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Macro-Economic News

Only 9% of Nigerian households obtained loans from banks and microfinance institutions since March – NBS

According to the survey, loans taken since mid-March have been predominately informal in nature.

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Getting a loan, What Nigerian banks consider before granting personal loans

Research from the National Longitudinal Phone Survey (NLPS), titled ‘COVID-19 Impact Monitoring’, which was conducted by the National Bureau of Statistics (NBS) has revealed that only 9% of Nigerian households obtained loans from banks and microfinance institutions between March to August 2020.

According to the survey, loans taken since mid-March have been predominately informal in nature, with over 55% obtained from friends or relatives. In addition, loans obtained from formal sources were lower with only 9% of respondents obtaining loans from banks and microfinance institutions, while a further 16% of the respondents obtained loans from cooperatives and savings associations.

READ: Sterling Bank extends loans to non-customers, targets N40 billion

Why this matters

The pandemic affected the livelihoods of Nigerian households, forcing many to take out loans, in order to meet their current obligations. Corroborating this fact, a part of the recently released NBS survey read thus;

“About 1 in 4 households were already indebted prior to the pandemic, while nearly one third have taken out new loans since the onset of the pandemic. Poorer households were more likely than richer households to have loans taken before the start of the pandemic, that they were still repaying. However, the opposite occurs with new loans; with households in the higher quintiles being more likely to have taken new loans than poorer households. This shows that the pandemic has impacted the finances (and livelihoods) of households across the whole income distribution, and not only the most vulnerable.”

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In light of this reality and accompanying the harsh economic consequences of the pandemic, CBN introduced some measures as a way of palliative targeted to households and firms, like the N50 billion COVID-19 credit facility for households and MSMEs. Therefore, the recent survey indicates barriers faced by Nigerian households to obtain formal loans in the face of the crisis, indicating that this might have turned households to friends and relatives for loans.

(READ MORE: What Nigerian banks consider before granting personal loans)

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Breakdown

The breakdown of the survey showed that 55.6% of the respondent households obtained loans from family, friends, and relatives; 16.2% from cooperatives and savings association; 9.0% from banks and microfinance institutions; 6.8% from women group/association; and 17.8% from others.

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British airways

The breakdown is depicted by the chart below;

Source: Nairametrics’ computation from NBS statistics.

Purpose of loan

Just like what was obtainable before the pandemic, new loans were obtained for self-sustenance and business purposes such as paying for foods, farm, and non-farm business inputs, etc. However, there is some sharp contrast as regards the purposes for which the loans were taken prior to, and during the pandemic. Buttressing this point is a part of the survey that read thus;

“About 51% of households that obtained loans after the pandemic began, used these loans for purchasing food, compared with 41% of households with existing loans, indicating that loans taken since the start of the pandemic were used to sustain households’ basic needs. There is no difference in the share of loans taken to pay for health expenses when comparing loans taken before and after the pandemic, but the share of loans being used for education expenses was substantially reduced, either due to the timing of the survey (at the end of the school year) or due to most schools being closed, as part of the mitigation efforts by the government. A substantial share of households with both new and existing loans are concerned about repayment, with more than 70% of households reporting that they are either very worried or somewhat worried about being able to repay their loans.”

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Chidi Emenike is a graduate of economics, a Young African Leadership Initiative Fellow and an Investment Foundations certificate holder. He worked as a graduate Teaching Assistant in the Federal College of Education Kano and is also a trained National Peer Group Educator on Financial Inclusion

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    Economy & Politics

    Nigerian states generate N1.31 trillion IGR in 2020 as Lagos dwarfs others

    The 36 states and the Federal Capital, generated a sum of N1.31 trillion as Internally generated revenue (IGR) in 2020

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    FAAC, IGR, Fiscal federalism in Nigeria, NEC Inauguration, Bailout Fund: FG begins deduction of N614 billion from states’ allocation in 2 weeks , Ekiti, Enugu, Bayelsa, 12 others attract no investment in 1H , States’ debt stock, Fiscal federalism

    The 36 states and the Federal Capital Territory generated a sum of N1.31 trillion as Internally generated revenue (IGR) in 2020. This was contained in the state IGR report, which was recently released by the National Bureau of Statistics (NBS).

    According to the report, the states’ IGR declined by 1.93% from N1.33 trillion, recorded in the previous year to N1.31 trillion in 2020. It however increased by 11.7% compared to N1.69 trillion recorded in 2018.

    The decline may be due to the effects of the covid-19 pandemic on the various states of the federation, as they were forced to implement lockdown protocols to curb the spread of the disease in the country.

    Highlights

    • States generated N1.09 trillion from taxes in the year 2020, accounting for 83.3% of the total IGR received in the year.
    • Tax revenue also declined, when compared to N1.11 trillion collected in the previous year. This represents a 2.25% decline year-on-year.
    • Lagos State recorded the highest Internally Generated Revenue of N418.99 billion, accounting for 32.1% of the total and closely followed by Rivers State with N117.19 billion.
    • Others with the highest IGR in 2020 include Abuja (N92.06 billion), Delta (N59.73 billion), and Kaduna (N50.75 billion).
    • Kebbi State recorded the highest year-on-year growth of 87.02%, closely followed by Ebonyi at 87.3%. Oyo State grew its IGR by 42.23%, Borno (41.63%), while Katsina grew by 34.16%.
    • On the flip side, Benue State recorded the highest year-on-year decline of 41.38%, followed by Sokoto State, which dipped by 37.93%, Kwara (36.03%), Jigawa (32.95%), and Ogun State (N28.44%).

    A cursory look at the data shows that the States recorded the highest quarterly IGR in the first quarter of the year, before the covid-induced lockdown in March 2020. It however dipped significantly by 25.53% to stand at N269.88 billion in Q2 2020.

    States generated a sum of N338.57 billion in Q3 2020 and then recorded a marginal decline in Q4 2020 to stand at N335.25 billion.

    Lagos dwarfed others

    Lagos State recorded the highest internally generated revenue in 2020, having made N418.99 billion, accounting for 32.08% of the total states’ IGR recorded in the period under review.

    • It is no surprise that Lagos State makes this much revenue as it is regarded as the commercial hub of Nigeria.
    • According to the data from NBS, Rivers State is a distant second on the list with N117.19 billion as IGR, representing 8.97% of the total, while the Federal Capital Territory, Abuja followed closely with N92.06 billion, representing 7.05% of the total recorded in the year.
    • Others on the list include Delta State (N59.73 billion), Kaduna State (N50.77 billion), Ogun (N50.75 billion), and Oyo State with N38.04 billion.

    Kebbi, Ebonyi boosted revenue by over 80%

    Kebbi State and Ebonyi State grew their internally generated revenue by over 80%, with Kebbi recording 87.02% growth in IGR to stand top on the list of states with the highest growth rate; followed closely by Ebonyi State with 82.3% growth in IGR to stand at N13.59 billion.

    • Oyo State grew its IGR by 42.23%, Borno (41.63%), Katsina (34.16%), and Gombe (25.5%).
    • Meanwhile, 18 out of the 37 states of the federation recorded a decline in IGR in 2020, a list led by Benue State, having dipped its annual IGR by 41.38%, followed by Sokoto with 37.93%, Kwara (36.03%), Jigawa (32.95%), and Ogun State with a decline of 25.44%.

    What this means

    • The decline in states’ internal revenue was caused by the pandemic which struck earlier in 2020, disrupting economic activities in the country.
    • Nigeria recorded a recession in the third quarter of 2020, after a consecutive economic contraction, recorded in Q2 and Q3 2020.
    • It, however, recovered from the recession in the fourth quarter. It is therefore hoped that as economic activities resume fully in the country, the states will be able to boost their revenue in the short-to-medium term.

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    Macro-Economic News

    Nigeria’s inflation rate surges to 18.17% in March 2021

    Nigeria’s inflation rate for the month of March 2020, rose to 18.17% from 17.33% recorded in February 2021.

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    Nigeria’s inflation rate for the month of March 2020, rose to 18.17% from 17.33% recorded in February 2021. This represents 0.82% points higher than the February figures.

    This is according to the Consumer Price Index report, recently released by the National Bureau of Statistics (NBS).

    On a month-on-month basis, the Headline index increased by 1.56% in March 2021, this is 0.02% points higher than the rate recorded in February 2021 (1.54 percent).

    Food inflation

    Food inflation, a closely watched index spiked to 22.95% from 21.79% recorded in the previous month.

    • On a month-on-month basis, the food sub-index increased by 1.9% in March 2021, up by 0.01% points from 1.89% recorded in February 2021.
    • The rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, yam, and other tubers, Meat, Vegetables, Fish, Oils and fats, and fruits.
    • Also, the average annual rate of change of the Food sub-index for the twelve-month period ending March 2021 over the previous twelve-month average was 17.93%, representing 0.68% points from the average annual rate of change recorded in February 2021 (17.25%).

    Core inflation

    The ”All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce rose to 12.67% in March 2021, up by 0.29% when compared with 12.38% recorded in February 2021.

    • On a month-on-month basis, the core sub-index increased by 1.06% in March 2021. This was down by 0.15% when compared with 1.21% recorded in February 2021.
    • The average 12-month annual rate of change of the index was 10.01% for the twelve-month period ending March 2021; this is 0.76 percent points lower than 10.77% recorded in February 2021.
    • The highest increases were recorded in prices of Passenger transport by air, Medical services,
      Miscellaneous services relating to the dwelling, Passenger transport by road, Hospital services, Passenger transport by road.
    • Others include; Pharmaceutical products, Paramedical services, Vehicle spare parts, Dental services, Motor cars, Maintenance and repair of personal transport equipment, and Hairdressing salons and personal grooming establishment.

    Meanwhile, the urban inflation rate rose to 18.76% (year-on-year) in March 2021 from 17.92%
    recorded in February 2021, while the rural inflation rate jumped to 17.6% in March 2021 from 16.77% in February 2021.

    State inflation rate

    • In March 2021, all items inflation on year on year basis was highest in Kogi (24.51%), Bauchi (22.24%), and Sokoto (20.70%), while Imo (16.08%), Kwara (15.34%), and Cross River (14.45%) recorded the slowest rise in headline Year on Year inflation.
    • In terms of food inflation, on a year on year basis was highest in Kogi (29.71%), Sokoto (27.02%), and Ebonyi (26.59%), while Abuja (20.10%), Kebbi (19.98%), and Bauchi (18.61%) recorded the slowest rise .in year on year inflation.

    What this means

    • The galloping nature of Nigeria’s inflation is an indication of the dwindling purchasing power of Nigerians.
    • This implies that Nigerians spent more on purchasing goods and services in the month of March, compared to February.
    • The last time Nigeria recorded an inflation rate higher than 18.17%, was in January 2017 when headline inflation stood at 18.72%.

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