Macroeconomic Report & Economic Updates

Nigeria external reserves exceeded US$ 40 billion on 18^th November 2021 according to Central Bank of Nigeria (CBN) dataset on external reserves.² A total of US$ 5.5 billion external reserves were earned between 27th September 2021 and 27th October 2021, as the external reserves increased from US$ 36.3 billion on 27th September 2021 to 41.8 billion on 27th October 2021, which indicates an increase of 15 percent over a month. Since mid-November 2019, external reserves have been consistently lower than US$ 40 billion. The upward trend in reserves can be attributed to several factors including Special Drawing Right allocation of US$ 3.35 from the IMF, and the CBN stoppage of selling dollar to Bureau de Change. The upward movement in external reserves would help in reducing pressure on naira. Thus, the naira is expected to maintain a stable rate as the reserves increase. Ongoing reforms in the exchange rate management system aimed at unifying the exchange rate should be sustained and improved upon. A unified exchange rate erodes arbitrage associated with multiple exchange rates. Furthermore, the less diversified structure of the country’s export bases which makes the country to depend on few commodities for external reserves is unhealthy for the economy. Existing support schemes for the manufacturing sector both in terms of technical skills and financial resources should be strengthened to increase their output level for the domestic and the export markets.

The Central Bank of Nigeria (CBN) introduced the Tertiary Institutions Entrepreneurship Schemes (TIES) to promote the culture of entrepreneurship among the undergraduates and graduates of Nigerian Universities and Polytechnics. The TIES represents an innovative financial model, comprising three different categories of facilities for entrepreneurship in agribusiness, information technology, creativity industry, and science and technology. The TIES was enacted in response to the economy's rising levels of youth unemployment and underemployment. The scheme seeks to finance 25,000 start-ups and businesses led by graduate entrepreneurs, with the goal of creating 75,000 jobs per year. This is a timely intervention, which is expected to lead to the birth of innovative businessess in the country. It is important that the selection of graduate entrepreneurs under the scheme follows a transparent process. In addition, a structure needs to be created to promote effective use of the finance provided, in order to avoid diversion of funds for non-business related expenses. Given that many graduates have innovative ideas but lack funding, it is critical that TIES is apolitical, and transparent to ensure equal opportunities to applicants, regardless of gender and geographical location.

According to the National Bureau of Statistics (NBS), the average price of Premium Motor Spirit (PMS) commonly referred to as petrol increased by 2.36 percent year-on-year but experienced a month-on-month decrease of 0.04 percent, from N164.91 in August 2021 to N164.85 in September 2021. In September, the top three States with the highest average price of PMS were Abia (N172.50), Ekiti (N170.62) and Lagos (N167.80). Additionally, the States with the lowest average PMS were Ebonyi (N162.27), Ondo (N162.20) and Kano (N160.83). The variation in the price of petrol indicates that the Petroleum Equalisation Fund (PEF) had fallen short of its goal of administering a uniform pump pricing for petroleum products across the country. Furthermore, because of the inelastic nature of PMS demand, price volatility and discrepancy immediately affect the pricing of other products and services across the country, thus affecting the optimality of monetary policy. With the recent abolishment of the PEF, structural improvements in terms of absorbing transportation costs are required to reduce cost differentials in the transportation of PMS across the country.

Under the Nigeria Youth Investment Fund (NYIF), the Central Bank of Nigeria (CBN) as part of its development finance initiative in collaboration with the Federal Ministry of Youths and Sports Development has so far released the sum of N3 billion to 7,057 beneficiaries (4,411 individuals and 2,646 SMEs) across the country.¹ The NYIF programme, launched in October 2020 by the CBN is designed to improve the access to finance for youth and youth-owned enterprise. The programme seeks to provide Nigerian youth between the ages of 18-35 with investment inputs required to build successful businesses and become sustainable employers of labour in critical economic and social sectors. The NYIF was designed to curb youth restiveness and boost the managerial capacity of youths. This programme is expected to grow the economy, reduce unemployment, and diversify the economy. Created exactly a year ago, there is need for the CBN to publish a report which highlights the economic impact of the Fund, in terms of the jobs created and the milestones attained in view of ascertaining its challenges and thus strengthening the programme.

According to the Debt Management Office (DMO), there was an increase in the country’s total public debt stock in Q2 2021 from the total recorded in Q1 2021.¹ The total public debt which was reported as N33,107,247.23(in millions) in Q1 2021, increased to N35,465,005.39(in millions)  in Q2 2021 as reported by the DMO. Although domestic debts accounted for 61.34 percent of the total public debts in Q2, which is less than the 62.44 percent it accounted for in Q1, the total amount of domestic debts increased from N20,636,881.02(in millions) in Q1 2021 to N21,754,127.62(in millions)  in Q2 2021.However,  external debt which made up 37.67 percent of the total public debts in Q1 2021 experienced a  slight increase to account for 38.66 percent of the total public debt in Q2 2021. The total amount of external debts also increased from N12,470,366.21(in millions)in Q1 2021, to N13,710,877.77(in millions)  in Q2 2021. As the government continues to pursue debt financing as a source of funding public expenditure, it should ensure that such funds are invested  mostly on capital expenditures which will generate funds for servicing these debts to avoid default in repayment which increases the interests on them.