Economy
Cash Scarcity: Former NBS Chief Yemi Kale Projects Reduction in Nigeria’s Q1 GDP
By Adedapo Adesanya
Nigeria’s former statistician general, Dr Yemi Kale, says the biting cash crunch in the country will lead to a reduction in the country’s nominal gross domestic product (GDP) numbers for the first quarter of 2023 by up to 15 trillion.
In a series of tweets, the new Partner/Chief Economist and Head of Research at KPMG Nigeria said this is because a large chunk of the country’s informal sector is cash dependent just as one-third of the formal sector is.
“I am estimating a reduction in Q1 2023 nominal GDP by between N10-15 trillion due to challenges sourcing cash in Q1 2023.
“This is because about 40% of Nigeria’s N198tn GDP in 2022 is informal of which about 90% is cash-based. Further 30% of formal sector GDP is cash-based. This means N106.9tn of total GDP is cash-based,” he wrote.
He added that “Of the 46 economic activities, agriculture, some manufacturing activities (especially food & beverage, textiles, apparels), trade, arts entertainment & recreation, accommodation & food services, road, and water transport and other services expected to be the most affected.”
Speaking on the currency redesign, he noted that there is nothing new or wrong about currency redesign or cashless policy, “if done for the right reasons [and] at the right time,” putting forth that every policy will have pros and cons while benefiting some but not others.
“There is no policy that won’t affect someone negatively. Or that won’t have costs. The idea is to do a cost-benefit analysis looking at the overall impact of any policy & how and when it is to be implemented across the economy and not just in one or a few areas and deciding if overall, the benefits outweigh the costs.
“If yes, then the costs are acceptable. Then a policy maker can or should introduce palliatives to make the costs bearable to those that will be negatively affected by its implementation,” he advised.
Dr Kale said the government, after its analysis then decides to implement the policy and it turns out to be more detrimental to the entire system than beneficial even if it benefits a particular area or sector,” then it clearly isn’t a good idea to go ahead.”
He also projected a marginal drop in inflation for the month of February from the current 21.82 per cent based lack of cash to chase more of the same amount of goods that contribute to the price rise.
In his words, “Inflation though might slow down not because of an increase in output of goods & services above available cash to spend but because of lack of cash to chase more of the less same amount of goods. The CPI is about 50% food of which several are perishable in the absence of storage.”
“Assuming there is a decline in inflation rate which I anticipate (though marginal) when [NBS] publishes their inflation report, we can then compare if the gains in inflation in Q1 2023 outweighs the expected decline in GDP &possibly other macro & socio-economic variables.”
He also painted a dour picture of the country’s already high unemployment reality.
“Recall employment is also tied to GDP growth- a slowdown in growth will have a negative impact on employment. On the other hand, both a reduction in inflation and growth in GDP can improve poverty rates.
“So it will be interesting to see which dominates overall economic wellbeing,” he concluded.
However, in the inflation data released today, the National Bureau of Statistics (NBS) said the average price of goods and services in Nigeria rose by 21.91 per cent last month.
By Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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