Macroeconomic Report & Economic Updates

Discussions are underway between the Nigerian National Petroleum Corporation (NNPC) and a range of foreign and Nigerian trading houses with the NNPC aiming to raise $1 billion oil prepayment towards the revamping of the Port Harcourt refinery.¹ The funds acquired are expected to be repaid through the delivery of refined products over a span of seven years. In 2019, the refineries of Nigeria lost approximately N167 billion ($439.47 million) leading to the shutting down of the refineries in April 2020 for rehabilitation. If the project is successful, Nigeria’s fuel import bill will be reduced. Additionally, it would be the country’s second oil-backed financing since the onset of the COVID-19 pandemic. Currently, a key financing source is the African Export-Import (Afrexim) Bank. Some foreign banks have stated their aversions to participating or contributing to the project due to their consideration of Nigeria as a high-risk country and low credit availability. The use of sales of refined products to finance the rehabilitation of the refinery provides the appropriate incentive for successfully completing the project. However, the use of public-private partnerships in managing the refinery should be considered in order to enhance efficiency and effectiveness.

Discussions are underway between the Nigerian National Petroleum Corporation (NNPC) and a range of foreign and Nigerian trading houses with the NNPC aiming to raise $1 billion oil prepayment towards the revamping of the Port Harcourt refinery.¹ The funds acquired are expected to be repaid through the delivery of refined products over a span of seven years. In 2019, the refineries of Nigeria lost approximately N167 billion ($439.47 million) leading to the shutting down of the refineries in April 2020 for rehabilitation. If the project is successful, Nigeria’s fuel import bill will be reduced. Additionally, it would be the country’s second oil-backed financing since the onset of the COVID-19 pandemic. Currently, a key financing source is the African Export-Import (Afrexim) Bank. Some foreign banks have stated their aversions to participating or contributing to the project due to their consideration of Nigeria as a high-risk country and low credit availability. The use of sales of refined products to finance the rehabilitation of the refinery provides the appropriate incentive for successfully completing the project. However, the use of public-private partnerships in managing the refinery should be considered in order to enhance efficiency and effectiveness.

Data from the International Monetary Fund (IMF) shows that real GDP is projected to contract by 3.25 percent at the end of 2020 due to the negative impact of the COVID-19 pandemic.¹ The economy is expected to recover with minimal growth of 1.5 percent in 2021 with output returning to its pre-pandemic level by the year 2022. Fiscal deficits are expected to remain elevated as revenue collections have significantly dropped. Inflation is also expected to increase, which places the economy in a very vulnerable state. The IMF suggests that major policy adjustments such as exchange rate and monetary policy reforms, increased revenue mobilization and structural reforms need be implemented to achieve economic recovery and growth. The removal of fuel subsidy as well as the devaluation of the naira signals adequate political will in embarking on bold reforms. However, future economic reforms need to be proactive rather than reactionary, and wholistic rather than in parts. Furthermore, the government should leverage on high level public officials that have demonstrated the will for achieving structural change, technical assistance from external development institutions, and the experience of best practice countries.

According to the National bureau of Statistics¹, total value of Nigeria’s merchandise trade grew to N8,374.4 billion in Q3 2020, representing a 34.15% increase when compared to the previous quarter. The bulk of the country’s trade for the period comprises imports, which accounted for 64% while exports formed 36% of total trade (majorly from sale of crude oil produce). Further disaggregation of the data shows that while the value of export is gradually rising (34.85% more than Q2 2020) due to relative increase in economic activities, it remains significantly less by 43.41% in Q3 2019. Whereas imports continue to soar high, thereby worsening the widening trade deficit. It is therefore critical for government to intensify its efforts towards economic diversification, and implement better policies/ strategies to support non-oil exports, in order to curtail this negative trend.

The Central Bank of Nigeria (CBN) is taking critical steps in efforts to close the 8.5 percent gender financial inclusion gap and achieve 95 percent financial inclusion by 2024. 34,000 women have accessed 62 percent of the Micro, Small and Medium Enterprises Development Fund (MSMEDF) while over N9.5 billion has been disbursed to over 3,600 women through the Agribusiness Small and Medium Enterprises Equity Investment Scheme (AGSMEIS). Women have also significantly benefitted from other interventions such as the Textile Sector Intervention Facility, Real Sector Support Facility, and Commercial Agriculture Credit Scheme¹. In order to ensure gender parity in financial inclusion, women should be incorporated into high wage sectors and become better educated to enable them earn sufficient income and access the financial services available.