Macroeconomic Report & Economic Updates

Food prices in Nigeria experienced a further increase in September 2022, according to the Selected Food Prices Watch Report for September 2022, published by the National Bureau of Statistics (NBS).² The report highlighted the change in prices of some selected food items. For example, the average price of 1kg of Tomato on a year-on-year (YoY) basis increased by 30.06 percent, from N342.25 recorded in September 2021 to N445.12 in September 2022 and on a month-on-month (MoM) basis, 1kg of tomato increased by 3.29 percent to N445.12 in September 2022 from N430.93 recorded in August 2022. Also, the average price of 1kg of rice (local, sold loose) rose on a YoY basis by 14.98 percent from N410.01 recorded in September 2021 to N471.42 in September 2022, and on a MoM basis, the average price increased by 3.82 percent. Also, the average price of 1kg of beans (brown, sold loose) increased on a YoY basis by 13.14 percent from N492.13 recorded in September 2021 to N556.81, and on a MoM basis, 1kg of beans rose by 2.05 percent from N545.61 in August 2022. Tomato, rice, and beans are major food items consumed daily in Nigeria. Food is a necessity, and a must-have for every household, implying that the increase in food prices leaves many households worse off.  The rising prices can be attributed to disruptions in food supply occasioned by insecurity and recent floods in most parts of the country. Hence, there is a need to support farmers by addressing the problem of insecurity and flooding as well as providing them with improved seedlings to boost food production and reduce the extent of increase in food prices in the country.

According to the 2022 global hunger index (GHI) report, Nigeria ranked 103rd out of 121 countries, suggesting Nigeria's weak and fragile food system.³ The GHI is a tool for measuring and tracking hunger at global, regional, and national levels. It is calculated based on the values of four component indicators – undernourishment, child wasting, child stunting, and child mortality. Nigeria's index score in the 2022 report is 27.3, which is more than five times the score of Belarus, which is the country with the lowest hunger level. Conflicts and climatic disasters have hampered food production in Nigeria, causing shortages that have progressively raised food prices and general inflation rates. The current flood disaster in Nigeria also affects food and agricultural production in several (food-producing) states. As a result, food production is likely to reduce in 2023 and could result in a shortage of food supplies, higher food and general inflation rates, and a more profound hunger crisis in the nation. There is a need for the government to intensify support to farmers whose farmland had been affected by the current flood, as well as scale up the introduction of modern agricultural inputs to increase productivity and boost production levels. There is an urgent need to increase investment in climate mitigation and adaptation by both the private sector and the government. This call is necessary to reduce the occurrence of climate-induced disasters like floods and their effects on the nation's food security

According to Telecommunications Sector Data for the second quarter (Q2) of 2022, released by the National Bureau of Statistics (NBS), Nigeria's telecoms sector experienced a growth in both voice and internet subscriptions.³ The total number of active voice subscribers in Q2 2022 was 206.4 million, representing a 10.04 percent increase from 187.6 million subscribers in Q2 2021. Similarly, in terms of internet subscriptions, 151.3 million subscribers were recorded in Q2 2022, from the 140.2 million reported in Q2 2021. This indicates a growth rate of 7.96 percent on a year-on-year basis. An increase in active voice and internet subscribers will likely lead to increased transactions through digital platforms. In addition, the growth in subscribers suggests that for businesses, having an online presence is an excellent strategy to expand the reach of their products. In other words, businesses are no longer limited to physical stores alone. The increase in the number of subscribers also indicates that the digital economy's contribution to the overall economy will continue to increase over the next few years. A way for the government to support the expansion of the digital economy is to address the issue of unreliable electricity supply. The unstable electricity supply makes network providers rely primarily on generators to power their equipment, thereby increasing their operating costs and the cost of doing business via the internet.

Data from the Central bank of Nigeria (CBN) shows that Nigeria's external reserves dropped to $37.9 billion as of Wednesday, October 12, 2022, from $38.8 billion on September 12 2022.¹ The decline is due to CBN's continuous intervention in the exchange rate market and dwindling export earnings. There has been an increase in the demand for foreign exchange for importing inputs and finished products. Likewise, there has been a rise in the number of Nigerians moving to other countries for studies and work. These result in a demand-supply deficit pushing the exchange rate to an all-time high at different windows. The CBN has been intervening to minimise the rate of increase, leading to a trend of steady declines in foreign reserves since the beginning of September 2022. While it is prudent to intervene by pumping more forex from the external reserve, it is also essential, for sustainability, that government strive to boost export earnings to ensure more accretion into the reserve. As a result, the government needs to strengthen reforms to increase non-oil exporting firms' productivity and competitiveness in the international market.

The Organization of Petroleum Exporting Countries (OPEC), alongside OPEC+, cut crude oil output by two million barrels per day (mb/d) to achieve market stability². As a result, Nigeria’s oil output quota for November 2022 was reduced by 4.6 percent from 1.826 mb/d in August 2022 to 1.742 mb/d. This measure comes following the downward movement in crude oil prices. This cut follows several consecutive months of an increase in Nigeria’s oil output quota, which the country has continuously failed to meet due to vandalism, oil theft, low investment, and ageing infrastructure. The failure of the country to meet the OPEC quota also suggests the country had benefited little from the increase in global crude oil prices in the first half of the year. Without significant improvement in domestic production, there is a high likelihood that the production level would still be lower than the new quota level. Hence, there is a need to address structural factors such as insecurity that have contributed partly to the country’s low crude oil production. The Nigerian National Petroleum Company (NNPC) Limited needs to develop a roadmap to improve the security around the pipelines to tackle vandals, prevent oil bunkering, and attract investment into the industry.