The Nigerian economy has faced numerous challenges in time past. However, the events of the last six months have put unprecedented pressure on the capacity and livelihood of average Nigerians.
While insecurity remains a growing concern, macroeconomic indicators paint a rather grim picture of what is happening to businesses and individuals alike, even as the nation draws closer to general elections in 2023.
Recent data from the National Bureau of Statistics show that the country’s inflation rate rose to 17.71% in May 2022 due to a surge in food and energy prices. This galloping inflationary pressure has led the World Bank to predict that an additional 1 million Nigerians will be pushed into poverty by the end of 2022. This follows the estimated 5.6 million Nigerians that fell into poverty due to high inflation in the previous year.
The face-off between Russia and Ukraine has caused a significant surge in the price of crude oil and has consequently led to a global energy crisis. According to the NBS, the price of a litre of diesel increased by 181% to an average of N671.1 from the N238.8 price recorded in the corresponding period of 2021. Similarly, the price of cooking gas also surged significantly, rising by 103% year-on-year to sell at an average of N8,726 per 12.5kg cylinder of gas. This has led to a massive increase in the cost of transportation and business operating costs, thus forcing businesses to cut expenses by reducing working hours and downsizing staff in some cases.
On a positive note, the nation’s largest capital market, the Nigerian Exchange, recorded an impressive first half of the year as the All-Share Index grew by 21.3% to close the month of June at 51,817.59 basis points. The market capitalization also increased by N5.64 trillion in the first six months of the year.
In keeping with the economic doldrums, Nigeria’s currency devaluation problem persisted during this period. In the first six months of 2022, the exchange rate between the naira and the US dollar moved from N565/$1 to N615/$1, representing a N50 depreciation. At the peer-to-peer market, the naira fell to as low as N615.9/$1 against the US dollar.
The official exchange rate has also seen some devaluation, falling to an average of N425/$ compared to the N416/$1 rate at the beginning of the year. Similarly, the nation’s external reserves lost $1.37 billion year-to-date to close June 2022 at $39.16 billion from the $40.52 billion figure recorded as of December 2021.
While the decline in the country’s external reserves is mostly attributed to the constant intervention by the Central Bank in the official foreign exchange market, Nigeria’s FX inflows have also dwindled in recent times. The country’s inability to increase crude oil production has put a dent in Nigeria’s crude oil export earnings, even as capital importation continues to hit record low levels, and diaspora remittances not being enough to ensure improved FX liquidity in the economy.
The reality of Nigerians is dampened by various macroeconomic issues. These, coupled with social issues such as robbery, kidnapping, fraud, panic, and uncertainty, continue to cloud the outlook of the business environment in the country, despite the country’s Gross Domestic Product of Nigeria, which measures the productivity of the economy, growing by 3.11% in Q1 2022, following a growth of 3.4% in 2021.