Macroeconomic Report & Economic Updates

Inflation rate rose in December 2018 for the second consecutive month to 11.44 percent, 0.16 percentage points higher than the 11.28 percent recorded in November 2018.¹ The rise in inflation was driven by the food component of inflation which increased to 13.56 percent from 13.30 percent within the same period. Further disaggregated data shows that the highest increments were recorded in the price of basic food items such as bread, cereals, fish, meat, potatoes, yam and other tubers. Core inflation experienced no increment from the previous month, stagnating at 9.80 percent. Seasonal demand effect is closely linked to the rise in inflation given that the holiday season is associated with a rise in the price of food items. In the coming month, we expect the inflation rate to continue on the upward trend considering the increase in election-related spending. The current monetary policy parameters should remain unchanged until a clearer picture of the effect of the election on economic indicators is known

The amount of financial subsidy that Nigeria absorbs to maintain pump price at the official N145/litre has remained high. According to reports, the NNPC now pays N48.68 subsidy for a litre of petrol¹, as against the N26 recorded as payments in May 2018². In total, at the daily average consumption rate of 50 million litres per day, the government currently pays N2.43 billion per day as subsidy payments. The direct and externally-influenced reason has been increasing in landing costs which rose from N171 to N193.7 – consistently above the official N145 pump price - and this has fueled the very politically-charged issue of increasing petrol pump price domestically. With the upward trend in oil price, landing costs are expected to continue rising. The complete deregulation of the downstream oil sector will allow for private investment and consequently end subsidy payments, making it available for other sectors.

Considered as a looming crisis, Nigeria’s unemployment rate has continued to deteriorate. Based on the new data released by the NBS unemployment rate stood at 23.1 percent in 2018Q3¹, up from the previous quarter’s 18.8 percent. This implies that 3.3 million people became unemployed during the quarter, increasing the total figure to 20.9 million people. About 63 percent (13.1 million) of the total unemployed Nigerians are youth who experience much higher unemployment rates (29.7 percent in 2018Q3) than the rest of the population. While many have attributed their status to the inability to find their first job, others have become unemployed due to loss of previous jobs. This implies that the gap between job creation and labour market demand is widening. Given Nigeria’s young population structure, large numbers of labour entrants are expected going forward. Going forward, the current emergence of a vibrant entrepreneurial class that cuts across agriculture, services, and tech should be supported through the provision of credit facilities and enabling infrastructure.

Nigeria’s real GDP growth rate rose marginally Year-on-Year by 1.8 percent in 2018Q3, as against 1.5 percent recorded in the preceding quarter – a minor increase of 0.3 percentage points. Non-oil sector, the main driver of the overall GDP growth rate increase, improved to 2.36 percent, from 2.05 percent.