U.S. interest rate hike will increase cost of capital, debt burdens —Report

Looking ahead, analysts at investment banking and research firm, United Capital  Research have said the implications of higher interest rates in the United States (US) and other developed markets is that there will invariably be increase in the cost of capital for emerging/frontier markets like Nigeria, as well as increasing debt burdens and capital outflows.

In its research report last week, the firm also observed that tighter financial conditions may see foreign investments slow down significantly.

“We expect the US Fed decision, as well as global inflationary pressures, to impact the direction of monetary policy domestically, as the Monetary Policy Committee (MPC) may need to hike rates to make Naira assets attractive.

“That said, we expect higher yields on fixed income assets in 2022 and pressure on equities as a higher risk-free rate increases the cost of equity,” United Capital analysts stated.

At the December 2021 Federal Open Market Committee (FOMC) meeting held last week, the committee voted to ramp up the speed at which it reduces its bond purchases, putting the Fed on course to eliminate the emergency quantitative easing (QE) programme three months earlier than expected.

The decision will see the Fed reduce its asset purchases by $30.0 billion, beginning in January, 2022.

The Fed’s latest move, according to experts, paves the way for a liftoff in the federal funds rate, which portends a higher interest rate environment in 2022.

Notably England became the first G7 economy to hike rates two weeks ago, as it increased its key rate by 15 basis points (bps).

According to the United Capital Research, the hawkish shift from the Fed comes on the back of the nearly four-decade high inflation rate and drastic decline in the unemployment rate to nearly pre-pandemic levels, with businesses fervently looking out for workers.

To give perspective, the US unemployment rate fell to a pandemic-era low of 4.2 per cent in November 2021.

On the other hand, annual inflation surged to 6.8 per cent in November, 2021, the highest level since 1982.

“In our view, the Fed’s decision reflects confidence that the economic recovery from the pandemic is sustainable and will be carried on into 2022, therefore supportive of a withdrawal of emergency support,” analysts noted.

YOU SHOULD NOT MISS THESE HEADLINES FROM NIGERIAN TRIBUNE

FALSE! Yoruba Not An Official Language In Brazil

Claim: A national newspaper and multiple online platforms claim Brazil has adopted Yoruba as its official language and that the language would be included in primary and secondary schools curriculum.

Verdict: The claim is false. The content of the article published by these online platforms is not new; it has been recirculated several times and has been debunked.

Viral Voice Note On WhatsApp Billing False

Claim: A viral WhatsApp voice note, purportedly made by the director and CEO of WhatsApp, claims users will have to start paying for WhatsApp services.

Verdict: The viral WhatsApp voice note claim is a hoax. The content is not new and has been circulated as a broadcast message several times in the past.

Marburg Virus: What You Need To Know About Disease Recently Detected In West Africa

On Monday, August 9, 2021, the World Health Organisation (WHO) confirmed the first case of Marburg virus in West Africa in Guinea. This development has sent shivers down the spines of West Africans who are still grappling with the effects of the coronavirus pandemic. But before this dreaded disease is greeted by rumours and misinformation, here is what you have to know about the virus.

FACT CHECK: US Did Not Give Nigeria 48 Hours Ultimatum To Detain Abba Kyari

CLAIM: Several social media posts claim the United States of America (USA) gave Nigeria’s Federal Government 48 hours to detain suspended Deputy Police Commissioner, Abba Kyari, or face severe sanctions.

VERDICT: The claim is false and misleading. The US did not give Nigerian Federal Government 48 hours ultimatum to detain Abba Kyari.