Macroeconomic Report & Economic Updates

The Central Bank of Nigeria (CBN) has made repeated attempts to contain the inflationary spike by gradually raising the monetary policy rate to 18.5 percent. However, the inflation rate is still persistently high in May 2023. According to the report by the National Bureau of Statistics (NBS), the inflation rate increased by 0.19 percent on a monthly basis, from 22.22 percent to 22.41 percent in May 2023. 

Following the new government’s plan to unify multiple exchange rates in the foreign exchange (forex) market, the Central Bank of Nigeria (CBN) has taken the monetary policy decision of floating the Naira. In its latest press release, the apex bank declared some operational changes in the forex market. This includes the abolishment of segmentation and collapsing of all segments in the market into the Investors & Exporters (I&E) window, thus, granting commercial banks and other authorised dealers the green light to sell forex at free, market-determined rates.

The World Bank's Global Development Prospect report for June 2023 has maintained Nigeria's projected growth rate 2023 at 2.8 percent. According to the report, this growth will primarily be driven by the non-oil sector as the oil sector grapples with structural challenges, resulting in output levels below the assigned quota by OPEC. Foreign exchange shortages, exchange rate volatility, security challenges, rising living costs, and limited fiscal capacity are anticipated to impede growth.

In its first administrative steps, the new government of the federation has declared the removal of the country’s controversial subsidy on fuel. Welfare advocates have defended it, but it has also come under heavy fire for its macroeconomic and budgetary lapses. For instance, subsidy costs, which totalled over N10 trillion between 2006 and 2019, consumed N4.39 trillion ($9.7 billion) in 2022 alone and nearly N3.36 trillion ($7.5 billion) in the first half of 2023, have been a contributing factor in budget deficits in recent years.

The Nigerian economy grew by 2.31 percent in the first quarter of 2023, according to a report by the National Bureau of Statistics (NBS) released in May 2023. However, compared to the fourth quarter's GDP growth, which was 3.52 percent, this represents a fall of 1.21 percentage points. Compared to the first quarter's economic growth of 3.11 percent the year before, GDP growth decreased by 0.80 percentage points annually.