Macroeconomic Report & Economic Updates

The Debt Management Office (DMO) is set to issue Sovereign Sukuk bond valued between N200 - N250 billion before the end of the year. The government stated that the fund would be used to finance critical road projects across the country.² The Sukuk is a strategic initiative designed to support the development of infrastructure, promote financial inclusion and deepen the domestic securities market. Subsequent to the debut Sovereign Sukuk in 2017, in which N100 billion was raised, two additional Sukuk bond had been raised, N100 billion in 2018 and N162.557 billion in 2020. Thus, a total of N362.577 billion has been issued between 2017 and 2020. The proposed new commitment would be devoted to road infrastructure, which is expected to improve road connectivity and reduce transport costs within and outside cities in Nigeria. While the use of Sukuk would expedite the completion of the designated projects, emphasis should be placed on effective evaluation and monitoring processes to ensure that the projects are not only completed, but also match sustainable standards, especially in terms of scope and durability. Furthermore, there is a need for the government to maintain the culture of transparency in the utilisation of the funds.  

Estimates from the Organization of Petroleum Exporting Countries (OPEC) show that Nigeria produced about 1.25 million barrels per day (mbpd) in October 2021. This is below the budgeted crude oil production level of 1.86 mbpd in the 2021 budget. Furthermore, crude oil production recorded a decrease of 9% year on year from 1.3 million in October 2020 to 1.2 mbpd in October 2021¹.Similarly, on a month-on-month basis, Nigeria’s total oil production decreased slightly from 1.25 mbpd, decreasing by about 200,000 bpd. The decrease in output is primarily due to vandalism and bunkering in oil-producing regions, which causes damage to oil installations. As oil production level falls, government revenue falls, thereby shrinking the fiscal space and leaving the government with the option of borrowing to invest in vital sectors of the economy. Further, the fall in oil output level puts pressure on the value of the naira, as crude oil remains Nigeria’s primary export. To actualise the revenue projection from the oil sector, the government in collaboration with security agencies should strengthen relations with host communities in securing oil installations. The government can also leverage on technology by utilising satellite with geo information system to effectively monitor pipelines

The Anchor Borrowers’ Programme (ABP) was established to create economic linkages between smallholder farmers (SHFs) and reputable companies (anchors) involved in the production and processing of key agricultural commodities. Its main goal is to provide loans to SHFs via these links in order to increase agricultural productivity, create jobs, cut food import bills, and conserve foreign reserves. As at September 2021, the CBN had disbursed a total of N798.09 billion to SHFs through the Programme since its inception in November 2015.³ However, current economic trends indicate that the established goals are not being accomplished, as food prices continue to rise, and farmers are defaulting their obligations. In view of these developments, the CBN has changed the program's guidelines to reflect contemporary realities and developments, as well as to promote best practices for program implementation.⁴ The new development seeks to sanction and blacklist from all CBN interventions any stakeholder found to be undermining the programme. Furthermore, the new guidelines have two windows: public sector- led and the private sector-led models, which in turn provides the state governments an opportunity to key into the programme through an Irrevocable Standing Payment Order (ISPO). Since most States prioritise agricultural sector in their agenda, this revision provides states with the opportunity to help their farmers gain access to finance provided by the Bank under the ABP.

Nigeria external reserves exceeded US$ 40 billion on 18^th November 2021 according to Central Bank of Nigeria (CBN) dataset on external reserves.² A total of US$ 5.5 billion external reserves were earned between 27th September 2021 and 27th October 2021, as the external reserves increased from US$ 36.3 billion on 27th September 2021 to 41.8 billion on 27th October 2021, which indicates an increase of 15 percent over a month. Since mid-November 2019, external reserves have been consistently lower than US$ 40 billion. The upward trend in reserves can be attributed to several factors including Special Drawing Right allocation of US$ 3.35 from the IMF, and the CBN stoppage of selling dollar to Bureau de Change. The upward movement in external reserves would help in reducing pressure on naira. Thus, the naira is expected to maintain a stable rate as the reserves increase. Ongoing reforms in the exchange rate management system aimed at unifying the exchange rate should be sustained and improved upon. A unified exchange rate erodes arbitrage associated with multiple exchange rates. Furthermore, the less diversified structure of the country’s export bases which makes the country to depend on few commodities for external reserves is unhealthy for the economy. Existing support schemes for the manufacturing sector both in terms of technical skills and financial resources should be strengthened to increase their output level for the domestic and the export markets.

The Central Bank of Nigeria (CBN) introduced the Tertiary Institutions Entrepreneurship Schemes (TIES) to promote the culture of entrepreneurship among the undergraduates and graduates of Nigerian Universities and Polytechnics. The TIES represents an innovative financial model, comprising three different categories of facilities for entrepreneurship in agribusiness, information technology, creativity industry, and science and technology. The TIES was enacted in response to the economy's rising levels of youth unemployment and underemployment. The scheme seeks to finance 25,000 start-ups and businesses led by graduate entrepreneurs, with the goal of creating 75,000 jobs per year. This is a timely intervention, which is expected to lead to the birth of innovative businessess in the country. It is important that the selection of graduate entrepreneurs under the scheme follows a transparent process. In addition, a structure needs to be created to promote effective use of the finance provided, in order to avoid diversion of funds for non-business related expenses. Given that many graduates have innovative ideas but lack funding, it is critical that TIES is apolitical, and transparent to ensure equal opportunities to applicants, regardless of gender and geographical location.