Economy
The Challenges Facing Nigeria’s Economy
The Challenges Facing Nigeria’s Economy
The ongoing COVID-19 crisis is threatening to push Nigeria’s economy backwards, just a few years after the country successfully emerged from a damaging recession. The warning signs are flashing again as increased borrowing, a weakening currency and rising unemployment loom ominously.
As government and financial institutions struggle to remedy the situation, there is a growing demand for foreign exchange, forcing banks to ration outflow, while the hoped-for rally in oil prices has not materialised. Over-dependence on oil, policy inconsistency, insecurity and a persistent level of corruption have all had a dampening effect on the nation’s finances.
But Nigeria remains a nation with tremendous resources and potential, and there are reasons to be optimistic about the future, with a number of avenues to explore that could offer increasing prosperity and a way to guide the country to a firmer financial footing.
Promise of Agriculture
Agriculture remains a strength for Nigeria and it has the potential to help revive the economy. There are a number of plans in place, such as the Kano Agro Pastoral Project, that can help to galvanise this important part of the Nigerian economy. Nigeria is blessed with huge reserves of arable land and a significant farming population, offering a potential solution not just to economic downturn but also to the equally important issues of food poverty and food security.
There are promising signs that cooperation between agricultural specialists, state and national governments is starting to take effect, and by focusing on developing targeted crop value chains while improving the rural infrastructure, Nigeria’s farmers can be empowered to boost the economy.
Importance of Diversification
Nigeria has enormous human potential and economic ingenuity. The inventiveness of the Nigerian entrepreneur is on display across many sectors.
Take the thriving and growing mobile technology sector. Evidence suggests that mobile penetration increased from 36% to 50% between 2014 and 2017. That trend has continued with one estimate by Business Monitor International putting the likely number of mobile subscribers at 182 million by 2021, up from 153 million in 2017. Demand for mobile services has been driven both by technological advances and the dynamic marketing practices of Nigerian mobile companies.
This proliferation of mobile usage is also helping to drive the success of some of the top online casinos in Nigeria. The online casino sector, boosted by the ever-widening availability of mobile technology, is expanding rapidly, particularly among the increasingly affluent young Nigerian middle class.
Innovative local gaming companies are striking deals with major online casino content providers, as well as with international payment providers and digital support companies, enabling them to offer an ever more cutting-edge casino gaming experience.
The rise of the online casino and mobile sectors demonstrates Nigeria’s entrepreneurial potential. But fully unleashing that potential may first require tackling the country’s over-reliance on oil revenue. This has become a problem, but Nigeria has the opportunity to lead the way in designing the new green economy of the 2020s.
The government has already launched Africa’s first sovereign green bonds and has taken steps to extricate the country from oil dependency, starting with a cut in oil subsidies.
Money diverted from the oil industry can be directed into the renewables sector, while the Nigerian Ecological Fund has the potential to tackle some of the serious ecological problems facing the nation – a clean-up that can also boost the economy. The Ministry of Works, in conjunction with the wider government, can help to lead the way by bringing about green reforms in the Nigerian construction industry, while tackling the serious housing shortage in the country.
Rise of technology
Technology is another way in which Nigeria can help to steer its economic ship to safer waters. Although it can be difficult to focus on the future in times of economic difficulty, there is enormous untapped potential in Nigeria when it comes to technological change, not least among the country’s business sector. A strong push to adopt new methods, such as remote work, e-commerce and artificial intelligence, much of which has been given a boost by the pandemic, could reap dividends.
There is a huge potential demand for improved IT infrastructure, from collaboration tools that enable workers to operate effectively as a team while working at home, to teaching solutions that can enable teachers to deliver lessons remotely. And beyond that, the promises of cloud computing and smart homes offer Nigeria the opportunity to be bold and take the lead in African technology.
Retooled finance
Technology can also have a role to play in helping the Nigerian finance sector to contribute to the national economy. The pandemic has shown that more can be done in terms of automation and technical solutions to financing problems, while at the same time, the sector can do more to reach out to all sectors of society. The Nigerian finance industry is full of talent and the desire for innovation, and if unleashed, can play a major role in the nation’s recovery.
Like many other nations around the world, Nigeria has taken a hit due to COVID-19 and there are specific long-term problems that the country still needs to face. But the nation remains one of the most significant countries in the world and a powerhouse in Africa, and with sufficient guidance and investment, the potential of Nigerian farmers, business people, administrators, bankers and scientists can be harnessed to help build a more prosperous future.
By Dipo Olowookere
The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.
Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.
Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.
But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.
Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.
As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.
A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.
Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.
Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.
Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Adedapo Adesanya
It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.
In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.
In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.
The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.
President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.
The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.
President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.
Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.
Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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