Macroeconomic Report & Economic Updates

In the second quarter (Q2) of 2022, Nigeria’s Gross Domestic Product (GDP) grew by 3.54 percent (year-on-year) in real terms, which is an improvement compared to the 3.11 percent growth recorded in the previous quarter (2022Q1).² The aggregate real GDP stood at N17.29 trillion in the second quarter of 2022, a slight decline (-0.37%) compared to N17.35 trillion recorded in Q1 2022. At the disaggregate level, services accounted for 57.35 percent of the GDP, the agricultural sector accounted for 23.24 percent, and the industrial sector contributed 19.4 percent. In addition, the non-oil sector contributed 93.67 percent to the nation’s GDP and grew by 4.77 percent in real terms during the reference quarter (Q2 2022). The oil sector contributed 6.33 percent and contracted by 11.77%. The data suggest that the non-oil sector has to grow at a higher rate to compensate for the contraction in the oil sector to attain a GDP growth rate of 3.4 percent in 2022, as the International Monetary Fund (IMF) projected. As a result, the government needs to introduce reforms that would improve the business environment, which would support the growth and expansion of the non-oil sector. 

Data from the Central Bank of Nigeria (CBN) shows that as of 17th August 2022, the official exchange rate of Naira to the US dollar was N420.83 for a dollar suggesting a N5.15 depreciation compared to the N415.68 reported at the end of the previous month (July).² This fall in value of the domestic currency can be attributed to the shortage of foreign currencies in the country, arising from the demand for foreign currency (most especially the US dollar) which is higher than the supply. The preference for foreign-made products over locally produced products and the low production capacity of domestic firms contribute in part to the high demand for foreign currency. The high demand for foreign currency is also due to people's involvement in speculative purchases by saving dollars to fund education or relocation expenses. While the RT200 FX programme of the CBN is contributing to an increase in the supply of foreign currency, the demand for foreign currency exceeds the supply and, in turn, contributes to the continuous depreciation of the domestic currency both in the official and parallel exchange markets. Thus, there is a need for the government to support domestic firm production capacity to reduce importation. Also, exporting firms need to be provided with financial and technical assistance to increase exportation and expand the sources of foreign currency. There is a higher likelihood that firms that benefited from government support would use official channels in remitting their export proceeds. The supply of foreign currency should increase with effective execution and monitoring of these interventions, resulting in a more stable domestic currency, Naira.

According to the National Bureau of Statistics (NBS), Nigeria’s inflation rose to 19.64 percent in July 2022, from 18.60 recorded in June, 2022.1 This is 2.27 percentage points higher than 17.38 per-cent recorded in July 2021. The report also shows that on a month-on-month basis, the Headline inflation rate in July 2022 was 1.82 percent, which was 0.001 percent higher than the rate record-ed in June 2022, which was 1.816 percent. In the period under review, food inflation was 22.02 percent, core inflation was 16.26 percent, rural inflation was 19.22 percent, and urban inflation was 22.09 percent. The increase in inflation is due to monetary and structural factors. The persis-tence of structural issues such as high dependence on importation and insecurity lowers the im-pact of an increase in the monetary policy rate in taming inflation. For example, the insecurity in food-producing states has been responsible for the shortages in the supply of food in the country and contributes partly to rising food prices. Hence, there is a need to address prevailing security challenges to guarantee food security and increase food supply in the country to keep inflation under control. In addition, the government needs to strengthen social protection programmes to help poor and vulnerable households avert malnutrition and ensure continued access to housing and transportation.

According to National Bureau of Statistics (NBS) data, Nigeria’s mineral production in 2021 was 89.48 million tons, which indicates a 39.19 percent improvement over the 64.29 million tons produced in 2020.¹ Granite, laterite, limestone, and sand are the most mined products. At the state level, the top three producing states were Ogun, Kogi, and Cross River, mining 32.04 million tons, 18.40 million tons, and 11.64 million tons of minerals, respectively, while Borno state produced the least with only 231,000 tons. Given the urgent need to optimise all available mineral resources to create jobs and improve people’s living conditions, the improvement in performance needs to be sustained. Therefore, policies should target attracting more investment in the sector whilst promoting the processing and export of the mined mineral products to maintain and sustain high growth. Consequently, the government would need to create investment incentives to help actualise the desired development for the sector, which is to contribute 3 percent of GDP by 2025, as conceived in the National Development Plans (NDP).

The recently released 2021 Electronic-payment Fact Sheet by the Nigerian Interbank Settlement System (NIBSS) shows that Nigerian banks had a total of 191.4 million bank accounts in 2021, out of which 133.5 million were active, suggesting that a total of 57.9 million were inactive.¹ Further information provided revealed that the number of bank accounts increased by 24.4 million (14.6 percent) from 167.0 million in 2020 to 191.4 million in 2021. However, the number of active bank accounts increased by a less amount, 18.7 million, from 114.8 million in 2020 to 133.5 million in 2021. Consequently, inactive accounts increased by 5.7 million, from 52.2 million in 2020 to 57.9 million in 2021. The weak economic situation, which is reflected in high inflation, high unemployment, and continued depreciation of the domestic currency, contributes partly to the rising number of inactive bank accounts. Consequently, improving economic conditions would help tackle the rising inactive bank accounts in the country.