Macroeconomic Report & Economic Updates

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

The Monetary Policy Committee of the Central Bank of Nigeria (CBN) retained the Monetary Poli-cy Rate (MPR) at 11.5 percent, as well as all other monetary parameters, at the first meeting of the Central Bank of Nigeria (CBN) for 2022, held on the 24th and 25th of January. Specifically, the Cash Reserve Ratio (CRR) was retained at 27.5 percent, the Liquidity Ratio was retained at 30 percent, and the asymmetric corridor of +100/-700 basis points around the MPR was also retained. The de-cision to retain all the parameters was aimed at supporting the existing economic growth recovery and curbing the increase in prices. However, inflation persistence in the country has continued to emanate from supply-side constraints which monetary policy may be unable to mitigate. It there-fore becomes necessary for the government to leverage fiscal policy in order to improve the ease of doing business and boost aggregate supply. Unconventional monetary policies should also be scaled up to enhance productivity in both the agricultural and manufacturing sectors. This in turn would ease the pressure on the exchange rate, which would further dampen price levels.

On behalf of the Federal Government, the Debt Management Office (DMO) issued a N250 billion sovereign sukuk bond between the 16th and 23rd of December 2021, with a 346 percent subscription rate worth over N865 billion.¹ The sovereign sukuk bond has a tenor of ten (10) years at a rental income of 12.80 percent per annum to be paid semi-annually.  An analysis of the subscription data showed more diverse participation by investors, with high levels of subscription from banks and fund managers (including pension funds), as well as non-interest financial institutions, ethical funds, cooperative societies, and retail investors. This reveals that the DMO’s objectives of issuing sovereign sukuk bonds to grow the domestic investor base and promote financial inclusion is being achieved. The agency has reaffirmed that the proceeds of the N250 billion sovereign sukuk bond will be used to continue financing the rehabilitation and reconstruction of critical economic road projects across the six (6) geopolitical zones and the Federal Capital Territory. Given its observable impact on road infrastructure in terms of job creation, travel time, safety, and movement of goods, the sukuk bond has proven to be a beneficial instrument for financing economic growth and development. If duly implemented, the projects would reduce the cost of transportation, create more access to markets, lower commodity (especially food) prices, and also improve the country’s overall business environment.