Global economic outlook varied significantly across countries in January 2021, although the recent roll-out of the COVID-19 vaccines raised hopes of a rebound in global growth. The tepid expansion recorded in January 2021, was led by the US where business activities accelerated, despite continued supply chain disruptions. In China, business activities and new orders also increased, albeit, slowly just as the pace of recovery in the Emerging Markets and Developing Economies (EMDEs) remained sluggish. However, economic activities in the euro area continued to contract due to the renewed lockdown measures.
The IMF's World Economic Outlook (WEO) for January 2021 projected the global economy to grow at 5.5 percent in 2021, compared with an estimated contraction of 3.5 percent in 2020. The 2021 growth forecast was revised upward by 0.3 percentage point, indicating additional policy support in large economies and expectations of a vaccine-powered strengthening of economic activities. Despite the continued recovery in economic activities in some countries, the global outlook remained considerably uncertain amid surging global debt levels renewed lockdown measures (following the resurgence of the pandemic in Europe), and sluggish global trade. Nonetheless, the emergence of COVID-19 vaccines and the continued implementation of monetary, fiscal, and structural policies boost the prospects for global economic recovery.
Domestic economic activities weakened in January 2021, due to slowing momentum in manufacturing and non-manufacturing activities. This followed the end-of-year festivities and dampened consumer demand which was exacerbated by rising production cost from inflationary pressure and foreign exchange scarcity. This is in addition to the disruption of supply chains arising from the reintroduction of COVID-19 mitigation measures, sequel to the manifestation of a second wave of the coronavirus. Consequently, both the Composite Manufacturing and the Non-Manufacturing Purchasing Managers' Indices (PMIs) deteriorated in January 2021, relative to December 2020. The Composite Manufacturing PMI contracted to 44.9 index points, from the 49.6 index points recorded in the preceding period. The decrease was associated with the decline in demand, rising production cost and supply chain bottlenecks experienced by firms, in the review period. Similarly, the Composite Non-Manufacturing PMI for January 2021 dropped to 43.3 index points from 45.7 index points recorded in December 2020. The index recorded declines in all the subcomponent indexes.
Prices of most agricultural export commodities maintained an upward trend in January 2021. Also, crude oil spot price rose to US$54.87 pb, an 11-month high. However, the oil price in January 2021 was 18.0 percent below the level in the comparable month of 2020. The rise in crude oil prices in the review period was supported by the announcement of a voluntary output cut of 1.00 million barrels per day (mbpd) by Saudi Arabia.
Despite the modest recovery in crude oil prices, gross federally collected revenue stood at N807.54 billion in January 2021, representing a shortfall of 4.6 percent relative to the budget benchmark. The low revenue performance was due to the decline in non-oil receipts, following the lingering effects of the COVID-19 pandemic on business activities and the resultant shortfall in tax revenue.
Federal Government of Nigeria (FGN) retained revenue remained depressed at N285.26 billion in January 2021, falling short of its budget benchmark and collections in January 2020, by 41.3 percent and 7.5 percent, respectively. FGN's Fiscal deficit widened in January 2021, as a result of elevated spending, arising from the rollover and release of capital expenditure mandate in the 2020 Appropriation Act to Ministries, Departments and Agencies (MDAs).
The lingering effects of the COVID-19 pandemic and economic headwinds, continued to incumber the Nigerian economy, as it trudged towards recovery. Broad money supply declined in January 2021, due largely to the fall in net domestic assets of depository corporations, which outweighed the growth in net foreign assets. Financial markets were relatively calm and stable in the period under review, despite the resurgence of the COVID-19 pandemic around the world. The banking system liquidity moderated, but remained buoyantly above the regulatory benchmark of 30.0 percent. Capital market activities on the Nigerian Stock Exchange (NSE) was bullish in January 2021, as investors' sentiment improved regardless of lingering global uncertainties. Anticipated release of positive full year financial statements by quoted companies and the concomitant low yield in the fixed income market explicate domestic investors' interest in equities, which contributed to the surge in the capital market activities.
The continued spread of the second wave of the COVIDâ€“19 pandemic weakened global economic recovery and led to a decline in foreign exchange inflow into the economy in the month under review. The average exchange rate, at the inter-bank segment, the Bureau-de-Change (BDC) segment, and the Investors and Exporters (I&E) window, were N381.00/US$, N472.73/US$ and N394.04/US$, respectively, in the review period. Nigeria's external reserves dropped to US$35.43 billion compared with US$36.46 billion in the preceding month, driven, mainly, by foreign exchange interventions and third-party payments. At this level, the external reserves level is the equivalent of 6.1 months of imports of goods and services cover.