The IMF and the World Bank revised Nigeria’s 2022 growth upwards.

• Headline inflation sustained its uptrend in June 2022.





Tayo Busayo, ‘Seun Ibukun-Oni -Nigeria’s price index continued on a fast high rate to hit 463.6 in July 2022 compared to 387.5 in July 2021, making it highest in the last 17 years.

Figures from the National Bureau of Statistics (NBS) on Monday showed that in July 2022, on a year–on-year basis, the headline inflation rate was 19.64 per cent.

This was 2.27 per cent points higher compared to the rate recorded in July 2021, which was (17.38 percent).

This shows that the headline inflation rate increased in the month of July 2022 when compared to the same month in the previous year.

This means that in the month of July 2022 the general price level was 2.26 percent higher than in July 2021.

On a month-on-month basis, the headline inflation rate in July 2022 was 1.817 per cent, which was higher than the rate recorded in June 2022 (1.816 permcent).

Inflation Continues to Run Hot Globally, While The World’s Largest Economy Enters a Technical Recession

Around the world, as inflation continues to run hot and consumer spending becomes further constricted, monetary policy authorities have resolidified their positions to do everything it takes to ensure inflation does not become entrenched, even if outlined policy actions elevate the possibility of slowing economic growth. The United States Federal Reserve came out with guns blazing in July, as it raised its benchmark interest rate by 75bps for the second consecutive month, to a range of 2.25% – 2.50%.

Whilst the Fed is confronted with the dilemma of taming inflation at the risk of a possible recession, the U.S. apex bank has not dismissed the possibility of achieving a soft landing and has stated that its subsequent policy decisions would be largely influenced by unfolding economic data.

Elsewhere, the European Central Bank (ECB) also raised its benchmark interest rate for the first time in over a decade. Within the review month, the ECB instituted a 50bps rate hike relative to expectations a 25bps increase, lifting its bank’s deposit rate to 0.00%, the main refinancing operations rate to 0.50% and the marginal lending facility to 0.75%.

The ECB’s aggressive hawkish move was instituted in a bid to rein in the rising tide of inflation, as consumer prices rose 8.60% y/y in June, in the wake of rising energy prices and overstressed supply chains.

Meanwhile, Q2 2022 GDP growth in the U.S. fell by 0.9% on an annualized basis, representing a second consecutive quarterly decline. The GDP decline rode on the back of declining expenditure by the government, as well as an ebb in residential and nonresidential investments of 13.50%.

While the jury is out on whether the U.S. is in a recession having satisfied the technical definition, the narrative is different in the Eurozone, with the 19-member bloc still reaping the benefits of reopening its economy, after suffering from a covid-induced recession.

Hence, in Q2 2022 the Eurozone grew at an annualized rate of 0.70%, dwarfing market expectations of a 0.20% growth. Notwithstanding the Eurozone’s positive GDP performance, a sustained improvement in the economic outlook of the bloc may be at risk, as the conflict in Eastern Europe rages on and gas supply from Russia remains threatened.

On the local front, the budget office of the federation has revealed Nigeria’s budget performance figures for January – April 2022, spotting revenues from CIT, Customs, and VAT at 99%, 85%, and 98% realization rates, respectively. However, despite the impressive performance of these revenue heads, Nigeria could only meet 33% of its pro-rated revenue target for the period.

This was primarily due to the abhorrent revenue lag in the oil sector, as production fell below target despite higher oil prices. The revenue shortfall led the nation’s debt service-to-revenue ratio to settle at 118%, indicating an impending inability to service debt with overall earnings.

Elsewhere, with inflation printing at a 5-year-high of 18.60% in June, the Nigerian Monetary Policy Committee has renewed its commitment to trim these figures with yet another rate hike, as it made its second hawkish move in the last two months to take the benchmark interest rate up by a percentage point to 14%. The move, according to the apex bank, is expected to rein in inflation and encourage capital inflows.

The Macroeconomy

GDP Growth & Oil Production

Amidst deteriorating global growth forecasts and growing recessionary fears, Bretton Wood institutions like the World Bank and the IMF see improved prospects for Nigeria’s GDP growth in 2022. In Nigeria’s development update for June 2022, the World Bank posited that the Nigerian economy is expected to grow by 3.40% this year, up from the 2.80% forecast given in November 2021. While sighting Nigeria’s deteriorating macroeconomic framework and the economy’s susceptibility to global and domestic headwinds, the World Bank credits the upwards growth revision to the sturdy performance of non-oil segments like Services and Agriculture, as well as the hushed impact of the surge in the price of crude oil on Nigeria’s fiscal and external position. Similarly, in the IMF’s latest World Economic Outlook, Nigeria’s growth forecast for 2022 was revised up by 0.10% to 3.20%, with the non-oil sector taking the credit behind the revised outlook.

Nonetheless, Nigeria’s macroeconomic position remains fragile, due to factors like the ballooning public debt, the perennial exchange rate crisis, unabating inflationary trend, and the inefficiency of the oil sector due to an exorbitant petrol subsidy and the abysmal oil production level.

Elsewhere, OPEC, in its monthly oil market report for July revealed that Nigeria’s oil production advanced on a month-on-month basis by 13.09% to 1.16mbpd in June 2022. However, a quarterly comparison revealed a 12.97% slump in local oil output for Q1 2022, averaging 1.13mbpd in the period. Essentially, factors such as debilitated infrastructure, low oil investments, oil pipeline vandalism and oil theft have constricted local output.

Meanwhile, OPEC left its demand growth estimate for 2022 unchanged at 3.40mbpd. On the supply side, OPEC retained its non-member supply growth for 2022 at 2.10mbpd.

Capital Importation and Foreign Exchange Reserves

The total value of capital importation into Africa’s biggest economy stood at $1.57 billion in the first quarter of 2022, a 28.09% decline from the $2.19 billion recorded in the fourth quarter of 2021. When compared to the corresponding quarter of 2021, capital importation fell by 17.46% from $1.91 billion. Both quarterly and yearly downturns in capital importation resulted from the decline seen in Other Investments.

Breaking down the Capital Importation metric by type, Portfolio Investments which printed at $957.58 million essentially led the pack, accounting for 60.87% of the total capital importation in the review period. This was trailed by Other Investments, which accounted for 29.28% ($490.59 million) and Foreign Direct Investments (FDIs) which accounted for 9.85% ($154.97 million) of total capital imported in Q1 2022.

On a sectoral or nature of business basis, capital importation into banking had the highest inflow of $818.84 million, amounting to 52.05% of total capital imported in the first quarter of 2022. This was trailed by capital imported into the production sector, valued at $223.67 million (14.22%) and the financing sector $199.37 million (12.67%). By bank, Standard Chartered Bank Nigeria Limited ranked highest with $543.20 million or 34.53% of total capital imported into Nigeria, followed by Citibank Nigeria Limited at 27.91% and Stanbic IBTC Bank Plc with 15.99%.

United Kingdom emerged as the leading origin of capital importation into Nigeria with $1.02 billion representing 64.92%. This was followed by capital imports from Republic of South Africa and the United States valued at $117.50 million (7.47%), and $82.07 million (5.22%), respectively. As expected, Lagos State received the lion share of capital inflows, accounting for about 71.16% of the total capital investment flow into Nigeria, while investment into Abuja (FCT) came second at 28.40%.

Nigeria’s foreign reserve inched up by 0.16% during the month of July 2022. According to data obtained from the CBN official website, the 30-day moving average of the foreign reserve level rose by approximately $63.95 million during the month of July 2022 to close at $39.22 billion, compared to $39.16 billion recorded at the end of June 2022.