Welcome to Nairametrics’ Weekly Macroeconomic Roundup. It’s time to look back at some of the major economic news stories during the week that ended on November 26.
Last week, Nigeria’s monetary authorities intensified efforts at solving Nigeria’s many fiscal and macroeconomic problem. First, the newly redesigned naira was launched, even as the Central Bank of Nigeria hiked lending rates all in a bid to curb the high inflation. All these and more in today’s weekly roundup. Let’s begin…
IMF recommendation to CBN on private sector
The week began with the International Monetary Fund (IMF) recommending that the Central Bank of Nigeria (CBN) should stop its intervention policies in the economy amidst the rising inflation rate. The IMF made these recommendations in its concluding Statement of the 2022 Article IV Mission published on November 18, 2022.
Nigeria’s central bank has over the last five years intervened in the economy via specially designated loans to key sectors of the economy. Data from the apex bank reveals the central bank has intervened with about N11 trillion designated under “claims on other sectors” and another N27 trillion to the central government (inclusive of the N22 trillion in ways and means).
Speaking about Ways and Means, Nairametrics findings show that the Money supply in Nigeria crossed N50 trillion in October 2022. This is according to data obtained from Data from the central bank of Nigeria. This is the highest level ever reported for one of the most important monetary-related statistics tracked by Nigeria’s central bank or any central bank in the world.
The amount of money supply in the country has risen by N6.1 trillion this year alone having closed at N44.4 trillion at the end of 2021. The increase is on track to beat the N6.6 trillion achieved in the whole of 2021.
Another major highlight of the week is the launch of the much-awaited new naira notes. So special is the occasion that the central bank launched a countdown clock showing days left till they are released.
The naira notes were launched on schedule by President Muhammadu Buhari at the Stae House in Abuja CBN Governor Godwin Emefiele explained that the new banknotes will immediately start circulating after the launch, rather than wait for the initial date of December 15, 2022. According to the Governor, the new notes will help reduce the volume of currency in circulation, hence curbing the rising inflation rate.
In line with combating inflation, CBN disclosed that it will reduce the volume of N500, and N1000 in circulation. The governor made this known in his briefing to the media at the monetary policy communique held on November 22nd, 2022.
Mr Emefiele claimed the effort is aimed at curbing the inflation rate which he partly blamed on the higher-denominated naira notes.
Before the launch of the new banknotes, Emefiele told diaspora Nigerians that CBN will not wait for them to return their old N200, N500, and N1000 banknotes.
According to him, the apex bank will not delay the launch of the new banknotes just to allow Nigerians abroad to deposit the old naira in their possession.
Moving on to the all-important CBN action on the MPR, Nairametrics correctly predicted that the CBN would raise rates. Our in-house analysts expected the hawkish stance, albeit between 50bps and 100bps, which would bring the MPR to about 16% or 16.5%.
As predicted, the CBN MPC voted to increase the benchmark interest rate (MPR) by 100 basis points to 16.5%, its highest level since 2001. MPC members said this will help restore investor sentiment while curbing the rising rate of inflation.
More tax for the wealthy
The Director-General of the Budget Office of the Federation, Ben Akabueze advocated the imposition of more taxes on rich Nigerians to improve revenue generation. Akabueze made the call during the launch of the World Bank’s report titled, ‘Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustained Results, in Abuja.
The budget office boss had insisted that wealthy Nigerians must be made to pay taxes commensurate with their earnings.
The World Bank has said that the Nigerian government spends only $220 per Nigerian per year, and at merely 12% of GDP, this is one of the lowest levels of spending in the world. The amount is 12 % of GDP and must be improved upon to boost economic development.
The World Bank added that to promote economic development, Nigeria needs to increase spending from its current very low levels.
The World bank also weighed in on the issue of subsidy, advising the government to scrap it because Wealthy people in Nigeria benefit more from petrol subsidies than poor people. The World Bank said poor people benefit only 3%
The report went further to state that universal price subsidies for liquid petroleum products are almost always regressive because the rich consume far more than the poor both directly and indirectly.
Slowing economy
Nigeria’s economy bowed to pressure in the third quarter, dropping by 2.25%. The latest data released by the National Bureau of Statistics (NBS) revealed that this is the slowest since the Covid-19 pandemic.
The slow growth is attributable to the base effects of the recession and the challenging economic conditions that have impeded productive activities.
Nigerians groan as house rent doubles in major cities
A special report by Nairametrics showed that the cost of accommodation across major cities in Nigeria has become a huge strain on the finances of average Nigerians, who have been bedevilled by the rising cost of goods and services. This is according to findings by Nairametrics Research.
According to Nairalytics, the research arm of Nairametrics, the cost of accommodation has surged by over 100% in Lagos, Abuja, and Port Harcourt between 2019 and 2022, further fuelling the rising inflation rate in the country.
Rising naira
There was a moment of cheer as the Black market exchange rate appreciated to N772/$1 on 24th November 2022. The rise in the naira represents a 0.39% gain from N775/$1 recorded in the last two trading sessions.
This is according to information from black market traders who spoke to Nairametrics. In the same vein, the naira strengthened against the US dollar on Thursday at the cryptocurrency peer-to-peer market, closing at a minimum of N777/$1, representing a 0.24% appreciation from N778.9/$1 that was recorded in the previous trading session. The week had opened with the naira closing flat at N780/$1 on 21st November 2022