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
The Naira further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, July 16, by 65 Kobo or 0.04 per cent to sell for N1,381.53/$1, in contrast to Wednesday’s closing value of N1,382.18/$1.
This was buoyed by improved FX liquidity to absorb the high demand for Dollars during the trading session.
However, the local currency depreciated against the Pound Sterling in the official market yesterday by N9.48 to close at N1,866.17/£1 versus the preceding day’s N1,856.69/£1, and lost N2.99 against the Euro to quote at N1,582.68/€1 compared with the midweek rate of N1,576.69/€1.
At the parallel market, the Nigerian currency maintained stability against its United States counterpart at N1,405/$1, and at the GTBank FX desk, it remained unchanged at N1,389/$1.
On Thursday, data from the Central Bank of Nigeria (CBN) showed a surge in interbank FX turnover and deal count. Interbank FX activities at the NFEM window increased sharply by 69 per cent to $205.366 million from $121.727 million reported the previous day.
Nigeria’s gross external reserves continue to rise, supported by steady foreign exchange inflows from hydrocarbon receipts, remittances and foreign portfolio investments, boosting market confidence. It settled at $51.893 billion from $51.867 billion the previous day.
The apex bank has also launched a new digital platform that will track every foreign exchange transaction involving Bureau De Change (BDC) operators, marking a major step in its efforts to improve transparency and strengthen oversight of Nigeria’s retail forex market.
In an operational guidance issued on July 15 to authorised dealer banks and licensed BDCs, the CBN introduced the FX BDC Purchase Tracker (FXBT), a centralised electronic portal that will monitor foreign exchange purchases by BDCs from the point of request through approval, settlement and eventual sale.
As for the crypto market, prices were down as the markets weighed fresh US airstrikes on Iran that boosted risk sentiment, with Ethereum (ETH) down by 4.7 per cent to $1,829.37.
Solana (SOL) decreased by 3.6 per cent to $77.49, Dogecoin (DOGE) depreciated by 3.1 per cent to $0.0718, Cardano (ADA) also crashed by 3.1 per cent to $0.1588, Bitcoin (BTC) slumped by 2.9 per cent to $62,820.21, Ripple (XRP) dipped by 2.6 per cent to $1.08, Binance Coin (BNB) fell by 2.3 per cent to $569.02, and TRON (TRX) shrank by 0.8 per cent to $0.3219, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Aduragbemi Omiyale
In a bid to help investors recover about N270 billion in unclaimed dividends in the capital market, a nationwide enlightenment campaign has been launched by the Securities and Exchange Commission (SEC).
This initiative involves town hall meetings that would go around the country to sensitise Nigerians on the need to claim these fallow funds.
The Director General of SEC, Mr Emomotimi Agama, speaking at a town hall meeting in Lagos, said the regulator is not happy that investors, who worked hard to purchase shares in the stock market, have not claimed their profits for many years, making unclaimed dividends pile up.
“The commission considers this situation unacceptable. Funds belonging to investors should ultimately find their way back to their rightful owners,” the SEC chief, represented at the event by the Director of Registration and Exchanges, Market Infrastructure Department, Ms Hafsat Rufai, stated.
He said during this campaign Nigerians would be informed of the unclaimed monies, the role of the National Investor Protection Fund (NIPF), and the procedures for verifying and recovering legitimate claims, stressing that SEC is committed to ensuring that investors’ funds are returned to their rightful owners.
The DG stated that unclaimed monies administered by the NIPF include return funds from public offers, scheme consideration arising from mergers, acquisitions and corporate restructuring transactions, as well as other capital market-related funds that have remained dormant.
He disclosed that the town hall meetings would be held in the six geopolitical zones and the Federal Capital Territory.
In addition, electronic and social media platforms would be used to broaden public awareness on this issue, with efforts to be made to address the transmission of securities following the death of an investor, noting that many families were either unaware that their deceased relatives owned shares or lacked knowledge of the legal and administrative procedures required to transfer such investments to rightful beneficiaries.
“As a result, valuable investments and returns on investments sometimes remain inaccessible for many years, thereby denying beneficiaries the financial benefits intended for them,” he said, urging investors to maintain proper records of their investments and encouraging families to take proactive steps to preserve inherited wealth.
By Dipo Olowookere
The decision of investors to book profit after the previous session’s gains pulled back Customs Street by 0.09 per cent on Thursday.
The selling pressure was mainly on BUA Cement, which put the Nigerian Exchange (NGX) Limited off-balance during the session.
Analysis of the trading data showed that the industrial goods sector was the sole decliner, losing 2.85 per cent, as a result of the poor performance of BUA Cement at the market yesterday.
The other key sectors of the bourse were bullish, with the banking space up by 2.87 per cent. The consumer goods index appreciated by 0.30 per cent, the insurance counter improved by 0.16 per cent, and the energy segment rose by 0.08 per cent.
At the close of business, the All-Share Index (ASI) went down by 221.14 points to 242,145.61 points from 242,366.75 points, and the market capitalisation decreased by N32 billion to N156.207 trillion from N156.239 trillion.
Eunisell crashed by 10.00 per cent to N189.00, BUA Cement lost 9.99 per cent to quote at N275.60, CAP declined by 9.61 per cent to N142.45, Royal Exchange slipped by 9.55 per cent to N1.42, and Guinea Insurance tumbled by 5.38 per cent to 88 Kobo.
Conversely, First Holdco soared by 9.96 per cent to N87.25, McNichols gained 8.00 per cent to trade at N5.40, UBA appreciated by 7.93 per cent to N44.25, Veritas Kapital jumped by 6.85 per cent to N1.56, and Jaiz Bank chalked up 4.07 per cent to settle at N8.95.
It was observed that the market breadth index was positive after the exchange closed the session with 22 price losers and 27 price gainers, representing strong investor sentiment.
A total of 498.5 million shares valued at N34.9 billion were traded in 39,484 deals on Thursday, in contrast to the 476.3 million shares worth N29.6 billion transacted in 40,992 deals on Wednesday. This indicated that the trading volume grew by 4.66 per cent, the trading value increased by 17.91 per cent, and the number of deals depreciated by 3.68 per cent.
Japaul ended the day as the busiest equity after trading 77.7 million units for N231.5 million, Access Holdings sold 41.2 million units valued at N1.0 billion, First Holdco exchanged 38.8 million units worth N3.4 billion, UBA transacted 31.5 million units for N1.4 billion, and Fidelity Bank traded 23.8 million units worth N495.0 million.
