The fall in the monthly inflation rate seems to have resumed; this is following a drop in the headline inflation rate by 0.03 per cent point in January 2022 from the 15.63 per cent recorded in the month of December 2021. The figure is also lower that the 16.47 per cent record in January 2021 by 0.87 per cent point (NBS, 2022). The food inflation, although highest when compared to others, declined by 0.24 per cent point to 17.13 per cent as against 17.37 per cent recorded in the month of December. All other categories increased in rates. For instance, inflation was higher for almost all other categories, primarily clothing & footwear (15.4% vs 15.1%); transport (15.1% vs 15%); furnishings (14.6% vs 14.5%); miscellaneous goods & services (14.4% vs 14.1%) and alcoholic beverages & tobacco (14.1% vs 13.7%). The NBS stated that the food index was driven by increases in prices of Bread and cereals, Food product, Potatoes, yam and other tuber, soft drinks, Oils and fats and fruit.

The urban inflation rate for January, 2022 of 16.17 percent year-on-year which remained the same with December, 2021 rate was a decrease from 17.03 percent recorded in January 2021. The rural inflation rate also decreased to 15.06 per cent in January 2022 from 15.11 per cent and 15.92 percent recorded in December in January 2021, respectively.

The reduction in inflation in the month of January confirms the fact that the mad rush for food items was the main cause of the increased inflation in December, 2021. However, the National Bureau of Statistics released this result with a caveat that the coming months may witness increase in inflation. The signs are already noticed. With the influx of the adulterated fuel and the increase in the price as much as N1,000 in some states, the pass-through relationship between fuel prices, transport and food products will definitely lead to an increase in inflation in the coming months unless something drastic is done to curb the menace and restore normalcy in the sector.

Consumers should continue to exhibit moderacy in their expenditures.

The recently released GDP for the fourth quarter of 2021 shows that the real GDP grew by 3.98 per cent in the fourth quarter, this is higher by 3.87 per cent  than the 3.98 per cent in the same quarter of 2020. This is the third quater in 2021 that the real GDP grew above its 2020 counterparts. It is also the fifth consecutive time that th real GDP has grown positively since the exit of the COVID-19 enginered 2020 recession in Nigeria, when the GDP contracted by 6.1 per cent. However, this growth rate has shown diminishing rates from the third quarter. In other words, this is the lowest rate in the last three quarters. In monetary terms, real GDP increased to N20,329.06 billion naira in the fourth quarter, compared to N19,550.15 billion and N18,543.05 billion naira in the last quarter of 2022 and the thirq quarter of 2021, respectively.

In the same way, the nominal GDP grew by 13.11 per cent to N49,276.02 billion in the fourth quarter from N45,113.45 billion recorded in the third quarter of 2021. This figure is also higher than the N43,564.00 billionor or 10.07 per cent recorded in the fourth quarter of 2020 (see figure 1 below). The release of the fourth quarter GDP growth rate completes the four quarters for the year 2021. On the average, real GDP grew to 3.40 per cent in 2021, compared to the negative growth rate of 1.92 per cent in 2020. Similarly, nominal GDP growth rate averaged 13.92 per cent in 2021 as against 5.63 per cent in 2020. This is the strongest growth since the geginning of this present administrtation.

The non-oil sector is the main driver of 2021 GDP, having contributed about 92.76 per cent on the average in the years and about 94.81 per cent in the fourth quarter and growing by 4.73 per cent in the quarter under review. Although lower than 5.44 per cent recorded in the third quarter of 2021, it was very high compared to the 1.69 per cent recorded in the same quarter in 2020. The federal government’s investment in the agricultural and service sectors would have paid off as the two sectors contributed significantly in the basket of the non-oil sector. The highest performing subsectors in the quarter were the financial and insurance (24.14 %), transportation and storage (29.72%), water supply, sewerage, waste management and remediation (28.84%). The oil sector has continued its downward trend in GDP despite the increasing price of the barrel of oil. This could be a reflecting lower oil output as the average daily crude oil production stood at 1.50 million barrels per day (MBs/P), down from 1.57 MBs/D and 1.56 MBs/D in the third quarter of 2021 and fourth quarter of 2020, respectively.

This growth is however fragile, given the unending high inflation eating away the purchsing power of Nigerians. As at January, 2022, the inflation rate ws 15.63%. This is worsend by foreign exchange shortages and the administrative control over the exchange rate allocation, and the consequent incessant depreciation in the value of the naira. There is the need implement policies that will reduce the inflation. There most be a way out of the problems in the agricultural sector while also encouraging more the service sector. Diversification away from the only source of foreign exchange is key to further economic growth.

Following the recent passage of a bill into law by the Rivers State government empowering the state to collect VAT from businesses domiciled in the state, and the subsequent insistence by the Federal Inland Revenue Services (FIRS) to collect VAT, the River State government has obtained an order from the court validating their stand to collect VAT for now, from business in Rivers State, and restraining the FIRS from collecting same and personal income tax (PIT) due the state. Based on this, the Lagos State government has also asked the FIRS to stop giving demand notices for payment of VAT and to render accounts of all VAT collected in the state 2021, within seven days.

VAT is an offshoot of the sales tax which had been in operation under Federal government Legislated decree No.7 of 1986, administered by the states and the Federal capital territory, and abrogated by the Value Added Tax Decree 102 of 1993 which came into force in 1994 (Omesi and Nzor, 2015). The confinement of sales tax, now VAT under the exclusive list has been a subject of controversy, challenged and won at various times in the court by states. The main reason for the challenges is that, the legislation either as a sales tax or VAT is out of tune with the 1999 constitution. VAT is a consumption tax, and should be location-specific. VAT comes at a price to states, therefore proceeds of VAT should be channeled at addressing the socio-economic prices of consumptions in the originating states. It is useless for instance, taking the proceeds of alcohol VAT from Lagos to address issues in Kano where alcohol is prohibited. It makes no meaning therefore to pool VAT together and share at agreed date with other federating units and the federal government, who have different times and methods of attending to issues in their states. For these reasons, the courtroom invalidated the VAT Act and empowered the states to impose, demand and gather VAT inside their states, in the matters involving the Registered Trustees of Resort House owners and Managers Affiliation of Lagos v. A.G. Federation, in Ukala v. FIRS, in A.G. Rivers v. F.I.R.S.

The courtroom in 2019 also upheld the powers of the Lagos State Authorities to cost and gather Consumption Tax from motels, eating places and occasion centres throughout the state in the matter within the Registered Trustees of Resort House owners and Managers Affiliation of Lagos v. A. G. Federation & Others. While declaring certain sections of VAT, 1993 as inconsistent with the constitution, the court held that FIRS has no power to impose consumption tax on a facility under the residual energy and unique competence of states. This matter has been upheld by the latest ruling between the Rivers State government and the FIRS, in which the states except Katsina, argue that they could go ahead to collect VAT within their jurisdictions.

The conflicting directives from the states, especially Lagos, and the insistence of FIRS on collecting VAT has left businesses in confusion of whether to maintain their VAT compliance with the FIRS or direct it to the states, or suspend it until the Supreme Court puts paid to the matter. Any attempt to pay now may also put a business in the wrong side of the law, and result to double payment. This may mean accumulated tax, and a heavy burden on businesses when the case is finally led to rest. VAT, as stipulated by the new Rivers State law to be filed before the 20^th of every month, failure of which will attract fines. Whether the fine will still subsist if the case ends will determine how heavily indebted a business is or not. In any case, it is important that every VAT payer should be prepared to embrace the outcome. This is the cause of the uncertainty that businesses face in the ongoing VAT imbroglio between the States and the feral on VAT control.

It is in the best interest of both tiers of government to suspend VAT enforcement until the Supreme Court decides.

The average annual inflation rate for the year which ended December, 2021 16.95 per cent in 2021. This is higher than 13.25 per cent recorded in 2020 by 27.92 per cent. The rise in 2021 inflation was driven by food inflation which rose by 26.16 per cent from 16.17 percent in 2020 to 20.40 per cent in 2021. Similarly, the eight periods of consistent monthly decline in inflation rate in the country seems to have ended. This is as a result of the increase in in the monthly inflation rate from 15.40 per cent in November to 15.63 per cent in December 2021. This rate is the highest in the last two months.  This figure is however, lower by 0.13 percent point than 15.75 per cent rate recorded in December 2020 (NBS, 2022).

As usual, the increase in the inflation in the month of December was driven by a continued rise in food inflation, which moved to 17.37 per cent in December 2021 from 17.21 per cent in November but lower than 19.56 per cent in December 2020 by 2.19 percentage points. The rise in the food inflation was caused by increases in prices of Bread and cereals, Food product, such as meat, fish, potatoes, yam and other tuber, soft drinks and fruits, etc. As usual, the urban areas contributed more to the high inflation in the month of December, 2021, given their conspicuous consumption and larger population in the cities. The urban areas’ inflation rate for December 2021, was 16.17 percent (year-on-year), while the twelve-month year-on-year average for the month of December 2021 is 17.52 percent. The corresponding monthly and yearly average rates for the rural areas in the same month are 15.11 per cent and 16.40 percent, respectively.

Although, the increase in inflation rate in December is always foreseen, given the high purchases associated with the December yuletide period. There is every tendency that the rate may subsist or increase in this year as the petroleum sector is completely deregulated. The Lagos state government has also unveiled Consolidated Informal Transport Sector Levy, to harmonize the existing levies in the state. With the levy, every bus driver will pay a daily amount of N800 daily or N288,000 annually to the covers of the state government, in addition to other levies paid to the NURTW. Electioneering periods in Nigeria are periods of inordinate spending, not channeled to investment. All these may cause undue increasing pressure on inflation in this year.

Nigeria is already facing a mixture of high unemployment rate, poor income levels, high poverty rates and inequality gaps, couple with the rising inflation, etc. These threats mean a depletion of the income of mostly those whose marginal propensity to consume is high thereby leading to unstable consumption pattern. For instance, consumer spending in Nigeria decreased to N12,319,481.04 million in the second quarter of 2021 from N13,032,211.07 million in the first quarter of 2021. In other words, Nigerians will face a nosediving consumption spending this year.

The shrinking middle class and the resultant drop in consumers’ purchasing power will manifest in the form of high inventory of unsold finished products. The demand for durable goods will continue to be weak as consumers continue to give priority to food and other basics. The alternative for consumers may be to patronize cheap alternatives as well as demand for products with multiple uses. These actions will affect brand loyalty.  FMCGs should leverage the models operated by telecom brands who now provide financial services to their customers. They should explore different product lines, innovate products that serve multiple needs, design products that are cheaper so as to retain their market edge, drive patronage, production, turnover and profit margins.

The recently released GDP for the fourth quarter of 2021 shows that the real GDP grew by 3.98 per cent in the fourth quarter, this is higher by 3.87 per cent than the 3.98 per cent in the same quarter of 2020. This is the third quater in 2021 that the real GDP growth has suppased its 2020 counterparts. It is also the fifth consecutive time that th real GDP has grown positively since the exit of the COVID-19 enginered 2020 recession in Nigeria, when the GDP contracted by 6.1 per cent. However, this growth rate has shown diminishing rates from the third quarter. In other words, this is the lowest rate in the last three quarters. In monetary terms, real GDP increased to N20,329.06 billion naira in the fourth quarter, compared to N19,550.15 billion and N18,543.05 billion naira in the last quarter of 2022 and the thirq quarter of 2021, respectively.

In the same way, the nominal GDP grew by 13.11 per cent to N49,276.02 billion in the fourth quarter from N45,113.45 billion recorded in the third quarter of 2021. This figure is also higher than the N43,564.00 billionor or 10.07 per cent recorded in the fourth quarter of 2020 (see figure 1 below). The release of the fourth quarter GDP growth rate completes the four quarters for the year 2021. On the average, real GDP grew to 3.40 per cent in 2021, compared to the negative growth rate of 1.92 per cent in 2020. Similarly, nominal GDP growth rate averaged 13.92 per cent in 2021 as against 5.63 per cent in 2020. This is the strongest growth since the geginning of this present administrtation.

The non-oil sector is the main driver of 2021 GDP, having contributed about 92.76 per cent on the average in the years and about 94.81 per cent in the fourth quarter and growing by 4.73 per cent in the quarter under review. Although lower than 5.44 per cent recorded in the third quarter of 2021, it was very high compared to the 1.69 per cent recorded in the same quarter in 2020. The federal government’s investment in the agricultural and service sectors would have paid off as the two sectors contributed significantly in the basket of the non-oil sector. The highest performing subsectors in the quarter were the financial and insurance (24.14 %), transportation and storage (29.72%), water supply, sewerage, waste management and remediation (28.84%). The oil sector has continued its downward trend in GDP despite the increasing price of the barrel of oil. This could be a reflecting lower oil output as the average daily crude oil production stood at 1.50 million barrels per day (MBs/P), down from 1.57 MBs/D and 1.56 MBs/D in the third quarter of 2021 and fourth quarter of 2020, respectively.

This growth is however fragile, given the unending high inflation eating away the purchsing power of Nigerians. As at January, 2022, the inflation rate ws 15.63%. This is worsend by foreign exchange shortages and the administrative control over the exchange rate allocation, and the consequent incessant depreciation in the value of the naira. There is the need implement policies that will reduce the inflation. There most be a way out of the problems in the agricultural sector while also encouraging more the service sector. Diversification away from the only source of foreign exchange is key to further economic growth.

The last monetary policy committee meeting of the Central Bank of Nigeria (CBN) has ended on the 23^rd of November, with the committee deciding to retain thus;

• the Monetary Policy Rate (MPR) at 11.5 per cent
• the asymmetric corridor of +100/-700 basis points around the MPR
• the CRR at 27.5 per cent
• and the Liquidity Ratio at 30 per cent.

This is the sixth time the CBN will maintain the status quo since it reviewed its monetary policy stance in November 24, 2020 from the previous regime which held sway before September 22, 2020, viz;

• MPR of 12.5 per cent;
• Asymmetric corridor of +200/-500 basis points basis points around the MPR;
• CRR of 27.5 per cent; and
• Liquidity Ratio of 30 per cent.

The MPC believes that the existing monetary policy stance has continued to support the growth of the economy, and that if allowed would continue to consolidate the MPC mandate of price stability that is conducive for sustainable growth. Specifically, the committee noted that that GDP has consistently grown from the last quarter of 2020 to 4.03 per cent during Q3 of 2021 from the 5.01 per cent in the second quarter of 2021, while inflation has declined for the 6th consecutive month to 15.99 per cent in October 2021.

The MPC weighed other options. It noted that while tightening the MPR would further help to curb inflation aggressively, it will increase interest rates and constrain output growth. Similarly, while loosening will lower policy rates, ease liquidity pressures, and stimulate additional credit creation which will boost output growth, such a stance will further widen the negative real interest rate gap and compound the price distortions in the money markets which could fuel inflationary pressures. Either of the stances will amount to procyclical policies. The CBN therefore decided that there was no need to either tighten or loosen the Bank’s stance.

In the last six months inflation rate has continued to reduce and the economy has shown consistency in the growth trajectory in the last one year. It is expected that this monetary policy stance will consolidate on this favourable macro-economic environment which appears to have a good outlook in the coming year. However, the expected removal of subsidy and the likely increase in electricity tariff might lead to hoarding and drive prices up thereby truncating the growth trajectory. In other words, the activities of the energy sector will determine changes in the monetary police in the coming year.

The Central Bank of Nigeria (CBN) has given approval-in-principle to two leading telecoms companies, MTN Nigeria and Airtel Africa Plc to operate PSBs in Nigeria. This first step in a long process that would lead to an eventual approval is coming more than two years after the federal government initially announced its intentions to issue PSBs in 2018. This prompted these firms and other non-financial institutions to immediately apply for PSB licenses from the CBN, but were delayed. The approval-in-principle requires the telecoms firms seeking to operate payment service banks in Nigeria to each satisfy a host of conditions, including a $12.2 million (N5 billion) minimum capital requirement. The telecoms firms are also allowed to provide financial services to Nigerians, only through their subsidiaries separate from their core operations.

Airtel and MTN will operate PSB via its Smartcash Payment Service Bank Limited and MoMo Payment Service Bank Limited, respectively. The PSB operators provide financial services through digital means to low-income earners and people that do not use banks or banking institutions for transactions. Like the conventional commercial banks, they accept deposits from individuals and small businesses, offer payment and remittance services, issue debit & prepaid card for use across e-banking channel, operate electronic purse, and other activities prescribed by the CBN. These services make them more sophisticated than agency banking largely operated by street shops. However, they do not lend and receive deposits in foreign currency. Smartcash Payment and MoMo Payment Service Banks Limited will operate in line with these guidelines.

One of the reasons for licensing the PSBs is to bring more people into the financial inclusion space and meet the evolving needs of our customers and the economy. Previous attempts at extending financial services to unbanked Nigerians by fintech startups, were made through OPay, TeamApt, and Paga, through their agent networks and mobile payments infrastructure. Access and First Bank have also leveraged the agency banking model as a distribution channel to reach Nigerians in the remotest parts of the country. This has only afforded Access Bank and First Bank around 59,000 and 100,000 agents, respectively. This is a far cry when compared with 38 million Nigerian adults, or about 36% of over 105 million adult populations in the country assumed to be completely financially excluded as at 2020. This is higher than the target in the revised National Financial Inclusion Strategy (NFIS), which expects at most 20% of adult Nigerians to be excluded from financial services from 2020.

It is estimated that about 35 million out of the 38 million unbanked adult Nigerians own mobile phones and could be reached with mobile money. The incorporation of MTN and Airtel into the PSBs will expand digital financial products to the reach of millions of Nigerians who were hitherto unreachable by the conventional banks, thereby engendering the inclusion of these group of Nigerians into the financial services space. This will also heighten competition especially with commercial banks and Fintechs, such that cost of these services will drastically reduce. The telecoms companies are more in the position to deepen mobile money services given their subscriber numbers, available infrastructure, and broader agent networks, which outnumber those of banks and fintechs. Other telecoms are also waiting for the right to operate PSBs. This means stiffer competition in the financial service industry and a greater opportunity to achieve greater financial inclusion objective of government.

With the approval, both MTN and Airtel are now to work with the CBN, who reserves the right to approve PSBs, to meet all its conditions before receiving the licences to commence operation.

The Central Bank of Nigeria (CBN) has unveiled a Policy to Fund 100 Private Sector Companies Every 100 Days. This is a new financial instrument on Production and Productivity,” aimed at boosting support for selected private sector companies in the country. During the launch of the Central Bank Digital Currency (CBDC), the eNaira, the CBN announced that the policy will advertise, screen, scrutinize and financially support 100 targeted private sector companies in 100 days, beginning from 01 November 2021, and rolling over every 100 days with new set of 100 companies, whose names will be published in National Dailies for Nigerians to verify and confirm.

The policy will target and support the right companies and projects, to boost local production and productivity, reduce imports of certain products, increase non-oil exports, and improve in the foreign exchange-generating capacity of the economy. The policy opens up another vista of opportunity for banks’ customers as this instrument will be available to them through their banks to support critical sectors and immediately transform and jumpstart the productive base of the economy. The policy takes effect from November 1, with the first 100 projects by companies. The next 100 companies/projects for another 100 days begin from February 1, 2022, to April 31^st, 2022. The next 100 companies for another 100 days begin on May 1, 2022 and ends in July, 2022, and so on and so forth.

This policy is one of the many steps the apex financial institution in the country is taking to reverse the country’s over reliance on imports. It provides an opportunity for the financial institutions and the manufacturers, especially the MSMEs to collaborate and boost the nation’s productive sector. The CBN believes that production and continued production in the country will help address the Naira’s dwindling value.

In the early months of 2020, the COVID-19 which started in China and spread to few countries in the world in 2019 caused most nations in the world to impose serious restrictive measures into their countries. Non-essential businesses, schools, markets and even hospitals became no go arears as travel bans were imposed by many countries. This led to serious hunger, forcing many countries, including capitalist-oriented ones to resort to socialist policies as a way of ameliorating the excruciating pains passed through by its citizens.

As the lockdown continued, it became obvious that many nations were becoming poorer by day. Nigeria for instance could no longer find buyers for its crude oil, the most important means of raising foreign revenue and exchange for investment, the country was plunged into its second recession in the life time of this administration, the worst since the birth of Nigeria. The recession was caused by many factors. The manufacturers could not import inputs and other intermediate products; thus, production was stalled. Second, workers were barred from office, even if there were inputs for production, workers were not available to direct such processes. Third, while most workers were asked to stay at home with reduced or no salary, many were completely laid off and as such no monthly stipend for survival. This reduced the disposable income as well as the purchasing power of consumers, and as such affected the profitability of firms, many of which have not survived those harsh periods till now. The opportunity cost of this action was an increased poverty in the country.

Many nations around the world have eased down the lockdowns, not because COVID-19 has been eradicated or the vaccine found, but to bring an end to the ensuing hunger that is ravaging their population. Apart from the fact that the original variant of the disease from China is still present, different variants have also developed. The latest being the “Omicrom variant”, said to be detected first in South Africa. The Omicron variant is of concern because it has a large number of mutations, some of which have been associated with potential increased transmissibility and possible immune escape, this means that there are chances people may get infected by it even if they have developed some natural immunity from previous COVID-19 infection, or following COVID-19 vaccination. Another issue about this variant is that its mutation has not been properly investigated and documented to guide health actions against it.

In the light of the above, the omicron variant of the COVID-19 is generating a lot of fears among many nations. More than 50 nations, including the US, Canada, the UK, etc., have imposed stricter border controls as the variant is identified in 24 countries. So far, Canada, South Arabia, Tanzania have blocked flights in and out of their countries, the UK has announced a one moth restriction, Spain announced a state of emergency with a possibility of extension, France, Germany and Italy have also announced new restrictions. These countries are undaunted by their actions despite WHO’s warning of likely worsening inequalities. The question now is, is the world going to face another round of lockdown? What will the consequences be especially for countries like Nigeria, given the experience from the previous lockdown in 2020/2021?

Although the country has maintained a positive growth in GDP in the last four quarters since it exited the last recession in December 2020, the drop in the third quarter of 2021 real GDP growth to 4.03% from 5.01% in the second quarter could be worsened by this imminent global restriction and lockdown to reduce the transmission of the omicron variant of COVID-19.  Another global restriction will lead to the resurgence of the economic woes of 2020 which led to the losses of means of livelihoods and closure of businesses. While the manufacturing sector will be amongst the worst hit, the telecoms sector will again be the mostly patronized sector as most businesses will device to virtual transactions.

 The federal government has also announced the total deregulation of the downstream sector of the petroleum industry in 2022 in line with the Petroleum Industry Act of 2021. As said in the Nigerian parlance, deregulation, especially in the period of global restriction will “add pepper to salt” or worsen the already bad situation of the average consumer who is facing a southward drop in the disposable income due to the increasing cost of living, and cause more industries to go moribund. It is therefore difficult to suggest the outcome of deregulation in the period of global restriction against omicron variant of COVID-19.

The apps for the Nigerian digital currency, eNaira speed and wallets have been made available by the Central Bank of Nigeria (CBN) on Google playstore and Apple store. This is sequel to the launch of the digital currency by President Muhammadu Buhari in Abuja yesterday. The currency was developed by the Central Bank of Nigeria in partnership with Bitt, a leading fintech company that is instrumental to the creation of digital currencies in some East Caribbean countries.

In other to guide the consumers of the eNaira, the CBN has also published regulatory guidelines of the currency on its website. The guideline seeks to provide simplicity in the operation of eNaira, encourage general acceptability and use, promote low cost of transactions, and drive financial inclusion. It is also aimed at minimising inherent risks of disintermediation of any negative impact on the financial system. The CBN has made free of charge, all transactions conducted on the platform within the first 90 days, after which Electronic Funds Transfer below N5,000 is charged N10; N5,001-N50,000 is charged N25 and for above N50,000, a N50 charge is associated. These charges are equivalent to charges on transactions by banks and other financial institutions.

Among the information on the guidelines are: accessibility and onboarding of customers without BVN and the use of eNaira on a phone without Internet, meant to further drive financial inclusion. This has made Nigeria to become one of the first countries in the world to deploy the CBDC via USSD on phones without relying on internet connectivity. The CBN has also promised to add the onboarding of revenue collection agencies on the app, to increase and simplify collections, as well as the creation of sector-specific tokens to support the Federal Government’s social programmes and distribution of targeted welfare schemes in a bid to lift millions out of poverty by 2025.

In his speech during the launch, the President advised the CBN to engage in close monitoring and supervision, especially in these early stages. He also advised them to study the effects of the eNaira on the economy as a whole.