Macroeconomic Report & Economic Updates

Data from the National Bureau of Statistics (NBS) indicates improved performance in total volume and value of electronic banking transactions in Q4 2020. Total volume of e-payment transactions for the period under review was 3.46 billion valued at ₦356.47 trillion¹. This is a 24.6 percent and 11.4 percent increase in transaction volume and value respectively, relative to the previous quarter of 2020. Disaggregation by types of payment channels shows that online transfers accounted for 64.3 percent and 33.7 percent of total volume and value in the period under review. Real-time gross settlement (RTGS) accounted for just 0.04 percent of volume but 31.7 percent of value, while National Electronic Funds Transfer (NEFT) accounted for 1.4 percent of volume and 27 percent of value. Consistent growth in total digital financial transactions could signify a positive trend for the country’s financial inclusion goals. It is however important that such growth ultimately translates to extending banking services to excluded segments of the population.

Data from the World Bank Poverty and Shared Prosperity report shows that Nigeria’s poverty level has further increased in the wake of the COVID-19 pandemic. More specifically, 79 million Nigerians live in extreme poverty, accounting for 20 percent of the people living in poverty in SSA. COVID-19 and its associated economic crisis are enabling factors of the high poverty headcount². Data from COVID-19 phone surveys in Nigeria suggests that about 85 percent of households experienced higher food prices, with half reducing their food consumption as a coping strategy². The upward trend in poverty is expected to continue owing to the difficulty in generating adequate broad-based economic growth, inability to create jobs, and high population growth rate. As a result, private sector innovativeness and talent should be fostered in way that creates new opportunities for young people. The government on the other hand should utilize the policy landscape to support the private sector and enforce population control measures.

The Monetary Policy Committee (MPC) has voted to retain the monetary policy rate (MPR) at 11.5%¹. Other parameters remain unchanged; for instance, the cash reserve ratio (CRR) was maintained at 27.5% while liquidity ratio remains at 30%. The committee’s decision to take a holding position is expected to be supplemented by various ongoing government intervention programmes. These programs are intended to facilitate employment generation and stimulate recovery/growth in various sectors of the economy post-pandemic. While this decision might be suitable for now, it is important for the MPC to closely monitor the evolving economic situation in the country, especially in view of rising inflation rate and foreign exchange fluctuations which have an impact on the value of the Naira. Close monitoring and a proactive approach, will ensure that the measures put in place yield the desired outcome of stimulating growth.

Inflation rate for February 2021 rose for the 18^th consecutive month to its highest rate since February 2017.¹ SGeoffrey Johnson Obipecifically, inflation rate increased to 17.33 percent in February 2021 from 16.47 percent in January 2021. The food sub-component of inflation rose to 21.79 percent from 20.57 percent while core inflation stood at 12.38 percent from 11.85 percent in the review period.² Disaggregated data by states shows that Kogi (24.73 percent), Bauchi (22.92 percent) and Ebonyi (20.45 percent) recorded the highest inflation rates within the review period. The continuous rise in the prices of food supplies is as a result of the interplay of several factors including sustained insecurity in areas where foods are grown, rising transportation costs, and high import costs linked to the depreciation of the naira. As such, addressing the rise in prices will require a multipronged solution including ensuring the safety of farm workers and enhancing productivity in the sector through the adoption of innovative farming and processing technologies.

Total Nigeria merchandising trade stood at N9.12 trillion in the fourth quarter of 2020, representing an 8.9 percent increase relative to the preceding quarter and a 9.9 percent decrease relative to the corresponding quarter of 2019.¹ For the fifth consecutive quarter, Nigeria recorded a negative balance of trade with the import component of trade accounting for 65 percent while export component of trade accounted for 35 percent. Crude oil accounted for 78.93 percent of Nigeria’s export while manufactured goods accounted for 64.56 percent of total imports. Nigeria’s major export trading partner is India (17.12 percent) while China (28.28 percent) accounted for most import to Nigeria. Improvements in foreign trade is expected to continue as economic activities in our major trading partner countries increase. However, diversifying the export base to include other goods such as agricultural commodities, textiles, and manufactured goods is pertinent. To achieve this, ensuring standardization of commodities and setting competitive freight charges will unlock the opportunities in external trade.