Macroeconomic Report & Economic Updates

In August 2019, the Nigerian government closed all land borders to check the smuggling of products, especially rice and petroleum products, and other illicit cross-border activities. In December 2020, sixteen months after the closure, the government began the phased reopening of land borders and started with four borders - Illela, Maigatari, Mfun, and Seme. Sequel to the phased approach, on April 23rd, 2022, four additional borders – Idiroko, Jibiya, Kamba, and Ikon were opened.¹ The closure of the borders contradicts the principle guiding the African Continental Free Trade Agreement (AfCFTA), to which Nigeria is a signatory. The agreement seeks to ensure people's free movement and transfer of goods, technology, and knowledge within the continent, fostering intra-Africa trade. Therefore, the reopening of the borders indicates Nigeria's readiness and commitment to the regional free trade agreement. Nigeria has a lot to benefit from AfCFTA, but the benefit depends on several factors, including infrastructure, security, cost of doing business, and skills. Deliberate government efforts at improving security and infrastructure, especially electricity, roads linking Nigeria to other African countries, and the port conditions would increase the country's gains from the agreement. Also, there is a need for the government to address the porous state of our borders, thereby ensuring that they are not routes for the smuggling of arms, harmful substances, petroleum products, and agricultural products.

According to the Organization of Petroleum Exporting Countries (OPEC) May 2022 oil report, Nigeria’s oil production fell in April 2022.¹ The report shows that Nigeria produced an average of 1.22 million barrels per day (mb/d) of crude oil in April 2022. This production level is approximately 18,000 barrels per day (b/d) lower than 1.24 mb/d recorded in March 2022. In addition, total production is about 500,000 b/d lower than 1.74 mb/d OPEC assigned quota for the country. At US$ 100 per barrel, which is lower than the prevailing market price, the shortfall in production results in a loss of crude oil export earnings valued at over US$ 50 million per day, which also indicates a shortfall in Government revenue from crude oil royalty. These findings indicate that Nigeria is not maximising additional oil revenue associated with the surge in crude oil prices in the international market since Russia’s invasion of Ukraine. Nigeria’s declining crude oil production is due to low investment and other factors, including persistent oil theft and pipeline vandalism. For Nigeria to achieve the OPEC crude oil production quota, a result-oriented collaboration between the government and the private sector is required. The collaboration would lead to policies that eliminate bottlenecks hindering investment in the oil and gas sector. The collaboration would also ensure increased uptake of digital technologies in protecting the pipelines and the fast-track implementation of the revised PIA.

sector

According to the data on credit allocation by sector released by the Central Bank of Nigeria (CBN), Deposit Money Banks (DMBs) 's allocation to the agricultural sector rose to approximately N1.458 trillion in December 2021 from N1.049 trillion recorded in December 2020.¹ This represents a 38.88 percent increase year-on-year. The CBN's development financing initiatives, including the Anchor Borrowers' programme, which involves DMBs in funds disbursement to farmers, partly drove this increment in credit allocation to the agricultural sector. The challenge of lack of access to credit facilities to purchase improved seedlings and modern facilities lowers agricultural productivity and contributes to food insecurity. The high food inflation (above 15 percent in 2021)² indicates the persistence of food shortages, which might be attributable to non-financial factors constraining production, such as insecurity and poor road networks connecting farmlands. Addressing food shortages and achieving low food inflation requires a combination of financial and non-financial interventions from the government. First, the government needs to sustain initiatives that increase farmers' access to finance and partner with the private sector to unlock innovative agricultural financing tools. Second, the government needs to guarantee farmers' security and construct more roads connecting farmers to the markets. 

The International Monetary fund (IMF), in its April 2022 Economic Outlook, has revised its growth projection upward for the Nigerian economy in 2022 to 3.4 percent.¹ The IMF had earlier forecasted a 2.7 percent growth for the Nigerian economy in 2022, suggesting an increase of 0.7 percent point. Also, the forecast for 2023 was revised upward from 2.8 percent, indicating an increase of 0.4 percent point. Despite the upward revision, Nigeria’s growth forecast still lags behind the Sub-Saharan growth rate of 3.8 percent and the world growth rate of 3.6 percent. The forecast for Sub-Saharan Africa was revised upward by 0.1 percent point, and the world was revised downward by 0.8 percent point. The Fund expected that the sanctions imposed on Russia would disrupt the global value chain, resulting in a slow global economic growth rate. The upward revision for Nigeria was premised on the surge in crude oil prices, putting Nigeria in a beneficial spot for the Russian invasion of Ukraine. In other words, the forecast suggests that the Fund anticipates that Nigeria would optimise the oil revenue gains associated with the invasion. There is a need for the Nigerian government to match the positive image of the Fund by reforming the Nigerian oil and gas sector to address legacy issues that have adversely affected investment in the sector and resulted in low production levels.

Based on the ravaging effects of the covid-19 pandemic, the 2021 Budget sought to reposition the Nigerian economy towards recovery, growth and resilience. The latest 2021 budget implementation report, the third quarter, released by the budget office of the federation (BOF), shows that the actual net revenue in the quarter was ₦1.93 trillion, and 8.3 percent less than the budgeted net revenue of ₦2.11 trillion.² Of the ₦1.93 trillion revenue generated, non-oil contributed 65 percent, and the remaining came from oil revenue. The low contribution of oil revenue was due to fiscal deductions and federally funded upstream projects. The actual amount for both items is higher than budgeted and constitute about 65 percent of the initial oil revenue of ₦1.3 trillion, resulting in net oil revenue of ₦674.3 billion. On the expenditure side, actual expenditure in the quarter was ₦3.78 trillion, which is higher than the budgeted expenditure of ₦3.13 trillion by ₦654.96 billion. The high variation in expenditure arises from debt service. The budgeted debt service was ₦831.1 billion in the quarter, and the actual debt service was ₦1400 billion, indicating a variation of about ₦568.9 billion. As a result, debt services constitute about 37 percent of total expenditure in the third quarter. The relative size of the debt service in total expenditure and the low ratio of revenue to total expenditure indicates weak revenue collection. While the final budget implementation report for the whole of 2021 is being anticipated, efforts toward improving the country’s revenue generation in 2022 are urgently expedient. Specifically, the ease of tax payment through digitalization would strengthen revenue collection and increase tax revenue.