Macroeconomic Report & Economic Updates

Month-on-Month analysis of food prices show that average prices of selected food items reduced from December 2017 to January 2018. Precisely, total average month-on-month price decreased from 2.48 percent to 1.19 percent, with reductions in unit prices of items such as eggs, chicken, beef, rice, fish, and palm oil among others. Food prices which remains largely volatile in the short term, may have reduced in the review period due to a slight fall in consumer demand following the end of the festive period. Looking forward, the decline in food prices may be short-lived in the absence of yield-enhancing investments that can sustain food production/supply. Hence, the government should promote policies that alleviate the credit constraints to yield-enhancing investment in the private sector.

The federal government fiscal operations in 2017 shows that there were deficits for the four quarters recorded. The CBN report reveals that the federal government spent a total of N147.11 billion on capital expenditure in the four quarters (including a 2016 fiscal year roll-over due todelay in approving the 2017 budget), and N3.64 trillion as recurrent expenditure in 2017. Capital releases suggest that only about 6.6 percent of budgetary amount of N2.24 trillion was spent in the fiscal year, while recurrent expenditure represented 72 percent of N5.06 trillion budgeted for the year. Nigeria’s recurrent expenditure has always exceeded capital expenditure for infrastructure, however, the delay in the passage of the 2017 budget (in June 2017) may have triggered the slow-down in capital releases. Nonetheless, the 2017 budget is still being followed, given that the 2018 budget has not been passed. Going forward, the process of the 2018 budget release should be expedited, as delay in budget sends negative signals to foreign investors which could make them divert capital investment to other countries.

The national accounts for 2017Q4 show that the aviation sector grew year-on-year by 4.7 percent in real terms - significantly higher than the 0.48 percent in preceding quarter but significantly lower than the 13.3 percent in the corresponding quarter of 2016 Drawing from the data recently provided by the NBS, it can be inferred that the increase in the number of both domestic and international passenger traffic in the fourth quarter (by 4.9 percent YOY to 3.7 million passengers) may have partly driven the YOY real growth in the sector. This is in addition to remarkable increases in aircrafts and mail movements – by 4.6 percent and 229.6 percent respectively.

Recent media highlights suggests that the Federal Government made a non-oil-based revenue of N1.27 trillion from operating surpluses between 2007 and 2016¹. The period which covers the years of operation of the Fiscal Responsibility Act, shows a list of agencies and government organizations that paid the operating surpluses (revenues above approved budgetary expenditure at the end of each year) to the federal government.  Notably, the annual remittances shows year-on-year increases. This is likely attributable to the improved monitoring and intervention activities of the Fiscal Responsibility Committee over the years. There is greater scope for operating surpluses from public corporations with intensified efforts at monitoring the implementation of the template for calculating operating surplus liabilities across scheduled corporations.

Nigeria’s debt profile reached unprecedented high levels at the end of the year 2017. Figures obtained from the debt management office reveals that debt stock increased Year-on-Year by a significant 42.6 percent and Quarter-over-Quarter by 6.6 percent to N21.73 trillion as at December 2017¹. Domestic and foreign components of the debt profile grew to N3.35 trillion and N18.38 trillion respectively. The increased debt profile may have been triggered by domestic and foreign borrowings to fund Nigeria’s budget deficit, and excessive debt servicing costs – Nigeria serviced domestic debts to the tune of N1.48 trillion in 2017², about 29.13 percent of its total budget revenue. Implicatively, Nigeria’s debt to GDP ratio continues to increase, from 18.6 percent in 2016 to 21 percent