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Macro-Economic News

CBN intervenes in FOREX market with $5.62 billion in Q4 2020, up by 28.7%

The CBN intervened in the foreign exchange market with sales FOREX to dealers valued at $5.62 billion in Q4 2020.

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CBN forex restrictions on food itemsCBN approves new cheque standard for banks

The Central Bank of Nigeria intervened in the foreign exchange market with sales of FOREX to dealers valued at $5.62 billion in the fourth quarter of 2020. This was disclosed in the Q4 2020 economic report published by the Apex bank.

In the period under review, FOREX sales increased by 28.7% compared to $4.37 billion recorded in the previous quarter, while it decreased by 46.1% compared to $9.98 billion recorded in the corresponding period of 2019.

According to the report, the increase was largely attributed to the increased interventions in the BDC and I&E windows during the quarter. Meanwhile, the year-on-year decline can be attributed to the decline in export earnings due to the crash in global oil prices.

Further disaggregation showed that BDC sales and I&E sales rose to $1.36 billion and $1.62 billion from $340 million and $390 million, recorded respectively, in the preceding quarter.

Similarly, Interbank sales and SME intervention increased by 12.2% and 3.1% to $160 million and $310 million, respectively, from the levels recorded in Q3 2020. The Secondary market Intervention Sales (SMIS) and matured swap transactions, however, fell by 12.8% and 62.9% to $1.71 billion and $460 million, compared to the previous quarter.

A cursory look at the data obtained from the CBN showed that the apex has intervened in the Nigeria Foreign Exchange market with a sum of $62.16 billion, recording the highest in Q1 2020 ($13.38 billion) before the spread of the covid pandemic.

What you should know

The Apex bank had suspended the sales of foreign exchange to operators of Bureau de Change in March 2020 after the Association of Bureau de Change Operators of Nigeria (ABCON) requested that a market holiday be declared on its members’ weekly bidding.

  • CBN however, resumed sales of FOREX to Bureau De Change later in August 2020, which was attributed to the limited resumption of international travel in the country.
  • It is worth noting that the Association of Bureau de Change Operators of Nigeria (ABCON) has vowed to continue to defend the naira through regulatory compliance and constantly supporting the CBN in achieving a stable exchange rate.
  • Meanwhile, Nairametrics reported that forex turnover in the Investors and Exporters window increased by 359.4% on Wednesday 17th March 2021 to stand at $148.54 million compared to $32.33 million recorded in the previous day.

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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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Macro-Economic News

Nigerians spent N13.9 trillion on household consumption in Q4 2020, an increase of 16.6%

Household consumption expenditure of Nigerians rose by 16.59% in Q4 2020 to stand at N13.92 trillion.

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Misery Index
Household consumption expenditure of Nigerians rose by 16.59% in Q4 2020 to stand at N13.92 trillion

The final consumption expenditure of households in Nigeria hit N13.92 trillion in the fourth quarter of 2020. This is according to the recently published Nigerian Gross Domestic Product report (Expenditure and Income Approach), by the National Bureau of Statistics (NBS).

According to the report, Nigeria’s household consumption rose by 16.59% in Q4 2020 to stand at N13.92 trillion, compared to N11.94 trillion recorded in the corresponding quarter of 2019. It also represents a 20.76% increase compared to N11.52 trillion recorded in the preceding quarter.

READ: Nigerians earn N16 trillion as salary and wages in 2017 up 11%

Major Highlights

  • Household consumption expenditure in Q3 and Q4 2020 grew by 6.1% and 16.59% year-on-year in real terms.
  • The annual growth rate in real household consumption expenditure stood at 0.81% as against a decline of 1.06% recorded in 2019.
  • Government consumption expenditure recorded growth rates of 99.18% and 12.13% in Q3 and Q4 2020 respectively, while the annual growth rate stood at 61.58% in 2020 compared to 8.78% recorded in 2019.
  • Although Net Exports recorded positive growth rates in the first two quarters of 2020 but turned negative in the third and fourth quarters of 2020. It dipped by 52.39% and 72.61% in Q3 and Q4 2020 respectively.
  • By annual consideration, net export declined by 29.55% in 2020 as against a growth of 7.64% recorded in the previous year.

However, national disposable income grew by 4.44% in the third quarter of 2020 and 3.13% in the fourth quarter of the year, while a 3.34% growth was recorded as the annual growth compared to 0.35% growth recorded in 2019.

Compensation of employees, dipped by 2.32% in Q3 2020, before recording an increase of 6.36% in the fourth quarter of the year. The decline in the third quarter could be largely attributed to the downturn caused by the covid-19 pandemic, forcing many organisations in the country to either downsize their staff strength or embark on a pay cut.

READ: Covid-19: Nigerian record worst consumption expenditure in over 12 quarters

What this means

  • Consumption expenditure is an important factor in determining economic growth for any country. Nigeria recorded its worst quarterly consumption expenditure in the second quarter of 2020.
  • This was due to the effect of the covid-19 pandemic on the Nigerian economy, which eventually led to a second recession in 5 years as Nigeria’s real GDP contracted by 6.1% and 3.62% in Q2 and Q3 2020 respectively.
  • It is, however, important to note that Nigeria recovered from the covid-induced recession in the fourth quarter of the year as the real GDP expanded by 0.11% in Q4 2020.

READ: Nigeria’s GDP contracts by 1.92% in 2020, as economy initiates recovery

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International trade

In the third and fourth quarters of 2020, real exports declined by 42.05% and 57.79%, year on year, resulting in an annual growth rate of -26.96% in 2020. However, on a quarter on quarter basis, real exports remained negative from Q1 2020 to Q4 2020.

Due to declining rates of growth in exports and imports in 2020, the growth in the net balance of trade (or net exports) was negative in Q3 and Q4 2020. On a year-on-year basis, the net trade balance declined by 52.39% in real terms in Q3 and also dipped by 72.61% in Q4.

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READ: CBN blames petroleum import for Nigeria’s $5.2 billion current account deficit

What you should know

  • The Nigerian economy expanded marginally by 0.11% in Q4 2020. It, however, contracted by 1.92% in 2020 to stand at N70.14 trillion in real terms.
  • The final consumption expenditure of households in Nigeria stood at N42.81 trillion in 2020.
  • Individual consumption expenditure for general government stood at N1.68 trillion while collective consumption stood at N4.98 trillion in the same period.

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