The Nigerian economy has been severely hit by the crash of global oil prices since 2014. The country’s over-dependence on oil, 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 of Nigeria last year only exacerbated the crisis as foreign investors began to divest their exposure in the country and the exchange rate plummeted. Even as the policy has been revered the exchange rate 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:
The naira dollar rate has remained steady throughout the week at N455/$. The rate represents a further fall in the currency that began the week at 460/$. The interbank market however remained steady throughout the week at N306/$. Huge forex supply ($45 million) sourced through foreign remittances/inflow by a global forex dealer (Travelex) is 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. Some reports however suggest that the international money operator (Travelex) is already showing signs of faltering and may not be able to adequately provide liquidity in the near future.
What happened to price of crude oil?
Brent crude oil prices ended the edged up 0.05 percent to $51.79 compared to $51.52 at the start of the week. WTI crude similarly saw a rise in price from $49.94 to $50.91. This marks the fifth consecutive week of gains and the longest weekly winning streak since April. Crude oil prices have rallied around $50 mark this month. The World Bank is raising its 2017 forecast for crude oil prices to $55 per barrel from $53 per barrel as members of the Organization of the Petroleum Exporting Countries (OPEC) prepare to limit production after a long period of unrestrained output. “However, there is considerable uncertainty around the outlook as we await the details and the implementation of the OPEC agreement, which, if carried through, will undoubtedly impact oil market,” said John Baffes, Senior Economist and lead author of the Commodity Markets Outlook.
Nigerian Stock Market Summary
Nigerian stocks closed trading on a negative note as the all share index dropped -0.01% from the previous day. Market capitalization at the close of trading was N9,478,965,488,984.16. This represents a 0.01 fall in the all share index from the start of trading on Monday.
Highlights of today’s trading session.
- NSE All Share Index was 27,596.82 down -0.01%.
- Market capitalization closed at N9.48 trillion.
- Volume of shares traded was 70,937,515.00 units
External reserves down
Data from the website Central Bank of Nigeria reveals that the country’s external reserves has dropped to be below $24 b ($23.95b) , the lowest in about 11 years. External reserves stood at about $23.9 billion back in October 2015
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)