Macroeconomic Report & Economic Updates

According to the National Bureau of Statistics (NBS), the prices of energy products increased further in August. The average retail price of a litre of petrol increased by 14.89 percent to N189.46 in August 2022 from N164.91 in August 2021.¹ The price of a 5kg Cylinder of Cooking gas rose by 101.17 percent to N4,397.68 in August 2022 from N 2,215.33 in August 2021². For household kerosene, the price of a litre of the product rose by 102.38 percent from N400.01 in August 2021 to N809.52³. The price of a litre of diesel rose by 209.54 percent to N786.88 from N254.21 in August 2021⁴. These increases are partly due to (i) the spike in crude oil price affecting the prices of its refined products, and (ii) exchange rate depreciation. The rate of increase was higher because the refined crude oil products were imported. High energy prices contribute partly to the country’s rising headline inflation by increasing the input costs and overall cost of production. Hence, there is a need for the government to initiate policies that can limit the rate of price increases. Fixing existing refineries and introducing incentives to attract investors to invest in modular refineries will likely boost domestic production of refined crude oil products and eliminate increases in energy prices associated with the importation of the products.

According to the National Bureau of Statistics (NBS), Company Income Tax (CIT) revenue increased in Q2 2022.¹ CIT revenue was N714.40 billion in Q2 2022, an increase of 29.53 percent on a quarter-on-quarter basis from N551.53 billion recorded in Q1 2022. On a year-on-year basis, CIT collections in Q2 2022 increased by 51.34 percent from Q2 2021. Local payments amounted to N634.01 billion (88.8 percent), while Foreign CIT payments contributed N80.39 billion (11.3 percent) in Q2 2022. The CIT revenue from local payments relative to foreign sources shows that local organisations remit more CIT payments than foreign organisations. Regarding local CIT revenues, manufacturing had the highest contribution in the period under review with 27.6 percent, followed by information & communication with 24.6 percent, and financial and communication with 15 percent. The rising CIT revenue is a positive development, as it contributes to non-oil revenue, which will help move the country’s dependence on oil revenue as the mainstay of the economy. Furthermore, this increase in CIT revenue can partly be attributed to the continuous utilisation of the recently implemented TaxPro Max (digital tax payment platform), a digital tool Federal Inland Revenue Services (FIRS) developed to enhance the digitalisation of filing of taxes and transaction convenience. Hence, the coverage and awareness of the platform need to be strengthened, as digitalisation of tax administration is key to efficient and effective tax collection, as it is more convenient and transparent and makes monitoring easier

Nearly one year after the launch of the eNaira project, the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, at the Grand Finale of the eNaira Hackathon, announced the commencement of the second phase of the project¹. In October 2021, the CBN introduced the eNaira wallet to enhance financial inclusion. As of August 2022, the eNaira wallet has been downloaded about 840,000 times, with around 270,000 active wallets (including over 252,000 consumer and 17,000 merchant wallets) created. Moreover, there have also been over 200,000 transactions valued at N4.4 billion on the platform. The second phase aimed to improve financial inclusion by enrolling the unbanked and underserved through offline channels. With the eNaira wallet, Nigerians can conduct transactions on their mobile phones by using the Unstructured Supplementary Service Data (USSD) code*997. For a population with over 50 million active bank accounts, the registration for the eNaira wallet is relatively low in proportion to the country’s economic size. Therefore, it is imperative for CBN to collaborate with fintech organisations in planning and organising events targeted at securing the masses’ confidence in the eNaira. Consequently, the downloads and registration on the platform should increase with improved confidence and clarity on the advantages of using the wallet. Hence, an appropriate private sector collaboration could also ensure wider acceptance of the eNaira for economic activities.

In the second quarter (Q2) of 2022, Nigeria’s Gross Domestic Product (GDP) grew by 3.54 percent (year-on-year) in real terms, which is an improvement compared to the 3.11 percent growth recorded in the previous quarter (2022Q1).² The aggregate real GDP stood at N17.29 trillion in the second quarter of 2022, a slight decline (-0.37%) compared to N17.35 trillion recorded in Q1 2022. At the disaggregate level, services accounted for 57.35 percent of the GDP, the agricultural sector accounted for 23.24 percent, and the industrial sector contributed 19.4 percent. In addition, the non-oil sector contributed 93.67 percent to the nation’s GDP and grew by 4.77 percent in real terms during the reference quarter (Q2 2022). The oil sector contributed 6.33 percent and contracted by 11.77%. The data suggest that the non-oil sector has to grow at a higher rate to compensate for the contraction in the oil sector to attain a GDP growth rate of 3.4 percent in 2022, as the International Monetary Fund (IMF) projected. As a result, the government needs to introduce reforms that would improve the business environment, which would support the growth and expansion of the non-oil sector. 

Data from the Central Bank of Nigeria (CBN) shows that as of 17th August 2022, the official exchange rate of Naira to the US dollar was N420.83 for a dollar suggesting a N5.15 depreciation compared to the N415.68 reported at the end of the previous month (July).² This fall in value of the domestic currency can be attributed to the shortage of foreign currencies in the country, arising from the demand for foreign currency (most especially the US dollar) which is higher than the supply. The preference for foreign-made products over locally produced products and the low production capacity of domestic firms contribute in part to the high demand for foreign currency. The high demand for foreign currency is also due to people's involvement in speculative purchases by saving dollars to fund education or relocation expenses. While the RT200 FX programme of the CBN is contributing to an increase in the supply of foreign currency, the demand for foreign currency exceeds the supply and, in turn, contributes to the continuous depreciation of the domestic currency both in the official and parallel exchange markets. Thus, there is a need for the government to support domestic firm production capacity to reduce importation. Also, exporting firms need to be provided with financial and technical assistance to increase exportation and expand the sources of foreign currency. There is a higher likelihood that firms that benefited from government support would use official channels in remitting their export proceeds. The supply of foreign currency should increase with effective execution and monitoring of these interventions, resulting in a more stable domestic currency, Naira.