Macroeconomic Report & Economic Updates

According to data from the Nigeria Inter-Bank Settlement System (NIBSS), cashless transactions in Nigeria increased by 42.05 percent to reach N395.47 trillion in 2022. The data revealed that Nigerians spent more through cashless forms of payment, which was N117.07 trillion more than the N278.39 trillion total cashless transactions processed in 2021. The N395.47 trillion processed in 2022 was composed of transactions made on the Instant Payment System and Point of Sales terminals, the channels where cashless transactions are recorded on the NIBSS.

According to the World Bank’s latest Nigeria Development Update published in December 2022, with the title “Nigeria’s Choice”, the country’s gross domestic product (GDP) is expected to grow by 2.9 percent in the year 2023, less than the 3.1 percent for 2022. Although expected to be slightly faster than the growth of the population, this growth rate, according to the update, is still below pre-2015 levels, those of oil-producing countries (4.8 percent), and the average for Sub-Saharan Africa (3.6 percent). Services, trade, construction, and oil production are expected to lead to growth in 2023.

Data from the Nigeria Inter-Bank Settlement Systems (NIBSS) shows that transactions performed electronically through the NIBSS Instant Payment platform (NIP) in Nigeria grew to N38.9 trillion in November 2022, which is 12.7 percent higher than the N34.5 trillion recorded in October 2022². On a year-on-year (YoY) basis, the N38.9 trillion value of e-payments increased 50 percent from the N25.9 trillion recorded in November 2021. The growth in e-payment transactions is partly due to the cashless policy of the Central Bank of Nigeria (CBN) and the aftermath effect of COVID-19 on the payment system. COVID-19 made firms introduce online payment into their payment system since people were ordering their products online. As a result, many Nigerians are adopting e-payment channels for payment. The withdrawal limit policy, which will take effect from January 2023, is expected to increase the use of electronic transactions across the country. However, high cybercrimes continue to undermine the effectiveness of the CBN cashless policy. Hence, the CBN and other financial intermediaries involved should focus on strengthening cybersecurity in the country to ensure the safety of funds of individuals and corporate entities.

The Central Bank of Nigeria (CBN) announced a new policy on cash withdrawals on 6th December 2022.² According to the policy, the maximum weekly withdrawal over the counter is set at N100,000 for individuals and N500,000 for organizations. Any withdrawal above these limits shall attract processing charges of 5 percent and 10 percent, respectively. In addition, withdrawals using Automated Teller Machines (ATM) and Point of Sale (PoS) terminals are set at N20,000 daily. The policy is scheduled to take effect from 9th January 2023. The policy aims to achieve several objectives, including fostering financial inclusion through electronic payments, increasing government revenue generation by making individuals and businesses visible to tax authorities, and improving the tracking of illicit transactions like ransom paid to kidnappers. Due to the country’s low internet penetration, the policy will likely disrupt economic activities, especially in rural areas where digital banking products are still in the infant stage, and transactions are mainly done through cash. For the policy to achieve its intended purpose, universal internet penetration is crucial. Also, the government might need to partner with banks and other financial institutions to expand the coverage of their digital financial products.

According to the Food Prices Watch by the National Bureau of Statistics (NBS), the average price of some selected food items in the country rose in October 2022.¹ The report showed that the average price of a 500g loaf of sliced bread rose year-on-year by 36.7% to N523.2 in October 2022. Also, 1kg of rice (local, sold loose) had an average price increase of 17.5% to N487.5 year-on-year in October 2022. Similarly, the average cost of 1 kg of beans increased by 18% to N564.7. In addition, the cost of a tuber of yam increased by 30.9% from N313.1 in October 2021 to N409.86 in October 2022. Food shortages, which occur due to several factors, including insecurity, flooding, and cultivation of low-yield seedlings, contribute to rising food costs. Rising food prices reduce the standard of living of millions of people in the country, as it reduces the purchasing power of people and makes basic meals less affordable. As shown in the recently launched Multidimensional poverty report, millions of Nigerians are poor and are experiencing food deprivation. Consequently, the government needs to prioritise interventions that would solve the problem of food shortages. The interventions might be in different forms, including the construction of irrigation systems, provision of fertilisers and improved seedlings, and strengthening security in agricultural farming areas. These interventions, if well executed, are expected to increase food production, and lower the rate of food price increases.