For the first half of the year, we followed up on macroeconomic issues affecting businesses in Nigeria. While some of these occurred as one-off events, like the Finance Act and the “Naira for Dollar” promotional activity by the Central Bank of Nigeria (CBN) in the first quarter of the year, others continue to linger, such as the inflation rate, insecurity and updates on Covid-19. Today, we will look at some recurring trends and significant activities in other sectors of the economy that have taken place during the third quarter of the year.
There have been quite a number of upwards and downwards fluctuations of the inflation rate, food inflation and core inflation rate in the third quarter of the year.
According to the Consumer Price Index (CPI) report by the National Bureau Statistics (NBS), the inflation rate has reduced to 17.38% in July 2021 compared to 17.75% recorded in June 2021. This signifies a decrease of 0.37% since the previous quarter. Similarly, food inflation rate dropped to 21.03% in July compared to the previous index at 21.83 in June 2021. However, the core inflation rate increased by 0.63%, from 13.09% in June 2021 to 13.72% in July 2021.
In August, however, a further drop in the inflation rate was recorded at 17.01% as against 17.38% in July, while food inflation rates dropped to 20.3% as against 21.03% recorded in July 2021. Similarly, the core inflation rate also dropped to 13.41% from 13.72% in July 2021.
While these changes may not be significant, as prices of goods and services in the country continue to increase, the decline recorded is a sign that inflationary measures are being put in place.
Insecurity remains one of the biggest problems in the country. This is evident in the increased rate of bandit attacks in the Northern and Southern regions in Nigeria. Several attacks in form of kidnaps, terrorism, armed robbery and assaults, as well as riots, have not only been a major source of concern to businesses in terms of security threats, but have proved to be a huge impact to the communities residing in the affected areas. These banditry actions have led to the imposition of strict measures such as curfews, limited supply of food and materials, closure of roads and deployment of the military to affected areas. In rural areas, farmers are afraid to access their farmlands, which is having a major effect on food supply.
The Council on Foreign Relations updated its tracker on 25 August 2021, which highlights the violence perpetrated in the country.
The first quarter of the year recorded the arrival of the first dosage of vaccines in Nigeria, However, as the year progressed, more vaccines were made available. In August, the Director of Public Affairs, Mr.Tunbosun Ogunbawo announced that the second dose of the AstraZeneca vaccines will be administered to those who have taken the first dose. This exercise took place between August 30 and September 24. Despite this, the virus continues to spread and, at the time of writing, the total number of confirmed cases is recorded at 205,047 in Nigeria.
Central Bank of Nigeria
Small and Medium Enterprises (SMEs) received some attention from the Central Bank of Nigeria (CBN). This is following the announcement made by CBN Governor Mr. Godwin Emefiele in the 51st convocation lecture of the University of Lagos in July. According to Mr. Godwin, the apex bank plans to increase its development financial intervention to support SMEs in Nigeria, particularly in the ICT sector. He urged the Government and private sectors to provide support to address the challenges faced by SMEs in the country, as these play a vital role in the growth of the economy.
The CBN has been working on developing a new digital currency known as e-Naira for quite some time. The decision to begin this project follows the increase in the global acceptance of digital currencies in many developed countries. According to the apex body, the e-Naira will solve problems associated with financial inclusion, payment efficiency, revenue and tax collection, as well as promote the cashless policy in Nigeria. In August 2021, CBN announced the engagement of Bitt Inc. as the technical partner to deliver the country’s first digital currency. On September 27, the official e-Naira website went live. We believe this is a major milestone for the country as we await the projected launch of this project on 1 October 2021.
Oil and Gas Industry
The Senate passed the long-awaited Petroleum Industry Bill (PIB), which has been debated on for years as a result of the controversies arising from revenue sharing and terms of exploration between local and international players. Some of the provisions of the PIB include free-market operations in terms of demand and supply, prohibition of gas flaring activities and fair market competition. Although this is a positive step towards improving the oil sector in Nigeria, there is room for further actions on the part of the Government and other regulatory bodies.
In summary, the economy seems to be picking up but at a very slow rate. Nonetheless, we expect to see improvements in the last quarter of the year.
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