Macroeconomic Report & Economic Updates

The National Bureau of Statistics (NBS) Power Sector Data report shows that Nigeria generated 36,397.92 Gwh of electricity in 2021, a 2 percent increase of over 35,720.27 Gwh generated in 2020¹. Despite the increase, the data suggests that about 4200MW of power was generated in 2021, which is grossly inadequate for a population above 200 million people. For instance, developing economies require about 1000MW per million people to meet their electricity demand, which translates to over 200,000MW for Nigeria. The situation is further worsened by the losses encountered during the transmission and distribution stages. Power generation has been a significant impediment to economic prosperity in Nigeria, as demand exceeds supply, which negatively affects both businesses (by increasing the cost of production through alternative sources of electricity) and general living conditions. Since electricity is crucial for activities in any economy, improving power generation in Nigeria remains an urgent imperative. The Power Purchase Agreement (PPA) is an important strategy to consider. It is expedient to aggressively explore renewable energy sources to boost generation and eventually increase power supply across the country.

Data from the Central Bank of Nigeria (CBN) revealed that crude oil price rose above $100 in February 2022 and has exceeded its historical price since 2014³. The rise in crude oil is mainly due to the shortage of supply and the ongoing crisis between Russia and Ukraine, which has heightened the level of uncertainty in energy supply. Russia is the third-largest producer of crude oil in the world after the United States and Saudi Arabia. The current rise in crude oil prices is temporary, and the extra revenues due to the higher prices are term revenue windfall. Therefore, the government should create a special fund to keep the revenue windfall and serve as fiscal buffers against low crude oil prices. The existing challenges affecting crude oil production in the country, such as insecurity, infrastructural decay, and inadequate investment in the oil sector, might limit the gains associated with the current increase in oil prices. Hence, the prompt passage of the proposed revision of the petroleum industry Act is crucial in addressing the Nigerian oil industry challenges.

The NBS report shows that the average retail price paid by consumers for premium motor spirit (petrol) slightly increased to N166.40 per litre in January 2022 from N 164.09 per litre in December 2021, indicating a 1.41 per cent increase year-on-year². Assessment of month-on-month data shows that the average retail price increased by 0.38 per cent from N165.76 per litre in December 2021. Abia state had the highest average retail price of petrol with N177.33 per litre, followed by Kebbi with N176.11 per litre, and Cross River with N172.38 per litre. Borno state had the lowest average price of N155.81 per litre, followed by Adamawa, with N159.88 per litre, and Lagos, with N163.26 per litre. Crude oil prices have risen by about 57 percent in the last year, from $54.8 per barrel in January 2021 to $86.5 per barrel in January 2022. However, the retail price of petrol increased slightly over the same period due to government subsidies. The decision of the government to retain the petrol subsidy for the next 18 months suggests that the price will remain relatively stable over the next few months. Consequently, upward trends in the price of crude oil would suggest that government petrol subsidies would be higher than planned and, in turn, lower the amount available for other sectors of the economy. Hence, there is a need for the government to develop a framework that would address the inefficiency in the oil industry, especially fixing the existing refineries that led to the persistence of the petrol subsidies.

A report on the telecommunications sector released by the National Bureau of Statistics shows that in Q4 2021, a total of 195.4 million subscribers were active on voice compared to 204.6 million subscribers recorded in Q4 2020 and 190.9 million subscribers in Q3 2021.³ This implies a 4.47 percent decrease in voice subscriptions on a year-on-year basis and an increase of 2.42 percent on a quarter-on-quarter basis. Relatedly, a total of 141.9 million subscribers were active on the internet in Q4 2021 compared to 154.3 million recorded in Q4 2020 and 140.3 million in Q3 2021. This signifies a 7.99 percent decrease in internet subscriptions on a year-on-year basis and an increase of 1.14 percent on a quarter-on-quarter basis. The decrease in the number of active subscribers on voice and the internet is partly due to the directive by the government in December 2020. The government directed telecommunication companies to suspend the sales and reactivation of SIM cards to embark on an audit of the subscriber registration database in April 2021. The audit by the government was long overdue and a step in the right direction towards strengthening data security. However, the government needs to partner with telecommunication companies to develop strategies that would minimise interruption of services accompanied with the audit exercises in the future. This is important given the role of the telecommunication sector in expanding the digital economy. Also, the government needs to intensify efforts in strengthening the service rendered by the telecommunication companies to their customers.

The CBN, in a recent circular to all banks and other financial institutions communicated an amendment to the Global Standing Instruction (GSI).³ The initial GSI which was introduced in July 2020 was a strategy to enable deposit money banks to recover outstanding debts from their customers who borrow money from it and default. The GSI was designed with the following specific objectives: (i) facilitate an improved credit repayment culture; (ii) reduce Non-Performing Loans in the Nigerian banking system; and (iii) watch-list consistent loan defaulters. In the amended GSI, the frequency of recovery attempts through the GSI platform was changed from “a specific number” to “continuous and unrestricted”. As a result of the amendment, the GSI loan recovery feature applicable to all loans in the banking industry shall remain perpetually in place throughout the life of the loan and/or until the loan is fully paid. The CBN needs to mandate all operating deposit money banks to educate their customers on the implications of the amendment before awarding new loans. The effective enforcement of the amended GSI is expected to enhance loan recovery rate among the deposit money banks and strengthen the health of the Nigerian banking industry