Macroeconomic Report & Economic Updates

October 23, 2014

Nigeria Economic Review (First Half Report 2014)

Globally,
advanced economies showed strong signs of recovery during 2014H1 despite the
adverse effect of the severe winter (especially on the United States economy)
while economic activities slowed and growth was below projection in emerging
and developing economies.

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Total
federally collected revenue increased to N2.42 trillion in 2014Q1 compared to
N2.20 trillion in 2013Q4 as a result of a significant increase in crude oil and
gas exports to some countries like India, Malaysia and China. Also, the federal
government consistently incurred fiscal deficit from 2013Q1 to 2014Q1; the
level of deficit increased drastically in 2013Q4 and was sustained through 2014Q1.

Inflation
rate remained within the Central Banks target (6 9 percent) for 2014
although it ticked up marginally from 7.7 percent in February to 8.0 percent in
May. Inflationary pressures are expected in the second half of the year but it
is expected that monetary policies and supply-side interventions can be used to
cushion the effect.




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Portfolio Diversification Between Developed And Less Developed Economies

This study examines the hedging effectiveness of portfolio investment diversification between developed and developing economies; with focus on the Nigerian stock asset vis--vis the stock assets of the United States (US) and United Kingdom (UK). Its main contribution is in the analysis of optimal portfolio diversification using optimal portfolio weight (OPW) and optimal hedging ratio (OHR). Empirical findings show that the OPW and OHR are low, which indicates impressive potential gains from combining Nigerian stock assets in an investment portfolio with US and UK stock assets. In addition, exchange rate volatility is found to pose stern limitation on the potential benefits of this portfolio diversification arrangement. It is therefore recommended that the monetary authority in Nigeria should pursue policies towards reducing exchange rate volatility to the barest minimum. This will possibly attract more investors from developed economies who might be willing to combine Nigerian stock in their investment portfolio to minimize portfolio risk.

Nigeria Economic Update (Issue 26)

Power sector statistics indicates a huge decline in power generated in the week under review (June 23, 2017 to June 30, 2017). Power generated, attained a peak of 4,305 MW on June 23, 2017 but fell significantly by 33.1 percent to approximately average of 3,000 MW as at June 30, 2017. The huge decline is attributable to continued poor payment and inability of most GENCOs to pay for gas supply and a system collapse. Consequently, power sector lost huge prospective funds; and daily power supply reduced to 4.5 hours per day7. Going forward, improvement in energy supply is critical to domestic production, job creation, and diversification agenda of the government.