Nigeria Economy | |
Nigeria Economy | |
6043 VIEWS | |
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Wednesday, January 23, 2019 06:30AM /Proshare
Research
With
oil prices sliding steadily and public revenues plunging, albeit mildly,
coupled with global trade activity shrinking on the back of a bitter
disagreement between the world’s largest trading partners, the United States of
America (USA) and China, Nigeria’s economic fortunes for 2019 appear uncertain.
Inflation rate-a slowly burning fire
Inflation
figures trended downwards in 2018 as the Central Bank of Nigeria (CBN) held a
tight fist over domestic money supply. The CBN’s desire to see domestic
inflation rate at between 6% and 9% per annum may drive a restrictive monetary
policy in 2019. The first quarter of 2019 may see inflation slide to between
10.98% and 11.12% as the monetary regulator retains Monetary Policy Rate (MPR)
at 14% for H1 2019.
Chart 1 Nigeria Inflation Rate 2018
Source: National Bureau of Statistics (NBS)
Interest rates-no reprieve yet for manufacturers
Domestic
interest rates, especially lending rates remained high in 2018. The CBN’s
indicative monetary policy rate (MPR) stayed at 14% per annum for twenty four
months, serving as a floor from which bank lenders have placed a premium to
cover default risks. According to CBN statistics, lending rates have hovered
between a high of 17.71% in December 2017 and a low of 16.53% in October 2018.
The falling official figures contradict the experience of manufacturers and
commercial retailers who still groan under the pressure of lending rates as
high as 25% per annum; indeed prime lending rates although lower than the 17.7%
posted in December 2017 is still as high as 17.08%.
Chart 2 Nigeria Lending Rate 2018
Source: Central Bank of
Nigeria (CBN)
Money supply-CBN’s
slippery chokehold
The
CBN aggressively controlled money supply in the last twelve months to hold down
growth in domestic cash and it’s near substitutes in addition to demand
deposits (M2) while it mopped up what it considered excess liquidity. The
effort saw M2 increase by only 7% between December 2017 and October 2018,
growing from N24.0 trillion in December 2017 to N25.6 trillion in October 2018.
In other words, the CBN ensured that M2 grew by a compound monthly average rate
of 0.65%. With fiscal revenues likely to fall in the first half of 2019 (as oil
prices tumble) money supply growth can also be expected to fall.
Money supply-CBN’s slippery chokehold
Source: Central Bank of Nigeria (CBN)
Unemployment: a problem that just keeps getting worse
Nigeria’s unemployment problem has so far been an official nightmare. The need to keep inflation in check and control an already staggering fiscal deficit has left the government with little room to manoeuver GDP expansion to increase job creation. The unemployment rate based on recently released figures by the NBS stands at 23.1% or 4% lower than South Africa’s Q3 2018 jobless rate of 27.5%.
Chart 4 Nigeria’s unemployment Rate
(2014-2018)
Source: Nigerian Bureau of Statistics (NBS)
Fiscal policy: Between the devil and deep blue sea
Nigeria’s
fiscal policy in 2018 has been trapped between loose budgetary expansion and
rising public sector debt. The fiscal authorities have tried to spend the
economy into growth but have unfortunately,
failed and been weighed down by huge recurrent expenditures and wildly swinging
international oil prices. The key outlook points include:
Chart 5 Nigeria GDP Quarterly Growth
Rate 2019 (Projections)
Source: Financial Derivatives Company (FDC), Lagos Business School (LBS)
External reserves- gentle slide baits hard crash
Nigeria’s
external reserves have bounced forward over the last three and a half years
rising from just under $30billion in 2015 to $42 billion as at the end of the
third quarter of 2018. This means that:
Chart 6 Nigeria External Reserves 2018
Source: Central Bank of Nigeria (CBN)
External trade- Oil still the elephant in the shop
Even
though the sector contributes only 10% to Gross Domestic Product (GDP),
Nigeria’s petroleum sector is responsible for over 90% of exports and 80% of
foreign exchange earnings. This means that any adverse disruption to the
sectors price and sales dynamics translates into a rapid deterioration of the
fiscal budget for the year. This may show up as a major concern in 2019 as oil
prices, by general consensus, may head south on the shoulders of shale oil manufacturers
increasing oil supplies as cash-strapped and debt-plagued oil economies such as
Venezuela, Iran and Libya continue to increase sales volume to ease their
stifling debt service obligations.
Nigerian
non-oil exports have not shown significant improvement in 2018 because of a
number of inhibiting factors which include:
Table 1 Nigerian Exports by Sectors
and Regions 2018
Sectors |
Region |
July |
Aug |
Sept |
Quarter
3,2018 |
Economic
Regions |
TOTAL |
1,511,802.30 |
1,587,237.80 |
1,754,576.90 |
4,853,617.00 |
|
AFRICA |
219,530.50 |
310,680.90 |
184,911.00 |
715,122.50 |
|
AMERICA |
221,274.80 |
228,224.50 |
277,532.90 |
727,032.20 |
|
ASIA |
330,693.40 |
435,814.30 |
594,918.00 |
1,361,425.70 |
|
EUROPE |
737,229.50 |
610,052.90 |
686,712.50 |
2,033,994.90 |
|
OCEANIA |
3,074.00 |
2,465.00 |
10,502.60 |
16,041.60 |
Agricultural
Goods |
TOTAL |
19,218.40 |
12,217.40 |
13,920.70 |
45,356.60 |
|
AFRICA |
453.9 |
57.6 |
153 |
664.6 |
|
AMERICA |
630.4 |
780 |
615.3 |
2,025.80 |
|
ASIA |
10,356.00 |
7,828.20 |
7,561.60 |
25,745.80 |
|
EUROPE |
7,409.70 |
3,214.50 |
5,245.60 |
15,869.70 |
|
OCEANIA |
368.5 |
337 |
345.2 |
1,050.80 |
Raw Material
Goods |
TOTAL |
5,289.90 |
12,027.50 |
14,864.40 |
32,181.80 |
|
AFRICA |
1,846.10 |
1,351.40 |
1,302.50 |
4,500.10 |
|
AMERICA |
28.9 |
3,921.80 |
6,994.50 |
10,945.10 |
|
ASIA |
1,227.20 |
1,389.50 |
734.1 |
3,350.80 |
|
EUROPE |
2,187.70 |
5,364.80 |
5,833.30 |
13,385.80 |
|
OCEANIA |
0 |
0 |
0 |
0 |
Solid Mineral
Goods |
TOTAL |
4,189.20 |
2,800.20 |
2,690.10 |
9,679.50 |
|
AFRICA |
3,308.20 |
1,874.70 |
1,477.50 |
6,660.50 |
|
AMERICA |
2.4 |
0 |
0 |
2.4 |
|
ASIA |
862.9 |
904 |
1,201.20 |
2,968.20 |
|
EUROPE |
15.6 |
21.5 |
11.3 |
48.4 |
|
OCEANIA |
0 |
0 |
0 |
0 |
Energy Goods |
TOTAL |
3,579.50 |
3,305.10 |
3,431.30 |
10,316.00 |
|
AFRICA |
3,427.10 |
3,172.80 |
3,345.50 |
9,945.50 |
|
AMERICA |
0 |
0 |
0 |
0 |
|
ASIA |
118.3 |
112.7 |
75.3 |
306.3 |
|
EUROPE |
34.1 |
19.6 |
10.5 |
64.2 |
|
OCEANIA |
0 |
0 |
0 |
0 |
Manufactured
Goods |
TOTAL |
20,777.80 |
20,600.70 |
24,416.50 |
65,795.00 |
|
AFRICA |
10,247.50 |
10,622.90 |
15,129.10 |
35,999.40 |
|
AMERICA |
265.4 |
294.8 |
389.9 |
950.1 |
|
ASIA |
4,456.10 |
4,354.80 |
7,058.20 |
15,869.10 |
|
EUROPE |
5,808.90 |
5,328.20 |
1,839.30 |
12,976.40 |
|
OCEANIA |
0 |
0 |
0 |
0 |
Crude Oil |
TOTAL |
1,299,722.30 |
1,351,725.60 |
1,495,187.70 |
4,146,635.50 |
|
AFRICA |
177,957.90 |
291,564.60 |
163,448.10 |
632,970.60 |
|
AMERICA |
198,011.10 |
178,219.40 |
265,693.60 |
641,924.10 |
|
ASIA |
252,135.60 |
351,543.80 |
452,571.40 |
1,056,250.80 |
|
EUROPE |
671,617.70 |
530,397.80 |
606,129.30 |
1,808,144.80 |
|
|
|
|
|
|
|
OCEANIA |
0 |
0 |
7,345.20 |
7,345.20 |
Other Oil
Products |
TOTAL |
159,025.00 |
184,561.30 |
200,066.20 |
543,652.50 |
|
AFRICA |
22,289.80 |
2,036.90 |
55.2 |
24,381.90 |
|
AMERICA |
22,336.70 |
45,008.50 |
3,839.60 |
71,184.80 |
|
ASIA |
61,537.30 |
69,681.40 |
125,716.00 |
256,934.70 |
|
EUROPE |
50,155.70 |
65,706.50 |
67,643.20 |
183,505.40 |
|
OCEANIA |
2,705.50 |
2,128.00 |
2,812.20 |
7,645.70 |
Source: National Bureau
of Statistics (NBS)
Nigerian
Economic Indicators 2018 – Nigeria’s Foreign Reserves Improves to N43.19bn
Nigeria’s economic performance has been patchy in recent times. Inflation rate which fell from 15.13% in January 2018 to 11.14% in July rose again to 11.28% in September and later dropped to 11.26% in November 2018. The seesaw has built in inflation rate uncertainty thereby increasing the domestic cost of funds.
Nigeria’s GDP growth which was +2.11% in Q4 2017 is currently at +1.81% at Q3’18. Also, the unemployment rate of
18.8% as at Q3 2017 rose to 23.1% in Q3 2018.
However, the country’s foreign reserves which stumbled
to US$38.91bn at the beginning of 2018 recently saw some improvements. As at
December 28, 2018, reserves stood at $43.19bn.
Below is a table of Nigeria’ major economic indicators
in 2018:
Economic Indicators in
2018 |
|||
Indicators |
Beginning of 2018 |
Current |
Unit |
GDP |
2.11 |
1.81 |
Percent |
Inflation |
15.9 |
11.28 |
Percent |
MPR |
14 |
14 |
Percent |
Import |
9,562.72 |
9,090.76 |
NGN bn |
Export |
13,598.27 |
14,050.02 |
NGN bn |
Foreign
Reserves |
38,912,059,328 |
43,195,564,994 |
USD bn |
Debt to GDP |
21.30 |
NA |
Percent |
Exchange Rate |
306.15 |
307 |
Naira |
Unemployment
Rate |
18.8 |
23.1 |
Percent |
CRR |
22.5 |
22.5 |
Percent |
NSE ASI |
38,243.19 |
31,430.50 |
Basis Points |
PMI |
64.16 |
61.1 |
Basis Points |
Source: CBN, NSE, Trading Economics, NBS |
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