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 Dipo Olowookere
The Nigerian Exchange (NGX) Limited returned to green territory on Friday, closing higher by 0.10 per cent after investor sentiment turned bullish.
Business Post reports that the market breadth index was positive yesterday after the bourse ended with 29 appreciating equities and 21 depreciating equities.
Linkage Assurance gained 10.00 per cent to trade at N1.43, Livestock Feeds appreciated by 9.93 per cent to N8.41, Mutual Benefits jumped by 9.84 per cent to 67 Kobo, UBA soared by 5.75 per cent to N36.80, and Oando grew by 5.59 per cent to N51.00.
Conversely, Red Star Express lost 9.91 per cent to finish at N4.82, Learn Africa depreciated by 9.85 per cent to N3.02, FTN Cocoa declined by 9.43 per cent to N4.80, Coronation Insurance slumped by 9.39 per cent to N2.22, and Ikeja Hotel slipped by 9.35 per cent to N9.70.
Customs Street grew yesterday as a result of buying interest in banking equities, which dominated the activity chart, according to data from the bourse.
Fidelity Bank transacted 62.3 million shares for N1.1 billion, Access Holdings traded 38.3 million equities worth N843.7 million, Tantalizers sold 32.0 million stocks valued at N99.2 million, Veritas Kapital exchanged 31.4 million shares worth N38.4 million, and Zenith Bank traded 22.7 million equities valued at N1.1 billion.
At the close of trades, a total of 397.2 million stocks worth N14.2 billion exchanged hands in 10,099 deals compared with the 310.5 million stocks valued at N6.3 billion traded in 10,182 deals a day earlier, indicating a decline in the number of deals by 0.82 per cent, and the growth in the trading volume and value by 27.92 per cent and 125.40 per cent, respectively.
The industrial goods and commodity sectors remained unchanged during the session, the insurance and consumer goods indices tumbled by 0.49 per cent and 0.02 per cent apiece, while the energy and banking counters went up by 0.50 per cent and 0.12 per cent, respectively.
The bargain-hunting activities of the market participants lifted the All-Share Index (ASI) on Friday by 104.19 points to 104,962.96 points from 104,858.77 points and the market capitalisation increased by N66 billion to N65.820 trillion from N65.754 trillion.
By Adedapo Adesanya
The last trading session this week at the NASD Over-the-Counter (OTC) Securities Exchange ended on a negative note with a 0.44 per cent decline on Friday, March 21.
The market capitalisation of the OTC securities exchange went down by N8.67 billion to N1.939 trillion from N1.948 trillion and the NASD Unlisted Security Index (NSI) ended the session at 3,358.61 points after dropping 15.01 points from the preceding day’s 3,373.62 points.
Trading data showed an increase of 50.7 per cent in the volume of securities transacted to 304,188 units from the 201,873 units transacted in the previous trading day, the value of transactions surged by 1,214.8 per cent to N10.2 million from N776,509.51, and the number of deals rose by 88.2 per cent to 32 deals from 17 deals.
Yesterday, FrieslandCampina Wamco Nigeria Plc lost N1.84 to trade at N37.17 per share versus Thursday’s closing price of N39.01 per share, Central Securities Clearing System (CSCS) Plc depreciated by N1.01 to sell at N22.84 per unit compared with the preceding day’s N213.85 per unit, and Afriland Properties Plc declined by 2 Kobo to close the day at N19.50 per share versus the previous session’s N19.52 per share.
At the close of trading activities, Impresit Bakolori Plc was the most active stock by volume on a year-to-date basis with 533.9 million units worth N520.9 million, followed by Industrial and General Insurance (IGI) Plc with a turnover of 69.9 million units valued at N23.7 million, and Geo Fluids Plc with 44.1 million units sold for N88.9 million.
Similarly, Impresit Bakolori Plc was the most active stock by value on a year-to-date basis with a turnover of 533.9 million units worth N520.9 million, trailed by FrieslandCampina Wamco Nigeria Plc with the sale of 13.2 million units valued at N511.8 million, and Afriland Properties Plc with 17.6 million units sold for N360.1 million.
By Adedapo Adesanya
The value of the Naira depreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, March 21 by N2.72 or 0.18 per cent to settle at N1,537.05/$1 compared with the preceding day’s N1,534.33/1$.
In the same official FX market, the exchange rate of the Nigerian Naira and the Pound Sterling and the Euro remained unchanged at N1,972.89/£1 and N1,657.81/€1, respectively.
At the parallel market segment, the local currency tumbled against the Dollar during the trading session by N5 to trade at N1,590/$1 versus Thursday’s closing price of N1,585/$1.
The pressure on the market continued as the Dollar strengthened in the international market, making currencies like the Naira weaker.
The continuous downward trend of the Naira has raised concerns about the effectiveness of recent injections into the market even as the Central Bank of Nigeria (CBN) channeled more than $55 million into the banks during the week.
In the cryptocurrency market, most tokens as prices inversed with the wider financial markets, which are down on tariff worries and decreased corporate earnings.
On the regulatory front, the US government is moving towards a market structure bill that has been touted as historic.
Solana (SOL) appreciated by 1.2 per cent to sell at $129.31, Dogecoin (DOGE) rose by 0.9 per cent to $0.1692, Ethereum (ETH) went up by 0.9 per cent to $1,988.34, and Ripple (XRP) added 0.8 per cent to close at $2.40.
Further, Bitcoin (BTC) expanded by 0.6 per cent to $84,293.76, Binance Coin (BNB) increased by 0.4 per cent to $631.94, and Cardano jumped by 0.3 per cent to end at $0.7134.
On the flip side, Litecoin (LTC) went down by 1.8 per cent to $91.25, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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