Economic Times
Allocation for textiles ministry increased 27.6% in 2024 interim budget, but there were no specific policies addressing waste crisis. The vibrant tapestry of the Indian textile industry, a cornerstone of the nation’s economic and cultural identity, is facing a growing threat — a burgeoning textile waste crisis. Concerns about textile waste have recently taken centre stage in the Rajya Sabha, sparking urgent discussions about its environmental impact, economic implications and potential solutions. Deciphering the discussion in the Upper House of the Parliament, comprehensive, centralised and state-wise data on textile waste generation remains elusive. However, the gravity of the problem is undeniable. The government’s response during the July and December 2023 sessions, too, painted a picture of fragmented action and unclear responsibility. While they highlighted existing regulations like the Plastic Waste Management Rules, 2016 and Extended Producer Responsibility guidelines, primarily aimed at plastic packaging, they emphasised local authorities’ responsibility for “other plastic sources” like synthetic textiles. Initiatives like the “Textile Advisory Group on Man-made Fiber (MMF)" might foster industry engagement, but their effectiveness remains unclear. This lack of a unified strategy leaves the true impact of synthetic fabrics and their waste largely unaddressed. It’s crucial to have a nuanced understanding of the different types of textile waste in India to develop effective solutions and policies. It’s also important to distinguish between pre-consumer waste (factory scraps) and post-consumer waste (used clothing). India’s textile waste comprises natural fibres like cotton, jute, wool, among others. While natural fibres are biodegradable, their decomposition rate can be slow and improper management can still lead to environmental concerns.
Man-made fibres (MMF), known as synthetic fibres, also make up a substantial share of the waste. Challenges in separation, sorting and technology limitations often lead to downcycling or indiscriminate dumping. Many textiles are blends of natural and synthetic fibres, further complicating the composition picture. Separating these fibres for individual recycling is, again, challenging. India is the world’s second-largest producer of MMFs. Many popular MMFs, like polyester, nylon, acrylic and spandex, are derived from fossil fuels. This means the building blocks of many MMFs are chemically identical to plastic. Many MMFs utilise chemical treatments and finishes for desired properties, potentially involving additional plastic-based chemicals. During production, washing and wear, MMFs shed tiny plastic fibres known as microplastics. Some MMFs, like polyester, are also produced using plastic bottles through chemical recycling. Additionally, MMF waste poses disposal challenges. Unlike natural fibres, they don’t readily biodegrade, leading to landfill accumulation and potential microplastic release. The age-old tradition of reuse and refurbishing still exists in small towns across the country, keeping textiles in circulation longer. However, this informal system is insufficient to handle the growing volume of waste generated by the industry’s rapid expansion. The country imports around 20 per cent of its synthetic fibres and produces the remaining 80 per cent domestically. The country produces over 1,441 million kilogrammes of synthetic fibres and over 3,000 million kg of synthetic filaments. Over 94 per cent of India’s domestic MMF industry is dominated by just two varieties: Polyester and viscose (rayon). Polyester takes the lion’s share with 77.5 per cent, leaving the remaining 16.5 per cent to viscose. The environmental cost of the ecosystem is staggering. Polyester production alone requires an estimated 342 million barrels of oil and 43 million tonnes of chemicals annually. With a current production capacity of 11.5 million tonnes per year and potential for further growth, polyester is seen as the most significant contributor to both pre- and post- consumer textile waste. According to a 2022 report Circular Economy in Municipal Solid and Liquid Waste by the Union Ministry of Housing and Urban Affairs, of the total 47,860.15 tonnes per day of dry waste generated from municipal sources in 2021, textiles accounted for a significant 15 per cent, the third largest dry waste stream after plastics (45 per cent) and paper / cardboard (21 per cent). However, only a mere 30 per cent was recovered, highlighting the massive gap in waste management. The Indian Textile Journal reported that over 1 million tonnes of textiles, predominantly polyester, are discarded annually, mostly from households. Conversations with an aggregator revealed that of the total domestic post-consumer textile waste recovered, sorting alone costs Rs 45-50 per kg. This is further compounded by the high logistical costs of city-wide collection and transportation. The burden is exacerbated by the low resale value of textile waste in the second-hand market — Rs 8-12 per kg. Only about 10 per cent finds new life through upcycling, another 10 per cent moves to thrift shops and about 20 per cent is downcycled. India’s domestic textile waste primarily comprises cotton, polyester, and their blends. Transforming blended and printed waste feedstock into good quality products remains a challenge due to technological limitations and a lack of innovation. The absence of a comprehensive classification system for textile waste further complicates the issue. Biodegradable, non-biodegradable, recyclable and non-recyclable materials remain lumped together, hindering effective sorting and recycling efforts. A concerning 20-30 per cent of the collected textile waste ends up burnt in energy plants due to contamination and again, due to a lack of technology for processing used and contaminated textiles. The human cost is equally concerning, with workers in the textile waste industry facing low wages, poor working conditions and limited opportunities. Stakeholders in the post-consumer waste value chain urge government support to address these issues, from financial aid for workers to improved technology and infrastructure for procurement and sorting. The 2024 interim budget offered a mixed bag for the textile industry. While the Union Ministry of Textiles received a 27.6 per cent increase in allocation, there were no specific policies addressing the waste crisis. Increased focus on bio-manufacturing, rooftop solar, and offshore wind energy can encourage green practices and improve the industry’s environmental footprint, but concrete measures for waste management are still needed. The textile waste crisis demands a multi-pronged approach. We need improved data collection, robust sorting and recycling infrastructure, incentives for sustainable production and consumer education. Additionally, promoting extended producer responsibility, encouraging design for disassembly and supporting innovative upcycling and recycling technologies are crucial.
Source: Dawn to Earth
Synopsis India is set to become the largest member of the World Trade Centers Association, potentially surpassing China within five years. This growth reflects India's increasing global presence, highlighted by active participation in major economic discussions alongside major economies. Currently, India has about 40 WTCA licensees, with many Indian entrepreneurs establishing successful companies in the US. The WTCA is bringing its global business forum to India in March 2024, aiming to engage every city holding a World Trade Center license and connect Indian businesses with those from other member countries. India is poised to overtake China as the largest member of the World Trade Centers Association (WTCA) in the next five years, its chairman said, underscoring a hitherto circumspect New Delhi's rapid global strides that neatly dovetail into a China-plus-one corporate sourcing strategy aimed at derisking supply chains across the planet.
Source: The Economic Times
Synopsis India is projected to become the third-largest economy by 2027, according to the country's G20 Sherpa, Amitabh Kant. He emphasized the need for India to grow rapidly at 9-10% annually over the next three decades to achieve its goal of becoming a $35 trillion economy by 2047. Kant highlighted the importance of sustainable urbanization, improved agricultural productivity, and increased exports for India's future growth. India will be the third largest economy by 2027 and it needs to grow at rapid rates to become a USD 35 trillion economy by 2047, the country's G20 Sherpa Amitabh Kant said on Wednesday. Addressing an event organised by the All India Management Association, Kant further said that India needs to grow at 9-10 per cent year after year for the next three decades. "India will be the third largest economy by 2027. And now that Japan, the United Kingdom and Germany are all in the recession phase, we should be able to do it much quicker and much faster," he said. Currently, India is the fifth largest economy and the size of the Indian economy would be about USD 3.6 trillion by March 31, 2024 in nominal terms. "And it is important to be ambitious to make India grow at rapid rates and be USD 35 trillion economy by 2047," Kant added. He noted that India has come a long way from the time when it had faced balance sheet problems. Kant pointed out that unlike the West, where all innovation came from Google, Facebook, Amazon, Meta and Apple, India has demonstrated the power of digital public infrastructure. The G20 Sherpa said by 2047, India should be an exporter of energy or clean energy to the rest of the world. "Our aim will be to become the cheapest producer, the cheapest exporter of green hydrogen and its liquid form ammonia and to be the biggest manufacturer of electrolyzer," he said. In the years to come, Kant said the country will grow on the back of sustainable urbanisation, enhanced agricultural productivity and increased exports.
Source: Economic Times
Synopsis India aims to become a 5-trillion-dollar economy by increasing the manufacturing sector's contribution to GDP. The 'India Inc On The Move 2024' event focuses on smart and sustainable practices, addressing policy changes, investments, and the convergence of IT and OT. The Economic Times, in collaboration with Rockwell Automation, presents ‘India Inc On The Move 2024’, an event designed to address the challenges and opportunities in the manufacturing sector, with a focus on fostering smart and sustainable practices, on February 27, 2024. New Delhi: India is steadfast in A key component of this transformative journey is the manufacturing sector, which presently contributes 17% to the GDP, with a targeted increase to 25%, and employing over 27.3 million workers, manufacturing already plays a significant role in the Indian economy. The positive policy changes, increased investments in infrastructure, easing business for national and international investors, and smart and sustainable manufacturing practices, are creating a robust pipeline for sustained economic growth. This would give the power and potential for India to catapult into a global manufacturing hub. However, achieving long-term and sustainable success will require rethinking the manufacturing process, scaling up the skills of employees, leveraging the tools of the latest technologies more intensively and extensively with public-private partnerships, and much more Smart manufacturing enables businesses to navigate the convergence of information technology (IT) with operational technology (OT) through edge-toenterprise analytics, machine learning, industrial Internet of things (IIoT), and augmented reality (AR) competitive manufacturing hubs represents one of the biggest opportunities for India to spur economic growth and job creation in this decade. In this context, The Economic Times, in collaboration with Rockwell Automation - a global leader in industrial automation and digital transformation, presents ‘India Inc OnThe Move 2024’, an event designed to address the challenges and opportunities in the manufacturing sector, focusing on fostering smart and sustainable practices. Scheduled for February 27, 2024, at the ITC Grand Chola, Chennai, the event will concentrate on key sectors, including Automotive/EVs, FMCG/CPG, Chemicals, Life Sciences, MMC (Metal, Mining, Cement), Semiconductors, Mobile Devices, and Data Centers. To propel the envisioned growth in manufacturing, the emphasis will be on bolstering infrastructure, ensuring safety compliance, addressing trade challenges, and enhancing productivity. Distinguished leaders from various industries, including Rahul Mammen (MD, MRF Tyres), Gyanesh Chaudhary (CMD, Vikram Solar), Ganesh Mani (COO, Ashok Leyland), P Kaniappan (MD, WABCO), Amol Deshpande (Group Chief Digital Officer & Head Innovation, RPG Group), Vinod Khode (Sr. VP President & Group CIO, Varroc), Vishal Badshah (Vice President Operations, Tata Motors), Amrit Manwani (Chairman & Managing Director, Sahasra Electronics Pvt. Ltd.), Chitti Babu (Group CIO, Aurobindo Pharma), S. Rizwan (Head, E&I Proposals, FLS India), Siddharth Behera (Associate Head - Engineering & Projects, Perfetti Van Melle), among others, will share insights and strategies. The event will feature discussions and sessions on such pertinent topics as ‘Dawning into the New Era of Sustainable, Secure, and Smart Manufacturing,’ ‘Transforming Manufacturing in the Digital Age,’ ‘Opportunities, Challenges, and the Human Element in the Factory of the Future,’ ‘Reducing Waste, Enhancing Efficiency, and Contributing towards Circular Economy,’and ‘Digital Technologies for startups and MSMEs,’ among others. Attendees will have the opportunity to partake in inspiring keynote sessions by industry stalwarts, engage in networking with subject matter experts and industry leaders, and attend technical training sessions and interactive demos showcasing the latest technologies. The expo floor will also host innovations from Rockwell and its partners.
Source: Economic Times
There is a crucial need to make India's exports more attractive amid continued uncertainty in global growth and trade conditions, with headwinds from geopolitical tensions and supply-chain disruptions and higher logistics costs posing downside risks to growth, the country’s finance ministry said in a recent report. Highlighting the need to work on an export strategy, the ministry said the broader economic outlook, however, ‘appears bright’. The manufacturing purchasing managers’ index’s employment sub-index suggests the generation of more employment opportunities in the manufacturing sector supported by an increase in export orders, rising domestic production and expansion in international sales, the report said. "Given persisting uncertainties for global output and trade growth, finding ways to enhance the competitiveness and attractiveness of India's exports is both urgent and important," the ministry's Monthly Economic Review for January said. The country’s merchandise exports in January increased by a mere 3.1 per cent year on year (YoY) to $36.92 billion, latest trade statistics show. These were down by 4.9 per cent YoY at $353.92 billion between April 2023 and January 2024, while imports during the period were lower by 6.7 per cent at $561.12 billion. "Downside risks to trade include a spike in new commodity prices from geopolitical shocks, including continued attacks in the Red Sea and supply disruptions or more persistent underlying inflation in the developed world, which could extend tight monetary conditions. This could impact the expected recovery in global demand, thereby affecting the prospects for India's exports," the ministry said. "Prospects of healthy Rabi harvesting, sustained manufacturing profitability, and underlying service resilience are expected to support economic activity in FY25," it said. The ministry is hopeful of household consumption rising, business sentiment improving, the government continuing to focus on capex, and banks and firms witnessing healthy balance sheets. The response from the supply side has been broad-based, it noted. Retail inflation declined to a three-month low of 5.1 per cent in January due to both food and core components. Core inflation continued to decline for the eighth consecutive month, from 5.2 per cent in May last year to 3.5 per cent in January. The outlook for a reasonably low headline inflation rate is good, it added.
Source: Fibre2fashion
India’s economy is performing well, with risks evenly balanced, to achieve 7% growth in FY25, but geopolitical tensions and geo-economic fragmentation pose risks to the country’s growth, the finance ministry said in its latest monthly economic review. In its economic review for January, the ministry said risks to global trade, including a spike in commodity prices due to the Houthi militant group’s attacks on important trade routes in the Red Sea region, have resulted in supply chain disruptions. Also, persistent underlying inflation in developed countries could extend tight monetary conditions, the ministry said in the review, released on Tuesday. During the Reserve Bank of India’s latest bi-monthly monetary policy committee meeting, the regulator projected a real GDP growth of 7% for FY25, up from its previous forecast of 6.6%, while maintaining its benchmark lending rate at 6.5% for the sixth consecutive time. RBI’s growth projections for FY25 include a growth rate of 7.2% in Q1, 6.8% in Q2, 7% in Q3, and 6.9% in Q4. “Prospects of healthy rabi (winter crop) harvesting, sustained manufacturing profitability and underlying service resilience are expected to support economic activity in FY25," the ministry said. “On the demand side, household consumption is expected to improve, while prospects for capital formation are bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of banks and corporates, and the government’s continued thrust on capital expenditure," it added. India remains the fastest-growing major global economy, ahead of the US, China and other major advanced nations. Advanced economies, hurt by persistent inflation, have kept their repo rates high— affecting Indian exports. A higher repo rate, which is the interest rate at which the central bank lends money to banks, makes debt and debt-servicing more expensive, thus slowing economic activity. Conflicts in Ukraine and West Asia have further threatened to push up commodity oil prices, leading to greater inflationary pressures globally. In India, though, policy measures by the government and the transmission of monetary policy tightening have helped rein in inflation, the finance ministry states in its January economic review. “With the stable downward movement in core inflation and moderation in food prices, the outlook for a reasonably low headline inflation rate is good," it said. “It is expected that food inflation will moderate further in the upcoming months." Retail inflation fell to 5.1% in January from 5.7% in December aided by a slower rise in food prices. It still remains above the central bank’s target of 4%, but has stayed within its tolerance range of 2-6% for a fifth consecutive month. Overall, food inflation fell to 8.3% in January from 9.53% in December. The finance ministry expects the average crude oil price for the Indian basket for FY24 (up to 12 February 2024) at $82.2/bbl, lower than the average of $93.2/bbl in FY23. “Lower input prices and overall inflation can influence output growth positively, which in turn can further improve the prospects for exports," the ministry said. “Given persisting uncertainties for global output and trade growth, finding ways to enhance the competitiveness and attractiveness of India’s exports is both urgent and important," it added.
Source: Live Mint
The Monetary Policy Report – February 2024, issued by the Central Bank of Sri Lanka, highlighted significant risks to real economic growth projections in both the near and medium terms. These risks stem from adverse global developments affecting export recovery, the outmigration of skilled labour leading to productivity loss, and structural obstacles hindering growth. This is as per media reports, which underlined, despite a rapid disinflation process, current inflation levels remain close to the target. However, projections suggest a deviation from the target due to amendments to the Value Added Tax (VAT), implemented in January 2024. This deviation is expected to gradually retract towards the 5 per cent target by the end of 2024. While this uptick in inflation is anticipated to be temporary, it poses no substantial threat to maintaining inflation at the targeted level over the medium term. The report indicates that risks to near-term inflation projections are skewed towards the upside, primarily due to supply-side factors. Conversely, risks to medium-term inflation projections are deemed balanced. Despite these challenges, the report maintains an expectation for economic growth to persist. However, the extent of growth may be constrained by the risks and uncertainties as mentioned above.
Source: Fibre2fashion
With annual inflation nearing 30% and a currency in freefall, Nigeria is facing one of its worst economic crises in years, provoking nationwide outrage and protests. The Nigerian naira hit a new all-time low against the U.S. dollar on both the official and parallel foreign exchange markets on Monday, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year. President Bola Tinubu announced Tuesday that the federal government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilize the naira, according to multiple local media reports. The currency is down around 70% since May 2023 when Tinubu took office, inheriting a struggling economy and promising a raft of reforms aimed at steadying the ship. In a bid to fix the beleaguered economy and attract international investment, Tinubu unified Nigeria’s multiple exchange rates and enabled market forces to set the exchange rate, sending the currency plunging. In January, the market regulator also changed how it calculates the currency’s closing rate, resulting in another de facto devaluation. Years of foreign exchange controls have also generated enormous pent-up demand for U.S. dollars at a time when overseas investment and crude oil exports have declined. “The weakened exchange rate should increase imported inflation, which will exacerbate price pressures in Nigeria,” Pieter Scribante, senior political economist at Oxford Economics, said in a note Friday. The country is Africa’s largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population. “Shrinking disposable incomes and worsening cost-of-living pressures should remain concerns throughout 2024, further stifling consumer spending and private sector growth,” Scribante added. Inflation, meanwhile, continues to soar, with the headline consumer price index hitting 29.9% year-on-year in January, its highest level since 1996. The increase is being driven by a persistent rise in food prices which jumped by 35.4% last month compared to the year before. The surging cost of living and economic hardship prompted protests across the country over the weekend. The plummeting currency has added to the negative impact of government reforms such as the removal of gas subsidies, which tripled gas prices. President Tinubu said in late July that the government had already saved more than 1 trillion naira ($666.4 million) from removing the subsidies, which it will redirect into infrastructure investment. Alongside soaring inflation and a plunging currency, Nigeria is also battling record levels of government debt, high unemployment, power shortages and declining oil production — its main export. These economic pressures are compounded by violence and insecurity in many rural areas. “Excess market liquidity, exchange rate pressures, and food and fuel shortages threaten price stability, while inflation risks rising out of the government’s control,” Oxford Economics’ Scribante added. “Robust import demand could force the Central Bank of Nigeria (CBN) to reimpose import bans and FX restrictions to lessen the burden on the balance of payments. This could exacerbate domestic product shortages and increase inflation further.” Inflation is expected to peak at nearly 33% year-on-year in the second quarter of 2024, according to Oxford Economics, and could stay higher for longer given the plethora of economic risks ahead. “Furthermore, rising inflation and increased hawkishness by the CBN indicate that the policy rate could be raised this quarter,” Scribante said. The policy rate currently sits at 18.75%. “We expect a combined 200 bps in rate hikes at the next two MPC meetings, scheduled for end-February and end-March this year; however, we think that more hikes are needed to stem rising inflation,” Scribante added. Jason Tuvey, deputy chief emerging markets economist at Capital Economics, sees the CBN opting for a bigger interest rate bazooka when policymakers meet on Feb. 26 and 27. “The meeting will be a key test of whether the policy shift under President Tinubu is truly regaining some momentum,” Tuvey said in a note Thursday. “We expect that the MPC will try to restore some of its inflation-fighting credibility by delivering a large interest rate of 400bp, to 22.75%.”
Source: CNBC News
