Macroeconomic Report & Economic Updates

As part of its ongoing intervention to address food insecurity, the Central Bank of Nigeria (CBN) has disbursed a total of N798.09 billion to the Anchor Borrowers Programme (ABP) since its inception in November 2015.¹ The cumulative disbursement has been given to 3.9 million smallholder farmers cultivating 4.9 million hectares of land, according to the CBN’s Monetary Policy Committee. In addition, the CBN disbursed N708.39 billion to 657 large-scale agricultural projects under the Commercial Agricultural Credit Scheme (CACS), and N134.57 billion to 38,140 beneficiaries under the Agribusiness/Small and Medium Enterprise Investment Scheme (AGSMEIS). As the government continues to implement policies intended to improve agricultural productivity, it is important that the disbursement of these interventions is transparent. Hence, transparency mechanism should be developed and enforced within all agriculture related interventions to prevent diversion of funds as well as increase accountability. Furthermore, monitoring and evaluation mechanisms are necessary to ensure that the productivity of the sector is improved over time.

The Monetary Policy Committee of the Central Bank of Nigeria (CBN) retained the Monetary Policy Rate (MPR) at 11.5 percent during its 281^st meeting ¹. Similarly, other monetary parameters were kept constant including the Cash Reserve Ratio at 27.5 percent and the Liquidity Ratio at 30 percent. The rates were retained largely as a result of the declining rate of inflation and the improvement in the growth rate of Gross Domestic Product. The continuous double digit MPR may however limit the availability of funds to the private sector, which is required to spur aggregate supply in order to achieve lower levels of inflation. This is underpinned by the fact that inflation in Nigeria is recognised to be mainly cost push rather than demand pull, and as such cannot be solely contained by monetary policy. Going forward, programmes to address structural factors that continue to exert upward pressure on prices should be integrated with ongoing monetary policy interventions.

Data on rail transportation showed that a total of 565,385 passengers travelled via the rail system in Q2 2021. This figure, when compared to 108,238 passengers recorded in Q2 2020 and 424,460 in Q1 2021, represents 422 percent year-on-year and 33 percent quarter-on-quarter growth respectively.¹ A total volume of 42,782 tons of goods/cargo also travelled through the system in Q2 2021, which is a 392 percent growth over the 8,691 tons recorded in Q2 2020, and 307 percent increase over the 10,511 tons recorded in Q1 2021. The corresponding revenue generated from passengers in the period under review was put at N1 billion as against N893 million in Q1 2021; and the revenue generated from goods/cargo was put at N72 million as against N26 million in Q1 2021. The data indicates the growing demand for rail transportation in Nigeria post COVID-19 and the government’s efforts to revive the railway industry. The convenience, affordability, and safety of railway transportation implies that expanding coverage through public and private investment and partnership will promote economic activities and growth.

 Nigeria’s merchandise trade with the rest of the world grew by 23.23 percent between Q1 2021 and Q2 2021¹. Similarly, year-on -year merchandise trade increased by 88.71 percent between Q2 2020 and Q2 2021, largely as a result of increases in oil exports. Furthermore, disaggregated data shows that the value of imports rose by 67.47 percent between Q2 2020 and Q2 2021 while exports increased by 128.29 percent within the same period. However, the export value of manufactured goods declined by 16.7 percent between Q2 2020 and Q2 2021. The growth recorded in exports signifies an improvement in the economy which should also ease the pressure on the exchange rate. However, the decline in the export value of manufactured goods implies that the efforts on economic diversification has not yielded results. Consequently, there is an urgent need to implement policies which can boost manufacturing sector output in order to avoid economic uncertainties emanating from crude oil price volatility. More specifically, policies that reduce interest rates, encourage knowledge and technology spillovers, and the adoption of mechanized processes are likely to be beneficial for manufacturing sector productivity.

In the second quarter of 2021, the country’s Gross Domestic Product (GDP) grew by 5.01 percent (year-on-year) in real terms, marking three consecutive quarters of growth after the negative growth rates recorded in the second and third quarters of 2020.¹ The rise in real GDP saw the oil sector contributing 7.42 percent while 92.58 percent was contributed by the non-oil sector. The steady recovery of the Nigerian economy since the end of 2020 is attributed to the increase in economic activities relative to pre-COVID-19 levels, and the easing of travel restrictions both locally and internationally. However, further insights show that real GDP grew at -0.79% in Q2 2021 compared to Q1 2021, reflecting slightly slower economic activities than the preceding quarter due largely to seasonality. It is important that the government adopts a multi-pronged solution to consolidate the recovery of the economy. This should include improving the ease of doing business, implementing expansionary fiscal policies to improve economic infrastructure, as well as improving security to boost aggregate supply.