Macroeconomic Report & Economic Updates

According to the National Bureau of Statistics (NBS), the average price of Premium Motor Spirit (PMS) commonly referred to as petrol increased by 2.36 percent year-on-year but experienced a month-on-month decrease of 0.04 percent, from N164.91 in August 2021 to N164.85 in September 2021. In September, the top three States with the highest average price of PMS were Abia (N172.50), Ekiti (N170.62) and Lagos (N167.80). Additionally, the States with the lowest average PMS were Ebonyi (N162.27), Ondo (N162.20) and Kano (N160.83). The variation in the price of petrol indicates that the Petroleum Equalisation Fund (PEF) had fallen short of its goal of administering a uniform pump pricing for petroleum products across the country. Furthermore, because of the inelastic nature of PMS demand, price volatility and discrepancy immediately affect the pricing of other products and services across the country, thus affecting the optimality of monetary policy. With the recent abolishment of the PEF, structural improvements in terms of absorbing transportation costs are required to reduce cost differentials in the transportation of PMS across the country.

Under the Nigeria Youth Investment Fund (NYIF), the Central Bank of Nigeria (CBN) as part of its development finance initiative in collaboration with the Federal Ministry of Youths and Sports Development has so far released the sum of N3 billion to 7,057 beneficiaries (4,411 individuals and 2,646 SMEs) across the country.¹ The NYIF programme, launched in October 2020 by the CBN is designed to improve the access to finance for youth and youth-owned enterprise. The programme seeks to provide Nigerian youth between the ages of 18-35 with investment inputs required to build successful businesses and become sustainable employers of labour in critical economic and social sectors. The NYIF was designed to curb youth restiveness and boost the managerial capacity of youths. This programme is expected to grow the economy, reduce unemployment, and diversify the economy. Created exactly a year ago, there is need for the CBN to publish a report which highlights the economic impact of the Fund, in terms of the jobs created and the milestones attained in view of ascertaining its challenges and thus strengthening the programme.

According to the Debt Management Office (DMO), there was an increase in the country’s total public debt stock in Q2 2021 from the total recorded in Q1 2021.¹ The total public debt which was reported as N33,107,247.23(in millions) in Q1 2021, increased to N35,465,005.39(in millions)  in Q2 2021 as reported by the DMO. Although domestic debts accounted for 61.34 percent of the total public debts in Q2, which is less than the 62.44 percent it accounted for in Q1, the total amount of domestic debts increased from N20,636,881.02(in millions) in Q1 2021 to N21,754,127.62(in millions)  in Q2 2021.However,  external debt which made up 37.67 percent of the total public debts in Q1 2021 experienced a  slight increase to account for 38.66 percent of the total public debt in Q2 2021. The total amount of external debts also increased from N12,470,366.21(in millions)in Q1 2021, to N13,710,877.77(in millions)  in Q2 2021. As the government continues to pursue debt financing as a source of funding public expenditure, it should ensure that such funds are invested  mostly on capital expenditures which will generate funds for servicing these debts to avoid default in repayment which increases the interests on them.

As part of its ongoing intervention to address food insecurity, the Central Bank of Nigeria (CBN) has disbursed a total of N798.09 billion to the Anchor Borrowers Programme (ABP) since its inception in November 2015.¹ The cumulative disbursement has been given to 3.9 million smallholder farmers cultivating 4.9 million hectares of land, according to the CBN’s Monetary Policy Committee. In addition, the CBN disbursed N708.39 billion to 657 large-scale agricultural projects under the Commercial Agricultural Credit Scheme (CACS), and N134.57 billion to 38,140 beneficiaries under the Agribusiness/Small and Medium Enterprise Investment Scheme (AGSMEIS). As the government continues to implement policies intended to improve agricultural productivity, it is important that the disbursement of these interventions is transparent. Hence, transparency mechanism should be developed and enforced within all agriculture related interventions to prevent diversion of funds as well as increase accountability. Furthermore, monitoring and evaluation mechanisms are necessary to ensure that the productivity of the sector is improved over time.

The Monetary Policy Committee of the Central Bank of Nigeria (CBN) retained the Monetary Policy Rate (MPR) at 11.5 percent during its 281^st meeting ¹. Similarly, other monetary parameters were kept constant including the Cash Reserve Ratio at 27.5 percent and the Liquidity Ratio at 30 percent. The rates were retained largely as a result of the declining rate of inflation and the improvement in the growth rate of Gross Domestic Product. The continuous double digit MPR may however limit the availability of funds to the private sector, which is required to spur aggregate supply in order to achieve lower levels of inflation. This is underpinned by the fact that inflation in Nigeria is recognised to be mainly cost push rather than demand pull, and as such cannot be solely contained by monetary policy. Going forward, programmes to address structural factors that continue to exert upward pressure on prices should be integrated with ongoing monetary policy interventions.