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COVID-19 Macro Impact Report: The Macro Impact from COVID-19

Nigeria Economy	2055 VIEWS
Nigeria Economy
2055 VIEWS

Tuesday, August 04, 2020 / 2:51 PM / FBNQuest Research / Header Image Credit: FBNQuest

Household budgets under further stress

Nigeria has a shortage of timely consumption indicators so we are indebted to REACH Technologies and the National Bureau of Statistics (NBS) to assess the impact of Covid-19. From REACH we find a few isolated signs of Nigerians' sunny optimism. However, its urban clientele has dropped the ambitious business and personal plans it had in January, and made its largest spending cuts on personal care. Already weak spending has taken another hit.

Timely boost to banks' loan books

One bright spot has been the 21% increase (N3.3trn) in the loan books of deposit money banks over 12 months. For manufacturing the increase has been closer to 35%. As well as leaning on the banks to boost lending as their regulator, the CBN has also multiplied and deepened its own credit interventions over the period. The beneficiaries are not identifying themselves and probably include few SMEs yet the increase should help businesses in their hour of need.

Less integration, less GDP contraction

Better access to bank credit and more government spending on the agenda too but the principal driver of the (negative) growth number this year is Nigeria's position a little apart from the global village. Its large agricultural economy and sizeable domestic market, combined with limits to its international integration, together mean that its GDP will contract in 2020 by rather less than many of its peers. For the same reason (its uneven development), the rebound next year is set to be modest.

Re-employment in a harsher environment

The NBS survey shows a better-than-expected return to work after lockdown, particularly in rural areas. Most returnees work in agriculture and non-farm household firms. However, respondents are returning to companies with a fall in revenue relative to pre-Covid and with magnified operating challenges. Farmers have generally reduced the area planted to crops. There are large gaps in the safety nets of many households.

Central economic indicators

	2018	2019	2020F	2021F
Real growth (in per cent; %)	1.9	2.3	-3.3	2.4
CPI (in per cent; y/y Dec)	11.4	12.0	13.1	12.2
Monetary policy rate (%; year-end)	14.0	13.5	12.0	12.0
Current account/GDP (in per cent)	1.1	-4.3	-0.5	-4.2
Bonny Light (end-period spot; US$/b)	62	67	44	48
Bonny Light (average spot; US$/b)	73	65	45	47
Official fx reserves (in US$ bn)	43	39	29	30
N/US$ (NAFEX/I&E; end-period)	364	365	410	440
N/US$ (NAFEX/I&E; average)	362	362	389	430