Intelligence

Currency Redesign

 The Central Bank of Nigeria (CBN) announced on the on October 26, 2022, that it has concluded arrangements to redesign 200, 500, and 1000 denominations of the naira which have about 75 percent of the notes outside the banking industry. The CBN opined that the redesigning of the naira notes will phase out old notes and render useless, huge amounts of raw cash in the hands of politicians, kidnappers, and terrorists. The essence of this policy is to mop up excess cash outside the banking industry with a view to handling monetary policy and foreign exchange programs credibly. The redesigned naira notes have been launched on the 23rd of November, the last date for the use of the existing 200, 500, and 1000 notes for transactions in the country is the 31st of January 2023. According to the CBN, the redesigning of the currency will help control the amount of money in circulation, estimated to be ₦2.73 trillion, out of the ₦3.23 trillion currency in circulation. Retrieving about 84.5% of the total amount in circulation back to o the CBN’s vault will help curb rising inflation and safeguard the integrity of the Naira.

National Domestic Card Scheme

Another policy that will shape the face of the financial sector from 2023 is the national domestic card scheme planned for introduction from the 16^th of January 2023 by the Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement Systems (NIBSS) Plc, in conjunction with the Bankers’ Committee. According to the CBN, the card scheme will foster innovation within the Nigerian domestic market, while enabling African and international interoperability, The domestic card is expected to enable seamless dissemination of government-to-person or even person-government payments, such as micro payment and credit, e-government, identity management, transportation, health sector and agriculture and other social impact initiatives as well as track spending.

The domestic card will accelerate financial inclusion programme of the government, as well as deliver lower cost payments services that are more accessible and affordable for Nigerians, i.e., the national card scheme will reduce operating cost of cards in the country. The scheme will allow banks and other institutions to offer a variety of solutions including debit, credit, non-interest, virtual, loyalty and tokenized cards, etc. The implication of the introduction of the national domestic card is that ATMs will be scrapped. Hence, Nigerians will queue at their banks for a new card from January 2023. This also has the tendency to limit cash in circulation.

Revised Cash Withdrawal Limit

To further curtail the ravaging inflation and improve the cashless policy of government, the CBN, in addition to its currency redesign policy launched on the 23rd of November by Mr. President, President Muhammadu Buhari, is set to implement a new cash withdrawal limit from January 2023. In its policy document released on the 6^th of December, the CBN has instructed all Deposit Money Banks (DMBs) and other financial institutions to limit the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N100,000 and N500,000 respectively, with withdrawals above the thresholds attracting processing fees of 5 per cent and 10 respectively for individuals and corporate entities going forward.

Similarly, the CBN has pegged the maximum cash withdrawal per week via Automated Teller Machine (ATM) at N100,000 subject to a maximum of N20,000 cash withdrawal per day, in the same way that the daily maximum cash withdrawal via the Point of Sale (PoS) terminal has been set as N20,000 cash. Also, third party cheques above N50,000 shall not be eligible for OTC payment while extant limits of N10 million on clearing cheques remain. The new policy also limits the highest denomination to be uploaded in the ATM machines as N200 notes.

However, where bank customers have reasons to withdraw N5,000,000 or N10,000,000 depending whether such a customer is operating as an individual or corporate entity, such person must pay the compulsory processing fees as an individual or corporate entity. Such a customer must also fulfil all the requirements of the Know Your Customer (KYC) as will be required by the DMBs. While the believes that the policy will enhance the efficiency of the payment system, support economic growth and monetary policy transmission, there is this palpable fear that the policy will lead to cash crunch and crumble the opportunities for SMEs to grow thereby limiting the envisaged economic growth.

Likely Consequences

No doubt, these policies will impact negatively on the informal sector which makes up about 80% of commerce and trade in the economy and reside mostly in the rural areas without access to the right infrastructure for a cashless transaction and where no banks or other financial institutions exist. A reduction in the quantity of cash in circulation, the main means of exchange in the country, as targeted by these policies will result in the slowdown of business transactions in the sector and reduce economic activities, especially in the short run. If not properly addressed may force the informal sector to abandon banking activities which may negate the financial objective of the CBN.

However, a move towards reducing the quantity of money will create greater opportunities for more economic agents to move into the formal sector thereby helping authorities to collect taxes and improve revenue generation. This will lead to fast, seamless and transparency in business transactions, ease of monitoring of transactions and thus reduces corruption. The main reason for these new CBN policies is to enhance the effectiveness of monetary policy through the mopping up of excess liquidity to curtail the ravaging inflation in the country, and to drag most of the population into the financial system.

The Nigerian inflationary trend has continued to move northwards since the beginning of the year. The year-on-year has moved on from 15.6 per cent recorded in January 2022 to 18.6 percent and to 21.09 per cent in October (see figure 1 below). According to the National Bureau of Statistics (NBS), the year-on-year inflation in October was 5.09 percent points higher than the 15.99 percent rate recorded in October 2021. This implies that the general price level rose by 5.09 percent between October 2021 and October 2022. On a monthly basis, the inflationary trend nosedived from 1.36 percent in September to 1.24 percent in October. This shows that the general price level declined by 0.12 percent in the month of October. This decline in the monthly inflation rate has been consistent in the last three months, from 1.82 percent in the month of July to 1.77 percent in August, 1.36 percent in September and then to the current 1.24 percent recorded in the month of October. This decline is made possible given the harvesting season.
 

However, the yearly headline inflation has continued to soar. The NBS attributes that to the disruption in the supply of food products and the increase in the cost of importation due to the persistent currency depreciation as well as the general increase in the cost of production such as the increase in energy cost. Unfortunately, this increase is not showing any sign of decline as Russia’s invasion of Ukraine and the lockdown in critical Chinese cities, the major causes of the global inflation that has transmitted to the increases in energy and food costs in the domestic economy is not abating. In Nigeria, the persisting uptrend in energy prices and the prolonged period of scarcity of Premium Motor Spirit (PMS), which contributed to a sharp rise in transportation, logistics and manufacturing costs, which fed through to consumer prices; as well as the contributory legacy factors including the lingering insecurity across the country; perennial flooding in major food producing states; critical deficit of infrastructure in the country; and poor road networks amongst others, are not still showing any sign of abating. This is exacerbated by the excess supply of money in the economy. According to the CBN, about 2.7 trillion naira out of the 3.2 trillion-naira cash in circulation outside the banking industry are another reason why inflation has continued to rise in Nigeria.

To help take control of the money in circulation, and curb rising inflation, the CBN announced a redesigning of 200, 500, and 1000 denominations of the naira which have about 75 percent outside the banking industry. The CBN opined that the redesigning of the naira notes will phase out old notes and render useless huge amounts of raw cash in the hands of politicians, kidnappers and terrorists. The essence of this policy is to mop up excess cash outside the banking industry with a view to handling monetary policy and foreign exchange programs credibly . The redesigned naira notes have been launched on the 23rd of November, the last date for the use of the existing 200, 500, and 1000 notes for transactions in the country is the 31st of January 2023.

Like other monetary policy agencies around the world who are looking for means to curb the increase in inflation in their economies, the Central Bank of Nigeria resorted to incessant manipulations of monetary policy instruments to reduce the quantity of money in circulation in the country. The past meetings of the MPC have seen the CBN implement contractionary monetary policies. The monetary policy rate (MPR) has increased from 11.5 percent in the first four months of the year 13 percent and 14 percent between May and June and between July and August respectively. But with the continuous rise in inflation rate, the MPC raised the MPR to 15.5 percent in September and now to 16.5 percent in the last meeting held on the 21st and 22nd of November 2022 (See figure 2).
 

The contractionary measure was taken by the CBN in reaction to the increase in inflation rate which again rose to 21.09 percent in October, especially the food inflation which increased to 23.72 percent in October 2022, from 23.34 percent in September 2022 . The CBN noted that a contractionary policy would narrow the negative real effective interest margin and thus improve market sentiment and further restore investor confidence. It also believes that previous tightening stances would have led to the observed decline in the month-on-month inflation rate and could further curb the inflationary trend.  Thus, it decided to sustain the tightening stance to instigate a significant decline in inflation rate.

A tightening monetary policy or an increase in MPR means that the CBN has increased the rate at which it lends to commercial banks. The commercial banks in turn cannot sell below the cost price and/or forfeit its profits or interest. In view of this, the commercial banks will sell at a margin or at the market rate. Hence, this will lead to an increase in the cost of loans in the banks thereby discouraging lending. The lesser the quantity of money in circulation in the economy, the lesser the inflation. According to Milton Friedman, “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. This means that an increase in the quantity of money by a percent would as well lead to an increase in inflation by the same margin. The reverse is the case when the quantity of money in circulation is reduced by the same margin.

Inflation and Economic Agents
Inflation has different impacts on different economic agents. The fixed income earners, salaried workers, employees, teachers, pensioners, creditors, et., are the worst loser during inflation. This is because their incomes do not rise as much as the rise in commodities prices. Similarly, persons who live on past savings, fixed interest or rent, pensioners, government employees, teachers, etc., also suffer during periods of rising prices as their incomes remain fixed. Inflation thus reduces the purchasing power of this set of people, thereby affecting the profits of manufacturing firms. The erosion of real income is the single biggest outcome of inflation.

Inflation takes its toll on manufacturers through cost increases, contract constraints, labour shifts, and input issues, which in turn affects inventory and capital purchases. Inflation decreases customer purchases. This is because with less purchasing power and less money in the bank, consumers tend to buy less. Fewer consumers buy, less profit for companies. This leads to accumulation and increased inventory costs: When replacement inventory costs more than inventory sold, it can lead to an inventory shortage and a reduction in gross profit. Inflation also leads to the increased cost of service as well as transportation costs: During inflationary cycles, the cost of fuel and truck maintenance increases, putting more pressure on gross profit. During Inflation, the lag between employee wages and the inflation rate affects productivity and increases personnel turnover. This leads to decreased output, delayed deliveries, and lower invoicing. Inflation also leads to reduced borrowing and investment capacity.

Addressing Inflation in the Manufacturing Sector
As inflation leads to high prices for goods and shipping, manufacturers are forced to adjust and increase prices and budgets throughout the company to match inflation. In doing this companies have to consider what a customer is willing to pay, the cost of production, and the actual costs of the goods. In another way the manufacturers would need to cut costs to balance the necessary adjustment of price increases. This could be achieved by researching new suppliers and materials, while at the same time ensuring that they maintain quality.
 
One of the impacts of inflation in the manufacturing sector is that it leads to a decrease in manufacturing sector productivity. The manufacturing companies can work towards increasing productivity. This could be achieved using a limited workforce, thereby reducing the increased cost of production and offsetting the effects of inflation. Inaddition, productivity bonuses and measures proven to increase productivity should be Implemented to boost the remaining employees' productivity while keeping costs low. It is believed that implementing new technology would help reduce the costs of production. Automation and AI technology can help provide more control over operations and help to avoid costly human errors. Addressing inflation at the manufacturing level would help offset the inflation at the consumer level.

The inflation rate in Nigeria witnessed yet another upsurge in the month of September 2022. The year-on-year headline inflation rate rose to 20.77 per cent, this surpassed the 20.52 and 16.63 per cent recorded in August 2022 and September 2021 by 0.25 and 4.14 per cent respectively, indicating that the general price level was higher by 0.25 and 4.14 per cent than what obtained in the months of August 2022 and September 2021 respectively. On the month-on-month basis, the headline inflation declined from 1.77 per cent recorded in August, to 1.36 per cent in September 2022. This shows a drop in the general price level of 0.41 per cent in the month of September. The decline in the monthly inflation rate was a function of the decrease in food prices due to harvest season which reduced the scarcity of food items witnessed in the previous months. On the other hand, the increase in the yearly headline inflation rate is attributed to the disruption in the supply of food products, increase in the cost of importation arising from the persistent currency depreciation and the general increase in the cost of production.

In both the urban and the rural areas, there were increases in the headline inflation rate in the month of September. The urban centre recorded a 21.25 percent year-on-year inflation rate, while the rural area was 20.32 per cent. The above figures show that the general price level increased by 4.06 per cent from the 17.19 per cent recorded in the same month in 2021 in the urban areas, while the rural areas presented an appreciation of 4.24 per cent in the general price level from the 16.08 per cent inflation rate recorded in the same month in 2021. On a month-on-month basis, the urban centre headline inflation declined by 0.03 percent from 1.79 per cent recorded in the month of August to 1.46 per cent in the month under review. Similarly, the rural areas also witnessed a decline in the month-on-month inflation rate from 1.75 per cent recorded in August to 1.27 per cent in September 2022. This shows that the general price level declined by 0.48 per cent.

The decline in the month-on-month inflation as stated above is attributed to the decline in food inflation given the harvest season. According to the National Bureau of Statistics (NBS), the reduction in prices of some food items like tubers, garri, local rice and Vegetables, etc., caused the food inflation to drop from 1.98 per cent in August to 1.43 per cent, i.e., a 0.54 per cent fall in the monthly food inflation in the month of September 2022. This was not the case with the year-on-year food inflation which rose from 19.57 per cent in September 2021 to 23.34 per cent in the month under review. The 3.77 per cent rise in the headline inflation within the period is attributed to increases in the prices of bread and cereals, food products, potatoes, yam and other tuber, fish, meat, oil and fat.

The core inflation rate, which excludes the prices of volatile agricultural produce, also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, fuel and lubricants for personal transport equipment, Cleaning, Repair and Hire of clothing caused a significant increase in Inflation rate from 17.20 per cent in August 2021 to 17.60 per cent in the month of September 2022. This figure is also 3.86 per cent from 13.74 per cent recorded in the same month of September in 2021. On a month-on-month basis, the core inflation rate was 1.59 per cent, the same rate it was in August 2022. This shows that the prices of items under the core inflation remained the same as in August.

However, despite the insignificant increase in the core inflation rate in the month under review, the average price level has continued to soar leading to increases in general inflation rate. This has been the case for the past months. The rate of inflation in Nigeria has assumed an alarming dimension, and is eroding the purchasing power of consumers, thereby affecting the sales and revenue of manufacturers. Unfortunately, this may not abate in the coming months. With the campaigns for the generation elections going on, the amount of money that would be pushed out by politicians escalate the inflations and cause more hardships. It is important that while manufacturers rethink the sources of their raw materials locally and resize their products to packages that are affordable to consumers for affordability, consumers should prioritize their needs and remove frivolities.

The financial inclusion objective of the Central Bank of Nigeria (CBN) received a boost recently as the Globacom Telecommunications Network officially commenced operations in its PSB subsidiary, Licensed by the Central Bank of Nigeria (CBN) on 27 August 2020. The CBN licensed the PSBs to provide financial services to many unbanked and underbanked residents in the country as well as about 79million bank accounts without registered BVNs. To bridge this gap, the CBN licensed the PSBs, and they commenced commercial operations on May 30, 2022. Globacom joined other networks providers, MTN and Airtel, that have diversified their product stack beyond telecoms sources to include operations in the PSB subsector of the financial sector, for the benefit of the people and to deepen financial inclusion in the country.

The launch of the financial technology (fintech) services of the MoneyMaster PSB of Globacom came with the introduction of its G-Kala. The G-Kala makes it possible for all prospective customers with Glo lines or any other telecommunications lines to simply dial *995# and then follow the prompts for enrolment. It allows the customers’ phone numbers to be used as account numbers. In order words, the Globacom’s PSB accommodates customers with phone numbers registered with their BVN, in all telecommunications services in Nigeria.

The PSBs licence gives the operators the platform to facilitate payment and remittance services within Nigeria, accept deposits from individuals and small businesses, issue debit and prepaid cards, operate electronic wallets, inbound remittances, and carry out other services in line with CBN regulations. The difference between the commercial banks and the PSBs is that the PSBs are not allowed to grant loans. Because of their nationwide spread, telecommunication services companies provide veritable opportunities for extending financial services to the largely unbaked rural populations (housewives, farmers, petty traders, etc.)  in the different parts of the country, who have over the years been financially excluded. This PSB also introduces the company into a different avenue source leveraging their huge customer base.

With the launch of the PSB by Globacom, the four biggest telecommunications companies in Nigeria have all diversified their services along the line of fintech services. While MTN owns MoMo PSB, Airtel has SmartCash PSB. 9PSB, on the other hand, is the payments subsidiary of telecom firm 9Mobile. These moves towards further digitalizing the economy will help revolutionize the financial services ecosystem in the country.

There are indications that the implementation of the federal governments sugar tax which was passed into law in the 2021 Finance Act by President Muhammadu Buhari on December 31, 2021, has started. A market survey by Legit.ng shows that a 50cl PET Coke, Pepsi, Sprite and others hitherto sold for N150 are now sold between N230 to N250, while a 33cl malt drink is sold for between N250 and N350 by retail marketers. Apart from the over 33 per cent increase in the prices of those products, the retail market survey also shows a spiked inflow of 35cl drinks from Rite Foods and Coca-Cola brands sold for N100 as cheaper choices for consumers.

Recall that in a desperate move to increase revenue, the federal government passed the 2021 Finance Act. The Act introduced a Sugar-Sweetened Beverage (SSB) tax, which imposed a ₦10 excise duty on every litre of all non-alcoholic and sugar sweetened carbonated drinks. This was followed by an announcement in January 2022, by the Federal government through the minister of Finance announced that it will start the collection of the N10 per litre excise duty on all non-alcoholic, carbonated and sweetened beverages. The current hike in the prices of these products is a fulfilment of the provisions of the Finance Act 2021 which empowered the federal government to collect such excise duties to generate revenue, curb the excessive consumption of sugars and tackle the growing obesity and diabetes menace in the country. The implementation of the policy supports the stand of the National Action on Sugar Reduction (NASR), who believe it is needed if the Nigerian government is to tackle diabetes and obesity.

However, different stakeholders have argued against this policy. On signing the policy, the National Union of Food, Beverage and Tobacco Employees (NUFBTE), the Manufacturers Association of Nigeria (MAN) and the Nigeria Employers’ Consultative Association (NECA) condemned the tax. They opine that the levy will increase the cost of production, reduce the production lines and force manufacturers to close down factories and lay off workers. They warned that the sugar policy will be counterproductive and therefore asked the government to suspend its implementation.

Despite this warning, the government has gone ahead to implement the policy, and this is impacting negatively on manufacturers’ cost of production. The manufacturers have therefore transferred this levy to the consumers as noticed in the over 33 percent rise in the cost of the products. This is piling unnecessary pressure on both consumers and manufacturers. Many retailer shops are now contemplating closing shops given the drastic reduction in the rates of sale of this product. With the reduction in sales, and its likely impact on production, the government may not achieve its revenue reason.

Many of the beverage companies have started resizing their PET bottles, this is the right step to take. This will ensure that consumers who are loyal to the products still find affordable sizes they can be able to purchase in the midst of the current increasing prices of the products coupled with the high inflation that is further depleting the size of the purchasing power of consumers. Coca-Cola still stands a better chance of remaining in the market given its presence in all the states and regions of the country. It is also important that this price increases should be done in phases such that the consumers will not feel at a swoop the heavy burden of the levy on them.

The inflation rate in Nigeria witnessed yet another upsurge in the month of August 2022. The year-on-year headline inflation rate rose to 20.52 per cent, this surpassed the 19.64 and 17.01 per cent recorded in July 2022 and August 2021 by 0.88 and 3.52 per cent respectively, indicating that the general price level was higher by 0.88 and 3.52 per cent than what obtained in the months of July 2022 and August 2011 respectively. On the month-on-month basis, the headline inflation declined from 1.82 per cent recorded in July, to 1.77 per cent in August 2022. This shows a drop in the general price level of 0.05 per cent in the month of August. The decline in the monthly inflation rate was a function of the decrease in food prices due to harvest season which reduced the scarcity of food items witnessed in the previous months. On the other hand, the increase in the yearly headline inflation rate is attributed to the disruption in the supply of food products, increase in the cost of importation arising from the persistent currency depreciation and the general increase in the cost of production.

In both the urban and the rural areas, there were increases in the headline inflation rate in the month of August. The urban centre recorded a 20.95 percent inflation rate in year-on-year inflation, while the rural area was 20.12 per cent. The above figures show that the general price level increase by 3.36 per cent from the 17.59 per cent recorded in the same month in 2021 in the urban areas, while the rural areas presented an appreciation of 3.69 per cent in the general price level from the 16.43 per cent inflation rate recorded in the rural areas in the same month in 2021. On a month-on-month basis, the urban centre headline inflation declined by 0.03 percent from 1.82 per cent recorded in the month of July to 1.79 per cent in the month under review. Similarly, the rural areas also witnessed a decline in the month-on-month inflation rate from 1.81 per cent recorded in July to 1.75 per cent in August 2022. This shows that the general price level declined by 0.06 per cent.

The decline in the month-on-month inflation as stated above is attributed to the decline in food inflation given the harvest season. According to the National Bureau of Statistics (NBS), the reduction in prices of some food items like tubers, garri, local rice and Vegetables, etc., caused the food inflation to drop from 2.04 per cent in July to 1.98 per cent in August 2022. This was not the case with the year-on-year food inflation which rose from 20.30 per cent in August to 23.12 per cent in the month under review. The 2.82 per cent rise in the headline inflation within the period is attributed to increases in the prices of bread and cereals, food product, potatoes, yam and other tuber, fish, meat, oil and fat.

The core inflation rate, which excludes the prices of volatile agricultural produce, also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, fuel and lubricants for personal transport equipment, Cleaning, Repair and Hire of clothing caused a significant increase in inflation rate from o 13.41 per cent in August 2021 to 17.20 per cent in the same month in 2022. On a month-on-month basis, the core inflation rate was 1.59 per cent in August 2022. This shows that the prices of items under the core inflation reduced by 0.17 per cent when compared to 1.75 per cent recorded in July 2022.

However, the reduction in the rate of increase in inflation could not impact the price of other products, hence total inflation also increased. The rate of inflation in Nigeria has assumed an alarming dimension. There is no month past without an increase in the rate of inflation. This increase in inflation is eroding the purchasing power of consumers, and this eventually would affect their ability to purchase as well as the sales and revenue of manufacturers. It is important that while manufacturers rethink the sources of their raw materials locally, they also should resize their products to packages that are affordable to consumers.

Despite the rising inflation and the dwindling capital importation, the Nigerian economy has continued to grow in the current fiscal year. The real Gross Domestic Product (GDP) grew by 3.54 per cent (year-on-year) in the second quarter of 2022, higher by 0.43 per cent points than 3.11 per cent recorded in the first quarter of 2022. When compared with the same quarter of 2021, it recorded contraction of 1.47 per cent points from 5.01 per cent growth rate recorded in the same quarter of 2021. If this is witnessed in the next quarter, Nigeria may as well be seen as having gone into its third recession in the recent time.

In nominal terms, with a year-on-year nominal growth rate of 15.03 per cent, the Nigerian GDP has grown to N45,004,520.89 million, higher than N39,123,713.32 million or 14.99 per cent growth recorded in the same quarter in 2021. This growth rate also supersedes the 13.25 per cent nominal growth recorded in the first quarter of 2022.

The Nigerian GDP growth is majorly composed of the nonoil sector which contributed 93.7 percent against the oil sector which brought in only about 6.3 per cent of the entire composition. This nonoil growth rate is higher than about 93.4 per cent witnessed in the previous quarter of this year, this is also higher than 92.6 per cent recorded in the same quarter of 2021. The oil sector’s contribution to GDP for this quarter on the other hand showed a depreciation of 1.1 per cent point from 7.42 recorded in the same quarter of the last fiscal year. The dwindling contribution of the oil sector to GDP is attributed to the contraction in the barrels of oil produced per day in the country. The barrel of oil produced per day reduced from 1.61 million barrels per day (mbpd) recorded in the same quarter of 2021 and 1.49 mbpd produced in the preceding quarter in 2022 to 1.43 mbpd. All these are also lower than the OPEC approved 1.830 million barrels per day quota for Nigeria.

Despite constituting the greatest percentage of the GDP in the quarter under review, the non-oil sector growth rate of 4.77 per cent was lower in real terms by 1.97 per cent points and 1.31 per cent points when compared to the rates recorded in the same quarter of 2021 (6.74 per cent) and the first quarter of 2022 (6.08 per cent). The sector’s growth in the second quarter was driven mainly by Information and Communication (Telecommunication); Trade; Financial and Insurance (Financial Institutions); Transportation (Road Transport); Agriculture (Crop Production; Livestock) and Manufacturing (Food, Beverage & Tobacco; Chemical and  Pharmaceutical Products), which contributed highest percentages of 7.71, 4.51, 20.06, 56.38, 1.54, 2.87, 5.11 and 9.29 per cents respectively to the different sectors leading to the positive GDP growth rate.

The Nigerian economy is still a services-based economy. The services sector contributed 57.35 per cent to the GDP in the second quarter under review, an improvement by 1.18 per cent point from 56.17 per cent recorded in the first quarter of 2022 and 1.70 per cent points from 55.66 recorded in the same quarter in 2021. The contribution of the agricultural sector, like the service sector also increased from 23.78 and 22.36 per cents recorded in the same quarter in 2021 and the first quarter of 2022 to23.24vper cent in the quarter under review. The industrial sector on the other hand showed declines by 2.06 and 1.16 per cent points from 19.40 and 20.57 per cents in the previous quarter of 2022 and the same quarter in 2021. The industrial sector has witnessed closure of many businesses, increase in the cost of importation of intermediate products because of inflation and dearth of foreign exchange and insecurity witnessed in many parts of the country, these would have been responsible for the increases in the cost of production decline in the sector’s revenue and its contribution to GDP in the quarter under review.

There is therefore the need for manufacturers to begin to source for raw materials locally. Issues of multiple taxes should be addressed to reduce the cost of production, while the monetary authority should find a way to address the issue of lack of exchange rate either to repatriate profits by foreign investors or to import the necessary inputs to production by investors. These would help the address the identified issues and boost the sector’s contribution to the economy.

The continuous rise in inflation in the Nigerian economy since the beginning of this year has become a source of worry to every person living in the country. On a year-on-year basis in the month of July, the headline inflation rate increased to 19.64 per cent from 18.60 per cent recorded in the month of June this year. This is also higher than 17.38 per cent in the same month in 2021. By implication, the general price level rose by 1.04 per cent and 2.26 per cent higher than in June 2022 and July 2021 respectively. On a month by monthly basis, the inflation rate increased by approximately the same rate as it did in the month of June 2022. The rate of increase of the headline inflation rate was 1.82 per cent in July 2022.

In both the urban and the rural areas, the increase in year-on-year inflation rate was significant. The urban centre recorded 20.09 percent in inflation rate in July. This is 2.08 per cent higher than 18.01 per cent recorded in the same month in 2021 and 1.0 per cent higher than 19.09 recorded in June 2022. On the monthly basis, the change in inflation was about the same figure (1.82 per cent) recorded in the month of June 2022. The rural are also moved from 16.75 per cent recorded in July 2021 and 18.13 per cent in June 2022 to 19.22 per cent year-on-year in July 2022. These amount to 2.47 per cent and 1.09 per cent in the two periods, respectively. Like the urban centre, the monthly inflation rate increased at the same rate in did in the previous month of June 2022.

The Nigerian inflation is increasing in all angles, there are significant rises in both food and core inflation rates. The food inflation rate rose to 22.02 per cent on a year-on-year basis in the month of July compared to 21.03 per cent in the same month in 2021 and 20.60 per cent in June 2022. The rise in food inflation on a month-on-month basis in the July is 2.04 per cent, this was an insignificant decline from 2.05 recorded in the month of June 2022. The National Bureau of Statistics (NBS) recorded that the decline in This decline in the prices of some food items such as tubers, maize, garri, vegetables, were instrumental to insignificant reduction in food inflation in the month under review.

The core inflation rate which excludes the prices of food items also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, Garments, Cleaning, Repair and Hire of clothing caused a significant increase in inflation rate from 13.72 per cent in July 2021 and 15.75 per cent in June 2022 to 16.26 per cent in the month of July 2022. The monthly inflation rate in July was 1.75 per cent and this figure was higher than 1.56 per cent in the month of June 2022.

The rate of inflation in Nigeria has assumed an alarming dimension. There is no month past without an increase in the rate of inflation. With these increases, the purchasing power of consumers is also declining, and this eventually would affect the sales and revenue of manufacturers. It is important that while manufacturers rethink to sources of their raw materials locally, they also should resize their products to packages that are affordable to consumers.

The NCC Releases Draft Guidelines on Infrastructure Deployment in the Telecom Sector

As part of agenda setting for the successful rollout of the Fifth Generation (5G) network scheduled for August 2022, the Nigerian Communications Commission (NCC), has released a draft guideline on infrastructure deployment in the telecom sector. The guidelines spelt out concerns about public safety, and the safety of personnel and equipment, the responsibilities of all stakeholders including the owners, designers and fabricators of communications masts and towers; the demands of the local operating environment as well as the need to achieve substantial conformity with applicable international best practices.

In the guidelines are the types and constituents of tower structures and a comprehensive data on wind speeds in Nigeria, to be referenced by engineers in the design of masts and towers. There are also the technical and general requirements for network design and planning, and the connection of all buildings within a new development with public networks, with a customer demand forecast of not less than 10 years. Other areas covered in the guideline are the requirements for reserve capacity, to allow for the construction of sufficient duct capacity for current and the future service. The guideline maintains that the siting of masts and towers shall be in line with the provisions of the NCC Act and guided by provisions of the collocation and infrastructure sharing guidelines of the Commission. It added that all masts and towers sited in cities shall conform to the guidelines and standards of the Commission concerning all matters on radio frequency. 

The guidelines are aimed at ensuring environmental safety and sound engineering practices, and therefore must be strictly adhered to by communications services providers/operators, designers, fabricators, and installers of communications towers, and other operators in the sector.

MTN and Huawei Install 100 5G Sites in Nigeria

Meanwhile, ahead of the commercial rollout of the 5G network in August, MTN Nigeria in partnership with Huawei Nigeria Technologies Company Ltd Technologies Company Ltd. has installed more than 100 5G mobile technology cell sites in the country. This is to enable them rollout service in at least one state in each geo-political zone: South-West, South-South, South-East, North-Central (including FCT), North-West and North-East zones within two years of the award of the country’s two 100MHz spectrum licences in the 3.5GHz spectrum band for 5G auctioned by the Nigerian Communications Commission (NCC) in December 2021 and which licenses were issued in March this year after payment by the winners.

Beyond that, the NCC mandates that “Service roll out in each state would mean a minimum of 5 sites in a state. The installation of more than 100 5G mobile technology cell sites in the country means that MTN has met the minimum standard set by the NCC of at least 30 sites in the country or 5 sites in each of the states chosen in each of the region. If successfully rolled out this month, Nigeria will become the third in Africa after South Africa and Kenya and the first in West Africa to launch the 5G network. Both the MTN Nigeria and Mafab Communications Limited are expected to commence the rollout of their 5G networks from 24 August in line with the terms and conditions of the concessions.

The number of mobile and internet data subscriptions in Nigeria have continued to be on the rise despite the ban on several subscribers who failed to link their Subscriber Identification Module (SIM) cards with the National Identification Number (NIN) within the given period. As of June 2022, a total of 206,081,720 active telephony subscribers were recorded. This is 1,867,073 or about 1 per cent higher than 204,214,647 recorded in the month of May 2022, and 18,806,173 or about 10 percent higher than 187,275,547 recorded in the same month in 2021 (Fig. 1). This figure is also higher than the previous subscriptions in the current year.

The distribution of subscription shows that MTN dominated the telephony services by about 38 percent, followed by Airtel and Globacom which had about 28 and 27 percent respectively. The list subscribed network is 9Mobile which recorded about 6 percent (See Fig. 2). This increase in subscription which remained the trajectory since the year also surpassed their previous months subscription.

In the internet data subscription, about 42 percent of data was subscribed by MTN users, followed by Airtel which received about 28 percent of the total subscription and by Gobacom with about 27 percent. 9Mobile received only about 4 percent of total data subscription in the month of June 2022 (Fig. 3).

In the month under review, the mobile network operators have also continued to witness the transfer of services by subscribers from one network service provider to another. A total of 2,601 lines were ported into the four network service providers by subscribers, while 2,942 were transferred out of their original networks. MTN received the highest number of the mobile lines, 1,770 or about 68 percent of the incoming line. Airtel and 9Mobile received about 14 and 13 percent respectively while Globacom about 6 percent only. On the hand, out of 2,942 number ported out of their original networks, MTN lost only 237 numbers. This is about 1,533 numbers less than the numbers than ported into its network. This is sharp contrast with 9Mobile which lost 1,661 numbers compared to only 324 lines it received. In other words, 9Mobile has a deficit of 1,337 lines in the month of June. Both Globacom and Airtel also suffered deficits in the number of telecommunications lines in the month under review (See Fig.4).

What is MTN doing that 9Mobile is not doing? Why can Globacom not overtake MTN? Why is Airtel lagging behind MTN and Globacom? Precise will provide answers to these questions.