Photograph — dailypost.ng

The Nigerian economy has suffered a gradual downturn following the crash of global oil prices in 2014. The country’s over dependence on the commodity, coupled with its import dependent disposition and depleted foreign reserves have meant a sharp slowdown in economic growth. The exchange rate peg instituted by the central bank last year only exacerbated the crisis as foreign investors began to divest their exposure in the country and the exchange rate plummeted.

Earlier in June however, Central Bank of Nigeria (CBN) decided to reverse exchange rate peg in favour of a free float (in theory). Since then over $1 billon have come into the country but the exchange rate has continued to plummet amidst persistent shortage of supply of the US dollar.

Nigeria officially fell into recession as GDP shrank by 2.06 percent year-on-year in the second quarter of 2016, compared to a 0.36 percent drop in the previous period. Inflation rate as of August stands at 17.6 percent, which marks the ninth consecutive rise in inflation since December 2015.

Below is the Ventures Africa Weekly Economic Index, giving you a glimpse into the recent activities in Nigeria’s economy as well as changes that could affect the economy:

Exchange rate
CBN floats Niara

The naira dollar rate appreciated by 2 percent this week on the parallel market, up from N470/$ to N460/$. The interbank market has however remained steady throughout the week at N306/$. Huge forex supply ($45 million) sourced through foreign remittances/inflow by a global forex dealer (Travelex) may have been behind the currencies strong performance. Travelex is expected to facilitate similar amounts of money supply in subsequent weeks and this could reduce dollar hoarding activities of some speculators. A continued appreciation of the naira will reduce the cost of imported raw materials for manufacturers which should enhance productivity.

What happened to price of crude oil?

Kenya oil

Despite the fall in prices on Friday, oil prices ended the week up 1.08 percent. Marking the fourth consecutive week of gains and the longest weekly winning streak since April. U.S. crude settled down 9 cents at $50.35 a barrel, closing the week up 1.1 percent. Crude prices fell Friday amidst skepticism that major oil producers will be able to coordinate the production cut they agreed to last month. Markets may be concerned about the persistent over supply of oil. OPEC is expected to meet again in late November to agree on details of the proposed production cut to cap total output under 33 million barrels a day, from the current 33.39 million barrels. Even in the face of this oil cut It may still take months for the markets to adjust.

What happened with Inflation?

Naira-venture-africa

The inflation rate rose for the 10th consecutive months Consumer Price Index revealed that Inflation rate for the month was 17.9% compared to 17.7% In August. The NBS attributed the rise to a higher increase in the prices of fashion related items as well as electricity and energy related prices. The rate of increases However, moderated for the second month running indicative of a slowdown in the rise of across board.

Nigerian Stock Market Summary

stock_market

NSE All Share Index closed on a positive note at 27,861.03 up 0.02% from the previous day. Market capitalization closed at N9.57 trillion. The figure represents a 0.09 percent increase from last week’s close when the NSE All Share Index was 27,835.22.

This week the value of shares traded on the Kenyan stock exchange surpassed Nigeria’s for the first time on record in September, as foreign investors shunned the West African economy, battered by militant attacks on oil facilities and shortages of foreign exchange.

Changes In monetary policy

CBN-building

The Central Bank of Nigeria issued a new circular indicating that it will undertake a one off intervention in the foreign exchange (forex) market by selling forex to the following industries using Forwards:

  1. Raw materials and machineries for manufacturing companies;
  2. Agricultural chemicals; and
  3. Airlines

Below is a snapshot of relevant economic indicators

GDP Growth Rate| -2.06% (2016Q2)
Inflation Rate| 17.9% ( September 2016)
Unemployment rate| 13.3% (2016 Q2)
Underemployment rate – 19.3% (2016 Q2)
MPR – 14% (July 2016)
CRR – 22.5% (July 2016)
Liquidity ratio – 30% (July 2016)

Elsewhere on Ventures

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