Macroeconomic Report & Economic Updates

According to the National Bureau of Statistics (NBS), Nigeria’s inflation rose to 19.64 percent in July 2022, from 18.60 recorded in June, 2022.1 This is 2.27 percentage points higher than 17.38 per-cent recorded in July 2021. The report also shows that on a month-on-month basis, the Headline inflation rate in July 2022 was 1.82 percent, which was 0.001 percent higher than the rate record-ed in June 2022, which was 1.816 percent. In the period under review, food inflation was 22.02 percent, core inflation was 16.26 percent, rural inflation was 19.22 percent, and urban inflation was 22.09 percent. The increase in inflation is due to monetary and structural factors. The persis-tence of structural issues such as high dependence on importation and insecurity lowers the im-pact of an increase in the monetary policy rate in taming inflation. For example, the insecurity in food-producing states has been responsible for the shortages in the supply of food in the country and contributes partly to rising food prices. Hence, there is a need to address prevailing security challenges to guarantee food security and increase food supply in the country to keep inflation under control. In addition, the government needs to strengthen social protection programmes to help poor and vulnerable households avert malnutrition and ensure continued access to housing and transportation.

According to National Bureau of Statistics (NBS) data, Nigeria’s mineral production in 2021 was 89.48 million tons, which indicates a 39.19 percent improvement over the 64.29 million tons produced in 2020.¹ Granite, laterite, limestone, and sand are the most mined products. At the state level, the top three producing states were Ogun, Kogi, and Cross River, mining 32.04 million tons, 18.40 million tons, and 11.64 million tons of minerals, respectively, while Borno state produced the least with only 231,000 tons. Given the urgent need to optimise all available mineral resources to create jobs and improve people’s living conditions, the improvement in performance needs to be sustained. Therefore, policies should target attracting more investment in the sector whilst promoting the processing and export of the mined mineral products to maintain and sustain high growth. Consequently, the government would need to create investment incentives to help actualise the desired development for the sector, which is to contribute 3 percent of GDP by 2025, as conceived in the National Development Plans (NDP).

The recently released 2021 Electronic-payment Fact Sheet by the Nigerian Interbank Settlement System (NIBSS) shows that Nigerian banks had a total of 191.4 million bank accounts in 2021, out of which 133.5 million were active, suggesting that a total of 57.9 million were inactive.¹ Further information provided revealed that the number of bank accounts increased by 24.4 million (14.6 percent) from 167.0 million in 2020 to 191.4 million in 2021. However, the number of active bank accounts increased by a less amount, 18.7 million, from 114.8 million in 2020 to 133.5 million in 2021. Consequently, inactive accounts increased by 5.7 million, from 52.2 million in 2020 to 57.9 million in 2021. The weak economic situation, which is reflected in high inflation, high unemployment, and continued depreciation of the domestic currency, contributes partly to the rising number of inactive bank accounts. Consequently, improving economic conditions would help tackle the rising inactive bank accounts in the country.

In line with the provisions of the Petroleum Industry Act (PIA), the Nigerian National Petroleum Corporation (NNPC) on July 16 was transformed into a new entity and regulated under the provision of the Companies and Allied Matters Act (CAMA).² As a result, NNPC was transited to Nigerian National Petroleum Company Limited (NNPC Limited) as a private entity without government interferences and free from regulations such as the Treasury Single Account (TSA), public procurement, and Fiscal Responsibility Act. The transition seeks to strengthen the capacity and market relevance of the country’s oil industry. Although, the transition promises to enable optimal performance of the country’s entire petroleum industry, concerns still hover as there are seemingly no defined strategies on how the new structure intends to deal with the industry’s legacy issues that include extant liability, compulsory commitment to frontier exploration, political interferences (especially as the Ministry of Finance and the Ministry of Petroleum Resources remain key shareholders), and loss-making subsidiaries. Under this new framework, there is a need for NNPC Limited to have robust funding and operating strategies necessary to compete favourably with domestic and global energy industries

The data from the June 2022 Money and Credit Statistics published by the Central Bank of Nigeria (CBN) shows that the net credit to the economy rose to N57.3 trillion at the end of June 2022 from N48.5 trillion at the end of December 2021, indicating an 18.02 percent increase in the first half of 2022 (H1 ’22).³ Credit to the government accounts for about 31.4 percent of total credit, while the private sector received the remaining. The banking sector credit to the government grew by 35.04 percent from N13.3 trillion as of December 2021 to N18.0 trillion at the end of June 2022. Further, the credit to the private sector grew by 11.58 percent from N35.2 trillion as of December 2021 to N39.3 trillion at the end of June 2022. This suggests that banking sector credit to the government grew at a higher rate compared to the private sector. The rise in credit to the government is consistent with the rise in government debt, which raises a concern about the crowding out effect of government borrowing in the domestic financial market on the ability of the private firms to secure funding for productive investments. Consequently, there is a need for the government to boost revenue collection and promote the use of innovative financing options to effectively fund the rising expenditure and curtail the rate of borrowing in the domestic financial market. In addition, there is a need for the government to prevent the mismanagement of borrowed funds by strengthening transparency in the debt management process.