Macroeconomic Report & Economic Updates

Crude oil prices fluctuated during the review week. OPEC weekly basket price decreased marginally from $53.63 on February 24, 2017 to $53.34 on March 3, 2017. Similarly, Brent crude declined (week-on-week) by 0.84 percent to $55.15, while Bonny light decreased by 2.4 percent to $54.4 per barrel. During the week, reports of Russias incomplete compliance to agreed production cut and rising United States crude production/inventories, led to the slight pressure exerted on oil prices. The uncertainties and volatility of global crude oil price stresses the need for the government to channel efforts at developing other key sectors of the economy, particularly the manufacturing sector.

The falling tide in the international value of Naira experienced a reversal in the review week with naira appreciating significantly by 11 percent from N516/$ on February 17, 2017 to N460/$ on February 24, 2017 at the parallel market the first appreciation since December 2016. The recent rise in naira value was driven by forex supply-demand gap closure, sequel to improvements in dollar liquidity. The recent CBN Special intervention (e.g. the auction and sale of $370 million and $1.5 million respectively, by the apex bank during the week) and its revised forex policy guidelinescontributed in dousing speculations in the parallel market, thus gradually narrowing the margin between the interbank and parallel market rates. Given that the sustainability of naira appreciation is strongly hinged on the improvement in foreign reserve which is largely dependent on crude oil sales, the government should continue its efforts at calming tensions in the Niger Delta region.

Sub-Saharan Africa experienced its worst economic performance in over two decades in 2016, with growth slowing to 1.5 percent. The poor performance in South Africa and oil exporting countries is responsible for attenuating regional growth rate, due to their high collective contribution to regional GDP, despite robust performance in non-resource intensive countries. Growth in Sub-Saharan Africa is projected to slightly improve in 2017 (2.9 percent) and further strengthen in 2018 (3.6 percent). At the sub-regional level, growth prospect is estimated to be highest in West Africa (4.78 percent), attributable to 5.93 percent growth rate from West African Monetary Union (WAEMU) Countries. East Africa is expected to grow at 4.5 percent, Southern Africa 3 percent, and Central Africa 2 percent. Agricultural exporting countries are projected to grow at around 7 percent, while oil producing countries are estimated to grow at 1.9 percent, which indicates a recovery from the negative growth recorded in 2016.

Recent domestic Crude oil statistics from the Nigerian National Petroleum Corporation (NNPC), reveals an increase in total crude oil export sales in December 2016. Relative to November 2016, total export sales of crude oil rose from $166.18 million to $195.40 million in December 2016 representing 17.6 percentage (Month-on-Month) increase. The increase is attributable to a rise in crude oil production following a drastic (Year-on-Year) reduction in pipeline vandalism in the preceding month. Given that improvement in oil revenue is critical to fiscal sustainability and external balance, intensified efforts should be implemented towards the maintenance and sustainability of peace in the Niger Delta Region.

The nations foreign reserves have been on a steady rise. In the review week, reserves increased by $415.2 million from $28.3 billion on February 3, 2017 to $28.8 billion on February 10, 2017. The increase is likely the reflection of a sustained crude oil revenue complemented by moderating global crude oil price and increasing domestic production. This should help strengthen the ability of the CBN to foster forex liquidity, and thus help maintain stability in the domestic forex market. If sustained, it should also help improve the value of the naira overtime. Hence, the government should implement proactive and effective policy strategies to, not only, sustain improvements in oil revenue but also boost non-oil revenue.