ECONOMIC REPORT
THIRD QUARTER 2016


CENTRAL BANK OF NIGERIA


C e n t r a l B a n k o f N i g e r i a
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Economic Report Third Quarter

The Central Bank of Nigeria Quarterly Economic Report is designed for the dissemination
of financial and economic information on the Nigerian economy on current basis. The
Report analyses developments in the financial, fiscal, real and external sectors of the
economy, as well as international economic issues of interest. The Report is directed at
a wide spectrum of readers including economists and financial analysts in government
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Economic Report Third Quarter

Contents


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Economic Report Third Quarter


Text Tables

Appendix Tables


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Figures


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Economic Report Third Quarter

1.0 Summary
The significant increase in domestic credit (net), foreign assets (net)
and other asset (net) led to growth in key monetary aggregates in
the third quarter of 2016. Broad money supply (M2) and narrow
money supply (M1) grew by 2.1 per cent and 9.0 per cent,
respectively, over the levels at end-June 2016.
The continued restrictive monetary policy stance of the Bank led to
the general increase in banks’ deposit and lending rates in the third
quarter of 2016. The spread between the weighted average term
deposit and maximum lending rates narrowed to 21.09 percentage
points at the end of the third quarter of 2016. Similarly, the margin
between the average savings deposit and the maximum lending
rates narrowed to 23.96 percentage points. The weighted average
inter-bank call rate rose to 23.42 per cent, reflecting the liquidity
condition in the banking system.
The total value of money market assets outstanding at the end of
the third quarter of 2016, stood at N10,684.44 billion, showing an
increase of 2.14 per cent over the level at the end of the second
quarter of 2016. The development reflected the increase in
commercial paper outstanding. Developments on the Nigerian
Stock Exchange (NSE) were bearish in the review quarter.
Shortfall in receipts from oil and non-oil revenue due to persistent low
price of crude oil and pipeline vandalism, continued to impact
negatively on government revenue. Consequently, at N1,980.95
billion, total federally-collected revenue was lower than both the
quarterly budget estimate and the preceding quarter’s receipts.
Gross oil and non-oil receipts were both lower than the provisional
quarterly budget estimate, though receipt from non-oil sources was
above the level in the preceding quarter by 87.1 per cent. Federal
Government retained revenue was N922.9 billion, while total
expenditure was N1,424.9 billion, resulting in an estimated deficit of
N502.0 billion in the third quarter of 2016, compared with the
proportionate quarterly budget deficit of N555.49 billion.
Agrcultural sector activities increased in the review period due to
widespread rain experienced in most parts of the country. Major
activities in the Southern and Northern parts of the country were
harvesting of maize, yam, groundnuts and potatoes, while farmers in
the livestock sub-sector, engaged in the breeding of poultry and
migration of cattle from the North to the South in search of green
pastures. The end-period inflation rate, on year-on-year and 12month moving average basis for the third quarter of 2016, was 17.9
per cent and 13.5 per cent, respectively.


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Economic Report Third Quarter

World crude oil demand and supply were estimated at 95.15 mbd
and 95.65 mbd, respectively, in the third quarter of 2016. Nigeria’s
crude oil production, including condensates and natural gas liquids,
was also estimated at an average of 1.48 million barrels per day
(mbd) or 136.16 million barrels (mb) for the third quarter of 2016.
Crude oil export was estimated at 1.03 mbd or 94.76 million barrels,
while deliveries to the refineries for domestic consumption was 0.45
mbd or 41.40 million barrels in the review quarter. The average price
of Nigeria’s reference crude, the Bonny Light (370 API), was US$46.44
per barrel in the review quarter.
Provisional data showed that foreign exchange inflow and outflow
through the CBN amounted to US$5.59 billion and US$7.73 billion,
respectively, resulting in a net outflow of US$2.14 billion. Foreign
exchange sales by the CBN to the authorized dealers amounted to
US$5.30 billion, while the average exchange rate of the naira vis-àvis the US dollar at the inter-bank market depreciated further to
N303.16/US$.
World Economic Outlook (WEO) 2016, projected a decline in global
growth to 3.1 per cent in 2016. Growth was, however, estimated to
rebound next year to 3.4 per cent. Growth in emerging market and
developing economies is expected to strengthen slightly in 2016 to
4.2 per cent after five consecutive years of decline.
Other major international economic developments and meetings of
importance to the domestic economy in the review period included:
the 2016 meeting of the African Governors of the IMF and World
Bank held at Palais des Congres, Cotonou, Benin Republic from
August 4 - 5, 2016; the 2016 Annual meetings of the Association of
African Central Banks held in Abuja, Nigeria, from August 15 – 19,
2016; and the 29th Ordinary Meeting of the Economic and Monetary
Affairs Committee and the Administration Committee of WAMA held
at the Riviera Royale Hotel, Conakry, Guinea from July 29 - 30, 2016.
In addition, the 33rd meeting of the Committee of Governors of the
West African Monetary Zone (WAMZ) was held on 4th August, 2016
to deliberate on the Report of the 39th Meeting of the Technical
Committee of the WAMZ. Finally, The 31st meeting of the Board of
Governors of WAIFEM was held at the Riviera Royale Hotel Conakry,
Guinea on August 4, 2016.


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Economic Report Third Quarter

2.0 Financial Sector Developments
2.1 Monetary and Credit Developments
On the back of significant increase in both domestic, foreign assets
(net) and other assets (net), growth in the key monetary aggregates
accelerated at the end of the third quarter of 2016. Banks’ deposit
and lending rates trended upward. The value of money market
assets outstanding increased, due, largely, to the rise in commercial
paper. Developments on the Nigerian Stock Exchange (NSE) were
bearish.
The persistent low crude oil prices continued to have
negative impact on the economy, including rising inflation
which resulted in a restrictive monetary policy stance of the
monetary authorities. However, provisional data indicated
that growth in the key monetary aggregates accelerated at
the end of the third quarter of 2016. On quarter-on-quarter
basis, broad money supply (M2), at N22,133.48 billion, grew by
2.1 per cent, compared with the growth of 5.9 per cent at the
end of the second quarter of 2016. The growth in M2 was
attributed to the significant increase in foreign assets (net),
other assets (net) and domestic credit (net) of the banking
system.
Over the level at end-December 2015, broad money supply
(M2) grew by 10.5 per cent, compared with the growth of 10.8
per cent at the end of the second quarter. The development
reflected the 21.9 per cent and 37.0 per cent growth in
aggregate credit and foreign assets of the banking system,
respectively.
Narrow money supply (M1), rose by 9.0 per cent to N9,949.39
billion, compared with 0.9 per cent and 9.3 per cent growth at
the end of the second quarter of 2016 and the corresponding
period of 2015, respectively . The development was attributed
to the 7.1 per cent and 9.4 per cent growth in currency
outside banks and demand deposits, respectively. Over the
level at end-December 2015, narrow money supply (M1) rose
by 16.1 per cent, reflecting the 1.5 per cent and 19.1 per cent
increase in its currency outside banks and demand deposit
components, respectively.
Relative to the level at the end of the second quarter of 2016,
quasi-money fell by 3.0 per cent to N12,184.09 billion in the
Key monetary
aggregates grew
during Q3 of 2016.


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Economic Report Third Quarter

third quarter, in contrast to the growth of 9.9 per cent
recorded in the preceding quarter. The fall in quasi-money
was due to a fall in foreign currency deposits of banks. Over
end-December 2015, quasi money increased by 6.3 per cent,
compared with the 9.6 per cent growth at the end of the
preceding quarter (Fig. 1, Table 1).
Figure 1: Growth Rate of Narrow Money (M1) and Broad Money (M2)1

At N26,341.47 billion, aggregate domestic credit (net) to the
economy, on quarter-on-quarter basis, grew by 8.3 per cent,
compared with the growth of 7.3 per cent and 0.5 per cent at
the end of the preceding quarter and the corresponding
period of 2015, respectively. The growth in aggregate credit
was attributed to the increased borrowing by the Federal
Government through the issuance of treasury bills and the
increased lending by banks to the private sector. Over the
level at end-December 2015, net domestic credit grew by
21.9 per cent, compared with the growth of 12.5 per cent and
11.7 per cent at end-June 2016 and the corresponding period
of 2015, respectively. The development was attributed to the
substantial growth in net claims on the Federal Government
and claims on the private sector.

1 QM1 and QM2 represent quarter-on-quarter changes, while CM1 and CM2 represent
cumulative changes (year-to-date).

-15
-10
-5

-10
-5

Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Quarterly (%)
Cumulative (%)
QM1 (RHS)
QM2 (RHS)
CM1 (LHS)
CM2 (LHS)


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Economic Report Third Quarter

Banking system‟s credit (net) to the Federal Government
increased by 29.6 per cent to N3,748.84 billion, in contrast to
the decline of 23.5 per cent at the end of the preceding
quarter. The development reflected the respective increase of
4.0 per cent and 4.5 per cent in outstanding government bills
held by banks and direct loans largely through CBN‟s Ways
and Means Advances, respectively. Relative to the level at
end-December 2015, net claims on the Federal Government
grew by 29.6 per cent, compared with the 0.00003 per cent
growth at end-June 2016.
At N22,592.63 billion, banking system‟s credit to the private
sector, grew by 5.5 per cent quarter-on-quarter, compared
with the growth of 13.5 per cent at end-June 2016. The
development was due, mainly, to CBN interventions in critical
sectors of the economy through the banks. Over the level at
end-December 2015, banking system‟s credit to the private
sector grew by 20.7 per cent, compared with the growth of
14.5 per cent at the end of the preceding quarter.
Figure 2: Growth Rate of Aggregate Domestic Credit to the Economy

The continued depreciation of the naira in the second quarter
of 2016 impacted positively on the foreign assets in the third
quarter, as net foreign asset holdings of the CBN rose by 13.9
per cent. Consequently, foreign Asset (Net) of the banking
system grew by 9.0 per cent (N7,742.28), compared with the
growth of 28.0 per cent at end-June 2016. Over the level at
end-December 2015, foreign asset (net) increased by 37.0 per
cent in the third quarter of 2016, compared with the growth of
-50

-50

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Quarterly (%)
Cumulative (%)
QCP (RHS)
QCG (RHS)
QAC (RHS)
CCP (LHS)
CCG (LHS)
CAC (LHS)
Banking system’s
credit to the Federal
Government
increased by 29.6 per
cent at the end of the
third quarter of 2016.
Foreign assets (net)
of the banking
system grew at the
end of the review
quarter.


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Economic Report Third Quarter

25.7 per cent at the end of the second quarter. The growth
was due to the 40.5 per cent increase in the foreign asset
holdings of the CBN.
Table 1: Growth in Monetary and Credit Aggregates (Per cent) Over
Preceding Quarter
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Domestic Credit (Net)

Claims on Federal Government (Net)

Claims on Private Sector

Claims on Other Private Sector

Foreign Assets (Net)

Other Assets (Net)

Broad Money Supply (M2)

Quasi-Money

Narrow Money Supply (M1)

Memorandum Items:
Reserve Money (RM)


2.2
Currency-in-circulation (CIC) and Deposits at CBN

At N1,794.3 billion, currency-in-circulation rose by 6.1 per cent
relative to the level in the second quarter of 2016. The
development was due, largely, to the increase in its currency
outside banks component.

Total deposits at the CBN amounted to N12,550.63 billion,
indicating an increase of 19.5 per cent relative to the level at
the end of the second quarter. The development reflected
increase in all the components of 2016. Of the total deposits at
CBN, the shares of the Federal Government, Banks and
„‟Others‟‟ were N5,072.8 (40.4 per cent), N4,864.7 billion billion
(38.8 per cent) and N2,613.1 billion (20.8 per cent),
respectively.
Reserve money (RM) rose by 24.0 per cent to N6,659.01 billion
at the end of the third quarter of 2016, reflecting an increase
in both DMBs‟ reserves with the CBN and currency-incirculation.


Reserve money (RM)
rose at the end of
the third quarter of
2016.


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Economic Report Third Quarter

2.3
Money Market Developments
To complement the adoption of the flexible foreign exchange
policy framework, the Monetary Policy Committee (MPC), at
its meeting during the quarter, increased the Monetary Policy
Rate (MPR) from 12.00 to 14.00 per cent to moderate inflation
and provide for positive real returns on investment to attract
foreign investment. However, the shortfall in the supply of
foreign exchange impacted on financial market indicators in
the third quarter. Furthermore, the Bank directed that foreign
exchange from remittances be sold to Bureau-De-Change
(BDC) operators to boost supply. However, these efforts could
not signifcinatly increase the supply of foreign exchange in the
market as the naira depreciated further at the parallel market,
while the rate at the official market was largely stable.

Provisional data indicated that the total value of money
market assets outstanding at the end of the third quarter of
2016 stood at N10,684.44 billion, showing 2.14 per cent
increase, compared with the increase of 20.36 per cent at the
end of the second quarter. The development was attributed,
mainly, to the significant increase in Commercial Paper.

2.3.1
Interest Rate Developments
The Monetary Policy Committee (MPC) increased the
Monetary Policy Rate (MPR) from 12.00 to 14.00 per cent at its
first meeting in the third quarter to moderate inflation, ensure
positive real returns on investment and attract investors. The
restrictive monetary policy stance of the Bank brought about
liquidity squeeze in the system due to the increase in market
interest rates.

Available data showed an upward movement in all banks‟
deposit and lending rates in the third quarter of 2016. Similalry,
the average term deposit rate rose by 0.75 percentage point
above the level in the preceding quarter to 6.16 per cent at
end-September 2016. The average prime and maximum
lending rates increased by 0.58 and 0.4 percentage points to
17.14 per cent and 27.25 per cent, respectively. Consequently,
the spread between the weighted average term deposit and
maximum lending rates narrowed by 0.34 percentage point to
21.09 percentage points, at the end of the third quarter of
2016. The margin between the average savings deposit and
The financial market
was relatively liquid
during the review
period .
The spread between
the weighted –
average term deposit
and maximum
lending rates
narrowed at the end
of the third quarter
of 2016.


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Economic Report Third Quarter

the maximum lending rates contracted by 0.14 percentage
point to 23.96 percentage points. With headline inflation at
17.9 per cent at end-September 2016, the prime lending and
deposit rates were negative in real terms, while the maximum
lending rate was positive in real terms.
At the inter-bank funds segment, the weighted average interbank call rate, which stood at 15.56 per cent at end-June
2016, rose by 7.86 percentage points to 23.42 per cent, in the
third quarter of 2016, due to the tight liquidity condition in the
banking system. The Nigeria inter-bank offered rate (NIBOR) for
the 30-day tenor rose from 10.04 per cent in the preceding
quarter to 17.72 per cent in the third quarter of 2016. Similarly,
the weighted average rate at the Open-Buy-Back (OBB)
segment rose by 4.27 percentage points to 14.85 per cent
(Fig. 3, Table 2).
Figure 3: Selected DMBs Interest Rates (Average)


Table 2: Selected Interest Rates (Percent, Averages)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Average Term Deposits

Prime Lending

Interbank

Maximum Lending


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Percent per Annum
Percent per Annum
Prime
Interbank
Maximum
Average Term Deposits (RHS)

Interbank call
rate rose in Q3
2016.


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Economic Report Third Quarter

2.3.2
Commercial Paper (CP)
Commercial Paper (CP) outstanding held by banks rose
significantly to N3.1 billion at the end of the third quarter of
2016, above N0.5 billion at the end of the second quarter of
2016. The development was due to the rise in investment in CP
by the banks in the review period. Thus, CP constituted 0.03
per cent of the total value of money market assets
outstanding during the review period, compared with 0.01 per
cent at the end of the preceding quarter.
2.3.3
Bankers’ Acceptances (BAs)
BAs outstanding increased by 53.23 per cent to N45.60 billion
from N29.76 billion at the end of the preceding quarter. The
development was attributed to the increase in investment in
BAs by the banks during the quarter. Consequently, BAs
accounted for 0.43 per cent of the total value of money
market assets outstanding, at the end of the third quarter of
2016, compared with 0.28 per cent at end-June 2016.

2.3.4 Open Market Operations
In furtherance of the restrictive policy stance, the Bank
continued to deploy different monetary policy tools to
achieve its objectives. There were regular interventions
through Open Market Operations (OMO) involving the sale of
Central Bank of Nigeria (CBN) bills for liquidity management.
Instruments with maturities ranging from 100 to 364 days were
issued between July and September 2016. Total sales was
N3,481.31 billion, while total subscription was N4,225.76 billion.
The bid rates ranged from 12.50 per cent to 20.00 per cent,
while the stop rates ranged from 12.50 per cent to 19.00 per
cent. Total sales included the N420.00 billion allotted through
the two-way quote trading platform. This translated to a net
withdrawal of N2,315.09 billion.
2.3.5
Primary Market
At the government securities market, NTBs and long-term (FGN
Bonds) debt instruments were issued at the primary market on
behalf of the Debt Management Office (DMO). NTBs of 91-
182- and 364-day tenors, amounting to N1,066.55 billion,
N2,550.72 billion and N1,239.55 billion were offered, subscribed
to and alloted, respectively, in the third quarter of 2016. The
bid rates ranged from 7.00 per cent to 20.00 per cent, 9.00 per
cent to 20.49 per cent, and 10.50 per cent to 25.35 per cent,
Investment in CP by
banks rose in the
third quarter of
2016.
DMBs’ holdings of
BAs increased
during Q3 of 2016.


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Economic Report Third Quarter

respectively, for the 91-, 182- and 364- day tenors, while the
stop rates ranged from 9.98 per cent to 15.44 per cent, 12.24
per cent to 18.06 per cent and 14.99 per cent to 18.50 per
cent, respectively, for the different tenors.
2.3.6
Bonds Market
Tranches of the 5-, 10- and 20-year FGN Bonds were reopened in addition to a new issue of the 5-year bond offered
for sale in the third quarter of 2016. The term to maturity of the
bonds ranged from 4 years 10 months to 19 years, 8 months.
Total amount offered, subscribed to and allotted were N350.0
billion, N604.1 billion and N335.0 billion, respectively. The
marginal rates for the 5-year bond ranged from 14.5000 per
cent to 15.1430 per cent, 14.9000 per cent to 15.5357 per cent
for the 10-year bond and 14.9830 per cent to 15.5974 per cent
for the 20-year. The marginal rates for all the tenors ranged
from 14.50 per cent to 15.59 per cent. The sum of N448.00
billion FGN Bonds matured in the third quarter.

2.3.7
CBN Standing Facilities
Deposit money banks and merchant banks continued to
access the Standing Facility window to smoothen their liquidity
needs either through lending (SLF) from the CBN or depositing
(SDF) their excess reserves at the end of each business day.
There was a reversal in the trend of standing facilities
patronage, with more requests for SLF than the SDF in the
review period. Applicable rates for the SLF and SDF stood at
16.00 per cent and 9.00 per cent, respectively.
Total request for Standing Lending Facility (including the Intraday lending facilities (ILF) converted to overnight repo)
amounted to N 11,360.51 billion with interest income of N8.78
billion, compared with SLF of N4,518.78 billion and interest
income of N2.64 billion in the preceding quarter. Penal rate of
an additional 500 basis points was charged on institutions that
failed to redeem their lending as at when due.
Total standing deposit facility (SDF) granted during the review
period was N2,431.95 billion with a daily average of N45.04
billion, compared with N 6,085.58 billion in the second quarter
of 2016. The interest payment on SDF in the third quarter stood
at N0.87 billion, compared with N 1.76 billion in the preceding
quarter.
Subscription for FGN
Bonds of various
maturities were reopened during the
third quarter of 2016.


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Economic Report Third Quarter

2.4
Deposit Money Banks’ Activities
The total assets and liabilities of the commercial banks stood
at N31,792.04 billion at the end of the third quarter of 2016,
representing an increase of 1.6 per cent over the level at the
end of the the second quarter of 2016. The funds were
sourced, mainly, from drawdown on reserves, and increase in
capital accounts and foreign liabilities. The funds were used,
mainly, to reduce time, savings and foreign currency deposits,
demand deposit and unclassified liabilities as well as to
increase claims on the central government.
At N21,485.13 billion, banks‟ credit to the domestic economy,
rose by 5.3 per cent, relative to the level at end-June 2016.
The development was attributed to the increase in claims on
both the private sector and the Federal Government, in the
review quarter.
Central Bank‟s credit to the commercial banks fell by 17.9 per
cent to N855.57 billion, at the end of the review quarter. Total
specified liquid assets of the banks stood at N6,782.09 billion,
representing 37.0 per cent of their total current liabilities. At
that level, the liquidity ratio expanded by 8.13 percentage
points above the level at the end of the preceding quarter
and was 7.0 percentage points above the stipulated minimum
ratio of 30.0 per cent. The loans-to-deposit ratio, at 81.05 per
cent, was 6.18 percentage points, above the level at the end
of the preceding quarter and 1.1 percentage points above
the prescribed maximum of 80.0 per cent.
2.5
Capital Market Developments
2.5.1
Secondary Market
The market was characterised by investors‟s low sentiments,
high volatility and poor performance by listed companies in
the review period. Hence, developments on the Nigerian
Stock Exchange (NSE) were generally bearish. Total volume
and value of traded securities declined by 32.3 per cent and
8.7 per cent to 18.3 billion shares and N149.1 billion in 211,065
deals, compared with 27.04 billion shares worth N163.36 billion
in 251,646 deals recorded in the second quarter of 2016. The
Financial Services Industry led the activity chart (measured by
volume) with 14.84 billion shares worth N77.98 billion in 117,547
deals, compared with 22.4 billion shares worth N105.5 billion in
154,827 deals in the second quarter of 2016. The banking subLiquidity ratio in Q3
was
above
the
stipulated
minimum,
while the Loan-todeposit
ratio
was
above the prescribed
maximum.


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Economic Report Third Quarter

sector was the most active (measured by volume).
Figure 4: Volume and Value of Traded Securities

Table 3: Traded Securities on the Nigerian Stock Exchange (NSE)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Volume (Billion)


18.3
Value (N Billion)


2.5.2
New Issues Market/Supplementary Listings
There were no new or supplementary listings in the review quarter.

2.5.3
Market Capitalization
Aggregate market capitalization for all the listed securities
(Equities and Bonds), as at September 29, 2016 stood at
N16.39 trillion, indicating a decline of 5.2 per cent below the
level at the end of the second quarter of 2016. Similarly,
market capitalization for the listed equities decreased by 4.3
per cent below the level in the second quarter of 2016 to
close at N9.7 trillion at the end of the review quarter. Listed
equities accounted for 59.4 per cent of the aggregate market
capitalisation compared, with 58.9 per cent at the end of the
preceding quarter.

2.5.4 NSE All-Share Index
The All-Share Index, which opened at 29,597.79, at the
beginning of the period, closed at 28,335.40 and represented
a decrease of 2.7 per cent. With the exception of the NSE-Oil
and Gas and NSE Consumer Goods indices, which increased

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Value (N billion)
Volume (Billion)
Volume of traded securities (LHS)
Value of securities (RHS)


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Economic Report Third Quarter

by 3.7 per cent and 2.9 per cent to 336.03 and 757.40,
respectively, at end-September 2016, as well as the NSE AseM,
which closed flat at 1,213.68, all other sectoral indices fell
below their levels at the end of the preceding quarter. The
NSE Banking, NSE Insurance, NSE Lotus Islamic, NSE Industrial,
NSE Pension and NSE Premium indices fell by 8.1 per cent, 7.5
per cent, 2.3 per cent, 14.6 per cent, 4.9 per cent, and 4.9 per
cent to close at 274.77, 129.58, 1914.19, 1834.31, 839.08 and
1772.51, respectively.
Figure 5: Market Capitalization and All-Share Index


Table 4: Market Capitalization and All Share Index (NSE)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Market Capitalization (N trillion)

All-Share Index (Equities)
41,210.10

34,657.15

31,744.82

33,456.86

31,217.77

26,871.24

27,385.69

29,597.79

28,335.40


14.5

15.5

16.5

17.5

18.5

19.5
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Index
N billion
Market Capitalization (LHS)
All-Share Index (RHS)


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

3.0
Fiscal Operations
3.1
Federation Account Operations
Federally-collected revenue in the third quarter of 2016, at
N1,980.95 billion, was lower than the quarterly budget2
estimate of N2,378.12 billion by 16.7 per cent. However, it was
higher than the receipts in the second quarter of 2016 by 70.9
per cent. The decline in federally-collected revenue (gross)
relative to the quarterly budget estimate was attributed to
the shortfall in receipts from both oil and non-oil sources (Fig.
6, Table 6).
Figure 6: Components of Gross Federally Collected Revenue

Table 5: Gross Federation Account Revenue (N billion)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Federally-collected revenue (Gross)

Oil Revenue

Non-Oil Revenue


Gross oil receipts, at N817.48 billion or 41.3 per cent of the total
revenue, was lower than the quarterly budget estimate by 7.5
per cent. It was however, higher than the receipts in the
second quarter of 2016 by 52.2 per cent. The decline in oil
revenue relative to the quarterly budget estimate was

2 Quarterly Budget is arrived at by prorating the Annual budget into four equal proportions.

Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Oil Revenue Gross
Non-Oil Revenue
Gross federally -
collected revenue
rose by 70.9 per
cent above the
level
in
the
second quarter of
2016.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

attributed to the fall in receipts from crude oil/gas export,
owing to the drop in the price of crude oil in the international
market as well as the shut-ins and shut-downs at some NNPC
terminals, arising from vandalism of oil infrastructure in the
Niger Delta region (Fig. 7, Table 7).

Figure 7: Gross Oil Revenue and Its Components

Table 6: Components of Gross Oil Revenue (N billion)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Oil Revenue Gross

Crude oil/Gas Sales

PPT/Royalties

Others

Non-oil receipts (gross), at N1,163.46 billion or 58.7 per cent of
total revenue, also fell below the quarterly budget estimate by
22.1 per cent, but was above the level in the second quarter
of 2016 by 87.1 per cent. The fall in non-oil revenue relative to
the quarterly budget estimate was due, largely, to the fall in
receipts from VAT, Independent Revenue of the Federal
Government and Customs Special Levies (Federation Account
component), during the review quarter (Fig. 3, Table 3).
-


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
N billion
Others
PPT/Royalties
Crude oil/Gas Sales


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Figure 8: Gross Non-Oil Revenue and its Components

Table 7: Components of Gross Non-Oil Revenue (N Billion)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Non-Oil Revenue

Value-Added Tax (VAT)

Companies Income Tax & Other Taxes

Customs & Excise Duties

Others/1

1/ Include FGN Independent Revenue, Education Tax, NITDF & Customs Federation/Non-Federation
Account Levies (Port, Sugar, ETLS, Steel, CISS & Cement Levies)
A net sum of N948.26 billion was retained in the Federation
Account after the statutory deductions and transfers of
N481.53 billion and N551.16 billion, respectively, from the gross
federally-collected revenue. This amount was distributed
among the three tiers of government and the 13.0% Derivation
Fund as follows: Federal Government, N473.73 billion; States
N240.28 billion; and local governments, N185.25 billion. The
balance of N49.00 billion was allocated to the 13.0%
Derivation Fund for distribution among the oil-producing
states. In addition, the Federal Government received N30.29
billion from the VAT Pool Account, while the state and local
governments received N100.97 billion and N70.68 billion,
respectively. The sum of N9.93 billion was received from the
Ministry of Mines and Steel Development (MMSD) in July 2016
and shared as follows: Federal Government, N4.55 billion;
States, N2.31 billion; and local governments, N1.78 billion, while
the balance of N1.29 was distributed among the mineral
-

1,000
1,200
1,400
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
N billion
Others
Customs & Excise Duties
Companies Income Tax & Other Taxes
Value-Added Tax (VAT)
The
sum
of
N948.26
billion
out of the gross
federally collected
revenue
was
distributed among
the three tiers of
government
and
13.0% Derivation
Fund
for
oil
producing states.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

producing states as 13.0% Derivation Fund.
The sum of N269.23 billion was also distributed as Exchange
Gain among the three tiers of government and the 13%
Derivation Fund as follows: Federal Government (N130.59
billion);
State
Governments
(N66.23
billion);
Local
Governments (N51.06 billion) and 13% Derivation Fund (N21.34
billion). Similarly, the sum of N85.17 billion was drawn down in
the quarter from the Excess Crude Account for distributiuon
among the three tiers of government and 13% Derivation
Fund. The Federal Government received N66.21 billion, state
governments received N8.14 billion and local governments
received N6.27 billion, while the sum of N4.55 billion was
distributed among the oil-producing states as 13% Derivation
Fund.
Furthermore, the sum of N18.99 billion was received by the
Federal Government being refund of indebtedness by the
NNPC to the Federal Governmnt in the third quarter of 2016.
Thus, the total statutory and VAT revenue allocation to the
three tiers of government in the third quarter of 2016
amounted to N1,534.88 billion, compared with the quarterly
budget estimate of N1,485.70 billion and N879.35 billion
received in the second quarter of 2016.
3.2
The Fiscal Operations of the Three Tiers of
Government

3.2.1
The Federal Government

Provisional data indicated that the Federal Government
retained revenue for the third quarter of 2016 amounted to
N922.86 billion. This was below the quarterly budget estimate
by 8.8 per cent. It was, however, higher than the receipts in
the preceding quarter by 36.1 per cent. Of the total revenue,
Federation Account accounted for 51.3 per cent, while
Federal Government Independent Revenue, Exchange Gain,
„Other Oil Revenue‟, VAT, and NNPC Refund accounted for
21.4, 14.2, 7.7, 3.3 and 2.1 per cent, respectively (Fig. 9, Table
9).


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Figure 9: Federal Government Retained Revenue

Table 8: Federal Government Fiscal Operations (N Billion)
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Retained Revenue

Expenditure

Overall Balance: Surplus(+)/Deficit(-)


At N1,424.91 billion, the estimated Federal Government
expenditure for the third quarter of 2016 was lower than the
quarterly budget estimate of N1,567.93 billion by 9.1 per cent.
It was also lower than the level in the preceding quarter by
19.4 per cent. This development relative to the quarterly
budget estimate was attributed, mainly, to the decrease in
capital expenditure in the period under consideration. A
breakdown of the total expenditure showed that the recurrent
component accounted for 76.8 per cent, while capital and
statutory transfers accounted for 16.0 and 7.2 per cent,
repectively (Fig. 5). A further breakdown of the recurrent
expenditure
showed
that
the
non-debt
component
accounted for 77.5 per cent, while debt service payments
accounted for the balance of 22.5 per cent.
The fiscal operations of the Federal Government, therefore
resulted in a deficit of N502.05 billion, which was 9.6 per cent
lower than the quarterly budget deficit of N555.49 billion.
Federation
Account
51.3%
VAT Pool
Account
3.3%
FGN Independent
Revenue
21.4%
NNPC Refund
2.1%
Exchange Gain
14.2%
Others
7.7%
Fiscal
operations
of the FG resulted
in an estimated
deficit of N502.05
billion in Q3 2016.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Figure 10: Federal Government Expenditure

3.2.2
Statutory Allocations to State Governments

Total allocation to state governments from the Federation
Account, including 13.0% Derivation Fund and the VAT Pool
Account stood at N494.48 billion during the review quarter.
This was lower than the quarterly budget estimate by 5.0 per
cent, but higher than the level in the preceding quarter by
58.3 per cent. Further breakdown showed that receipts from
the Federation Account was N393.51 billion (79.6 per cent),
while VAT contributed N100.97 billion (20.4 per cent). The share
of Federation Account was 79.8 per cent higher than the level
in the preceding quarter. Similarly, receipts from the VAT Pool
Account rose by 8.1 per cent above the level in the
preceding quarter.
3.2.3
Statutory Allocations to Local Government Councils

Provisional allocations to local governments
from the
Federation and VAT Pool Accounts in the third quarter of 2016
stood at N315.32 billion. This was below the quarterly budget
estimate by 8.7 per cent but exceeded the level in the
preceding quarter by 63.2 per cent. Of the total amount,
allocation from the Federation Account was N244.65 billion
(77.6 per cent), while VAT Pool Account accounted for the
balance of N70.68 billion (22.4 per cent).


Recurrent,
76.8%
Capital, 16.0%
Transfers, 7.2%


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Economic Report Third Quarter

4.0
Domestic Economic Conditions
There was improvement in the activities of the agrcultural sector in
the third quarter due to widespread rain experienced in most parts
of the country. Farmers in the Southern part of the country engaged
in the early harvest of maize and yam, while farmers in the Northern
and central states engaged in the harvest of potatoes and
groundnuts. Livestock farmers were involved in the breeding of
poultry and migration of cattle from the North to the South in search
of green pastures. Crude oil production was estimated at 1.48 million
barrels per day (mbd) or 136.16 million barrels, for the quarter. Endperiod inflation rate for the third quarter of 2016, on year-on-year
and 12-month moving average basis, were 17.9 per cent and 13.5
per cent, respectively.
4.1
Agricultural Sector
There was improvement in the activities of the agricultural
sector in the third quarter of 2016 due to impressive rainfall
experienced in most part of the country. Analysis of the
Standardized Precipitation Index (SPI) showed that there was
clement weather condition for farming. However, there were
cases of flash floods along the Benue and Niger rivers, the
confluence at Lokoja, and at convergence areas into the
Atlantic Ocean in the Niger Delta area.
Farming activities in the South centered on early harvest of
yams and maize, while farmers in the Central and Northern
states were mainly involved in the harvest of potatoes and
groundnuts. In the livestock sub-sector, farmers engaged in
breeding of poultry and migration of cattle from the Northern
states to the South in search of green pastures. However,
activities of insurgents continued to impact adversely on
livelihoods and functioning of markets in Northern and Central
Borno as well as south-eastern Yobe. The development
hampered humanitarian effort, especially provision of food to
the displaced households, thereby contributing to increased
prices of staple foods in those areas.
4.2
Agricultural Credit Guarantee Scheme
In terms of credit to the farmers, the sum of N2,146.2 million
was guaranteed to 17,851 farmers under the Agricultural
Credit Guarantee Scheme (ACGS) in the third quarter of 2016.
This amount represented an increase of 7.6 per cent above
the level in the second quarter of 2016, but was a decrease of


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

26.1 per cent below the level in the corresponding period of
2015. Sub-sectoral analysis showed that food crops obtained
the largest share of N1,437.4 million (67 per cent) guaranteed
to 14,130 beneficiaries, livestock got N297.8 million (13.9 per
cent) guaranteed to 1,328 beneficiaries, cash crops had
N152.4 million (7.1 per cent) guaranteed to 887 beneficiaries,
while
fisheries received
N131.7 million
(6.1 per cent)
guaranteed to 491 beneficiaries. The Mixed Crop sub-sector
received N105.3 million (4.9 per cent) guaranteed to 822
beneficiaries, while „Others‟ received a total of N21.6 million
(1.0 per cent) guaranteed to 193 beneficiaries. Analysis by
state showed that 34 states and the Federal Capital Territory
benefited from the Scheme in the period under review, with
the highest and lowest sums of N265.0 million (12.4 per cent)
and N4.6 million (0.22 per cent) guaranteed to Ogun and
Bauchi States, respectively.
As at September 20, 2016, total amount released by the CBN
under the Commercial Agriculture Credit Scheme (CACS)
from inception to the participating banks, for disbursement,
stood at N386.04 billion, for 474 projects(Table 10).


Table 9: Disbursement of Credit Under the Commercial Agriculture Credit Scheme (CACS)
S/N
Participating Banks
Amt Disbursed (N billion)
Number of Projects/State Governments

Access Bank Plc
18.63

Citibank Plc
3.00

Diamond Baqnk Plc
4.73

ECOBANK
6.38

FCMB Plc.
11.37

Fidelity Bank Plc
15.91

First Bank of Nigeria Plc
41.89

GTBank Plc
25.70

Heritage Bank Plc
6.81

Keystone Bank
3.55

Jaiz Bank Plc
1.00

Skye Bank Plc
11.77

Stanbic IBTC Bank
21.99

Sterling Bank Plc
29.68

Union Bank Nigeria PLC
22.91

United Bank for Africa (UBA) Plc
57.76

Unity Bank Plc
24.33

Wema Bank
1.82

Zenith Bank
76.84

TOTAL
386.0

C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

4.3
Industrial Production
Persistent supply-demand imbalance in the foreign exchange
market continued to adversely impact business confidence
and business transactions in the review period. Consequently,
activities in the industrial sector decreased, compared with
the levels in the second quarter of 2016, reflecting the decline
in the placement of new orders, output and employment
within the sector.
At 108.5 (2010=100), the estimated index of industrial
production fell by 0.02 per cent and 0.12 per cent below the
levels in the second quarter of 2016 and the corresponding
period of 2015, respectively. The decrease also reflected the
decline in activities in manufacturing and mining subsectors,
which more than offset the marginal improvement in the
electricity sub-sector.
The estimated index of manufacturing production in the third
quarter of 2016, at 186.6 (2010=100), showed a marginal
decrease of 0.01 and 0.03 per cent relative to the levels in the
second quarter of 2016 and the corresponding period of 2015,
respectively. Capacity utilization was estimated at 48.4 per
cent,
indicating
a
2.3
percentage
points
decrease,
occasioned by a fall in aggregate demand. The development
was exacerbated by the depreciation of the naira exchange
rate which contributed to increased production cost, hence
the fall in output (Fig.11).
Figure11: Manufacturing Capacity Utilization Rate


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Percent
Industrial activities
fell in the review
quarter due to
reduced activities in
all sub-sectors.
Industrial capacity
utilization
was
estimated to have
declined
by
2.3
percentage points
during the review
quarter.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

At 62.7 (1990=100), the estimated index of mining production
in the third quarter of 2016, fell by 0.1 and 0.3 per cent relative
to the levels attained in the preceding quarter and the
corresponding period of 2015, respectively. The decrease in
mining activities was attributed, mainly, to he fall in crude oil
and gas production.
At 3,307.15 MW/h, estimated average electricity generation in
the third quarter of 2016 rose by 25.4 per cent, compared with
the level attained in the second quarter of 2016. Increased
generation from the various hydro-power plants, due to
widespread rain in the country, accounted for the increase in
electricity generation.
Average estimated electricity consumed, at 2,853 MW/h also
rose by 22.9 per cent, compared with the level attained in the
second
quarter
of
2016.
The
increase
in
electricity
consumption was attributed to rise in generation (Fig. 12, Table
11).
Figure 12: Index of Industrial Production (2010=100) 3

Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Index
Mining
All Sectors
Manufacturing


3 Index measurement at (2010=100) from first quarter15
Average electricity
generation and
consumption rose
during the review
quarter.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Table 10: Index of Industrial Production and Manufacturing Capacity Utilization Rate
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
All Sectors (1990=100)

Manufacturing

Mining


62.7
Capacity Utilization (%)


4.4
Petroleum Sector
Activities of militants in the oil producing areas, which has led
to shut-ins and shut-downs at some of Nigeria‟s crude oil
production terminals, continued to impact negatively on the
nation‟s crude oil production. Consequently, Nigeria‟s crude
oil production, including condensates and natural gas liquids,
averaged 1.48 mbd or 136.16 million barrels (mb) in the review
quarter. This represented a decrease of 0.06 mbd or 4.1 per
cent, compared with 1.54 mbd or 140.14 mb recorded in the
previous quarter.
Crude oil export stood at 1.03 mbd or 94.76 mb, representing
a decrease of 5.8 per cent compared with 1.09 mbd or 99.19
mb recorded in the preceding quarter. The development was
as a result of the sustained sabotage on oil pipelines, despite
on-going efforts at repairing the leakages and negotiations
with the militants in the Niger Delta region. Allocation of crude
oil for domestic consumption was 0.45 mbd or 41.40 million
barrels in the review quarter.
There were positive sentiments regarding the recent plans by
Russia and Saudi Arabia to cooperate with other OPEC and
key non-OPEC countries towards stabilisation of the oil markets
in the review period. In addition, data from the EIA showed a
massive drawdown on crude oil stocks of the US due to the
effect of the hurricane that disrupted shipments in the Gulf of
Mexico. The effect of the development was a 1.9 per cent
increase in the price of Nigeria‟s reference crude, the Bonny
Light (37o API), from estimated average of US$46.44 per barrel
in the preceding quarter to US$47.33 per barrel in the review
quarter. The average prices of other competing crudes,
namely the The UK Brent at US$45.47/b and the Forcados at
US$46.27/b, exhibited a similar trend as the Bonny Light.
However, the WTI at US$44.43/b, declined by 1.7 per cent
relative to the average price in the preceding quarter.
Crude oil and
natural gas
production
decreased in the
third quarter of
2016.
Crude oil export
decreased in Q3
2016.
Average crude oil
prices, including
Nigeria’s Bony
Light (37o API) rose
in the international
crude oil market in
Q3 2016.


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Economic Report Third Quarter

The average price of OPEC basket of eleven selected crude
streams was US$42.86/b in the third quarter of 2016, indicating
a 1.1 per cent increase above the level in the preceding
quarter (Fig. 13, Table 12).
Figure13: Trends in Crude Oil Prices

Table 11: Average Crude Oil Prices in the International Oil Market
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Bonny Light

OPEC Basket


4.5
Consumer Prices4
Persistent depreciation of the naira exchange rate and the
resultant pass-through to general prices, fuelled inflationary
pressures in the review period. The pressures reflected mostly
the significant increase in the prices of food and energy. The
all-items composite Consumer Price Index (CPI), at the end of
the third quarter of 2016, was 208.0 (November 2009=100),
representing an increase of 3.1 per cent and 17.9 per cent,
above the levels in the second quarter of 2016 and the

4 New CPI with November 2009 = 100 as base and new weight based on the 2003/2004 Nigeria
Living Standard Survey (NLSS) was released by the National Bureau of Statistics (NBS) ON 18TH
October 2010.

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
US$ per barrel
Bonny Light
OPEC Basket
The general price
level rose in Q3,
compared with the
level in the second
quarterof 2016.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

corresponding quarter of 2015, respectively. The development
was driven, largely, by the increase in the prices of food and
non-alcoholic beverages; housing, water, electricity, gas and
other fuel; clothing and footwear; transport; education;
furnishing, household equipment and maintenance; and
health.
The urban all-items CPI at the end of the third quarter of 2016
was 209.6 (November 2009=100), indicating an increase of 3.0
and 19.4 per cent, above the levels in the second quarter of
2016 and the corresponding period of 2015, respectively.
Similarly, the rural all-items CPI, at 206.7 (November 2009=100),
represented increase of 3.1 per cent and 16.4 per cent above
the levels at end-June 2016 and the corresponding period of
2015, respectively (Fig. 14, Table 13).
The composite food index (with a weight of 50.7 per cent) was
212.0 per cent, representing an increase of 3.2 per cent,
compared with the 205.39 per cent at the end of the
preceding quarter. The development was attributed to the
increase in the prices of farm produce (vegetables, yam,
potatoes, and other tubers, rice, millet, and fruits) and
processed food.
Figure 14: Consumer Price Index

157.5

162.5

167.5

172.5

177.5

182.5

187.5

192.5

197.5

202.5

207.5

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Index
Composite
Urban
Rural


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Table 12: Consumer Price Index (November 2009=100)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Composite


Urban

Rural


The inflation rate at the end of the review quarter, on a yearon-year basis, was 17.9 per cent, compared with 16.5 and 9.4
per cent in the second quarter of 2016 and the corresponding
period of 2015, respectively. On a twelve-month moving
average basis, the inflation rate was 13.5 per cent, indicating
a 2.1 percentage points increase, above the level in the
preceding quarter (Fig. 15, Table 14).
Figure 15: Inflation Rate


Table 13: Headline Inflation Rate (%)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
12-Month Moving Average

Year-on-Year


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Percent
12-Month Average
Year-on-Year
The headline
inflation (y-o-y)
stood at 17.9 per
cent in Q3 2016.


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Economic Report Third Quarter

5.0
External Sector Developments
Lower than expected global crude oil prices and domestic
production challenges remained the major hindrance to the
performance of the external sector in the third quarter of 2016.
Provisional data showed that foreign exchange inflow through the
CBN in the third quarter of 2016, declined by 4.8 per cent below the
level in the preceding quarter, while outflow grew by 28.4 per cent.
Total non-oil export receipts declined by 15.3 per cent, relative to
the level in the preceding quarter. The average exchange rate at
the
inter-bank
segment
was
N303.16/US$,
compared
with
N209.13/US$ at end-June 2016. At US$24.11 billion, the gross external
reserves fell by 11.4 per cent, compared with the level at the end of
the second quarter of 2016.
5.1
Foreign Exchange Flows
The persistent lower than expected global crude oil prices and
below target crude oil output due to restiveness in the Niger
Delta region were the major challenges to the performance of
the external sector in the third quarter of 2016. As part of the
measures by the CBN to improve foreign exchange supply,
commercial banks were mandated to sell $50,000 from
diaspora-related foreign exchange inflow on weekly basis to
over 2,500 BDC operators to ease the foreign exchange
supply shortage. The Bank also amended Memorandum 21 of
the Foreign Exchange Manual to allow foreign exchange
inflow of individual Nigerians, companies, residents and nonresidents alike for investment in the debt, equities and money
market instruments.
Thus, there was a rise in inflow through the the CBN and
marginal increase in foreign exchange supply in the retail-end
of the foreign exchange market. However, fall in non-oil
receipts, more than offset the increase in oil and autonomous
receipts, and resulted in weak overall performance of the
external sector in the review period.
Provisional data showed that foreign exchange inflow and
ouflow through the CBN in the third quarter of 2016 were
US$5.59 billion and US$7.73 billion, respectively. This resulted in
a net outflow of US$2.14 billion, compared with the net outflow
of US$0.20 billion in the preceding quarter. Relative to the level
at end-June 2016 and the corresponding period of 2015,
inflow declined by 4.8 per cent and 49.7 per cent,
Foreign exchange
inflow through the
CBN rose by 4.8 per
cent, but outflow
grew by 28.4 percent.
This resulted in a net
outflow of US$2.14
billion in Q3 of 2016.


C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

respectively. Conversely, outflow through the CBN, at US$7.73
billion, rose by 28.4 per cent above the level in the preceding
quarter, but was a decline of 18.8 per cent relative to the
level at the end of the corresponding period of 2015. The
development relative to the preceding quarter was driven
mainly, by inter-bank sales, swaps and 3rd party MDA transfers
(Fig.16, Table 15).
Figure 16: Foreign Exchange Flows Through the CBN


Table 14: Foreign Exchange Flows Through the CBN (US$ million)
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q1-16
Q2-16
Q3-16
Inflow
13,094.23

10,641.86

8,307.23

6,976.02

11,111.00

7,135.41

3,942.89

5,875.18

5,592.44

Outflow
11,804.98

14,527.35

12,875.77

8,194.56

9,523.32

7,757.49

4,487.05

6,023.10

7,731.19

Netflow
1,289.25

(3,885.49)

(4,568.54)

(1,218.54)

1,587.68

(622.08)

(544.16)

(147.92)

(2,138.75)


Provisonal data on aggregate foreign exchange inflow into
the economy indicated that total inflow was US$17.02 billion.
This represented an increase of 11.1 per cent above the level
at the end of the second quarter of 2016, but showed a
decline of 37.7 per cent relative to the level at the end of the
corresponding period of 2015. The development was driven
by increase in oil and autonomous receipts. Oil sector
receipts, which accounted for 21.1 per cent of the total, stood
at US$3.60 billion, compared with US$3.15 billion and US$6.05
billion, in the second quarter of 2016 and the corresponding
period of 2015, respectively.
Non-oil public sector inflow, at US$1.99 billion (11.7 per cent of
the total), declined by 27.0 per cent and 60.7 percent below
Autonomous inflow
into the economy
increased by 21.1
per cent in Q3 2016
-10,000
-5,000


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
US$ million
Inflow
Outflow
Netflow


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Economic Report Third Quarter

the
levels at the end of the
second quarter and
corresponding period of 2015. Autonomous inflow, which
accounted for 67.2 per cent of the total, increased by 21.1
per cent compared with the level in the preceding quarter of
2016.
At US$8.33 billion, aggregate foreign exchange outflow from
the economy rose by 27.2 per cent, above the level in the
preceding quarter, but showed a decline of 23.9 per cent,
below the level at the end of the corresponding period of
2015. The outflow rose on the account of payments for
matured foreign exchange forwards, external debt service
and other official payments, which increased to US$3.54
billion, US$125.96 million and US$1.49 billion, respectively. Thus,
foreign exchange flows through the economy resulted in a net
inflow of US$8.69 billion in the review quarter, compared with
US$8.77 billion and US$16.4 billion in the second quarter of
2016 and at end-September 2015, respectively.
5.2
Non-Oil Export Earnings by Exporters
In spite of the measures taken by the Bank to reduce foreign
exchange supply constraints, low imports of production input
hampered domestic production of non-oil exports. Hence,
provisional data showed that non-oil export receipts by banks
in the third quarter of 2016 at US$500.45 million, fell by 15.3 per
cent, relative to the level in the second quarter. This was due
to the 28.6 per cent and 12.5 per cent contraction in the
volumes of exports of industrial and manufactured products to
US$65.59 million and US$70.61 million, respectively. Similarly, in
the review period, foreign exchange proceeds from transport,
agricultural and minerals sub-sectors fell by 4.0 per cent, 34.0
per cent and 0.7 per cent to US$0.12 million, US$146.95 million
and US$184.18 million, respectively.
The
percentage
shares
of
minerals,
agricultural,
manufacturing, industrial and food products as well as
transport sub-sectors in total non-oil export proceeds were 36.8
per cent, 29.4 per cent, 14.1 per cent, 13.1 per cent, 6.6 per
cent and 0.02 per cent, respectively.


.
Total non-oil export
earnings by
exporters fell
during the second
quarter of 2016.


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Economic Report Third Quarter

5.3
Sectoral Utilisation of Foreign Exchange

There was increased utilisation of foreign exchange mainly, for
industrial and manufatcured products in the review period,
following the various measures taken to improve the supply of
foreign exchange in the retail segment of the foreign
exchange
market.
Consequently,
aggregate
sectoral
utilisation of foreign exchange rose by 50.2 per cent to
US$10.10 billion, compared with the level in the second
quarter of 2016. The Invisible, which accounted for the bulk of
total foreign exchange disbursed in the third quarter of 2016,
(32.9 per cent), rose by 53.9 per cent relative to the preceding
quarter‟s level of US$3.33 billion. This was followed by the
minerals and oil sub-sector (23.7 per cent). The contributions of
the other sectors in a descending order were: industrial subsector (21.5 per cent), manufactured products (11.7 per cent),
food products (7.3 per cent), transport sector (2.1 per cent)
and agricultural products (0.8 per cent) (Fig.17).
Figure17: Sectoral Utilisation of Foreign Exchange


Percent of Total
Q1-16
Q2-16
Q3-16
The visible sector
accounted for the
bulk of the total
foreign exchange
disbursed during
Q3 2016.


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Economic Report Third Quarter

5.4
Foreign Exchange Market Developments5
The measures taken by the Bank in the review period
marginally improved foreign exchange supply in the retail end
of the foreign exchange market. To further improve the
general supply of foreign exchange, a total of US$5.30 billion
was sold by the CBN to authorized dealers during the third
quarter of 2016. This reflected an increase of 23.1 per cent
above the level in the second quarter of 2016, but a 34.1 per
cent decline below the level in the corresponding period of
2015. The development, relative to the preceding quarter, was
attributed to the increased intervention by the CBN in the
inter-bank market and swap transactions. Of the aggregate,
interbank sales amounted to US$0.72 billion or 13.6 per cent,
while swap contracts disbursed at maturity were valued at
US$1.04 billion or 19.6 per cent. The balance was accounted
for by matured forwards contract, valued at US$3.54 billion or
66.8 per cent of the total supply in the review period (Fig. 18,
Table 16).
Figure 18: Supply of Foreign Exchange


Table 15: Demand for and Supply of Foreign Exchange (US$ billion)
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Forex Sales at rDAS/Interbank

Supply of Swaps

Supply of Forex to BDC

Total Forex Supply(BDC and rDAS)


5 Market Closed (MC) - wDAS and rDAS window was closed in February 2015


Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
US$ billion
Forex Sales at rDAS/Interbank
Supply of Swaps
Supply of Forex to BDC
Total Forex Supply
Supply for foreign
exchange by
authorized dealers
rose during Q3 2016.


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Economic Report Third Quarter

The average naira exchange rate at the inter-bank segment
depreciated by 31.8 per cent to N303.16/US$, compared with
N206.8800/US$ in the second quarter of 2016. At the BDC
segment, the naira exchange rate depreciated by 14.7 and
42.9 per cent to an average of N394.59/US$, relative to the
levels in the second quarter and the corresponding period of
2015, respectively, (Fig. 19, Table 17).
Figure 19: Average Exchange Rate Movements

Table 16: Exchange Rate Movements and Exchange Rate Premium
Average Exchange Rate (N/US$)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
rDAS
157.29
162.33
169.68 N/A
N/A
N/A
N/A
N/A
N/A
BDC

Interbank

Premium (%)
rDAS/BDC
7.4
9.8
23.5 N/A
N/A
N/A
N/A
N/A
N/A
rDAS/Interbank
3.2
6.1
12.6 N/A
N/A
N/A
N/A
N/A
N/A
BDC/Interbank


Figure 20: Exchange Rate Premium

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
N/US $
Average wDAS/rDAS
Average BDC
Average Interbank

Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Per cent
rDAS/BDC
rDAS/Interbank
Interbank/BDC
The average naira
exchange rate vis-àvis the US dollar was
N303.16/US$ at the
interbank segment in
Q3 2016.


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Economic Report Third Quarter

5.5
Gross Official External Reserves
The lingering weak proceeds from oil and non-oil exports
together with the need by the CBN to make up for foreign
exchange supply shortage constrained the accretion to
reserves. Provisional data indicated that gross external
reserves as at September 28, 2016 stood at US$24.11 billion,
showing a decline of 11.4 per cent and 19.3 per cent, below
the levels in the second quarter and the corresponding period
of 2015, respectively. Foreign exchange payments in respect
of swap transactions in the review period accounted for the
bulk of the decline in reserves. A breakdown of external
reserves by ownership showed that the federation reserves
was US$3.03 billion (12.6%); the Federal Government reserves,
US$5.92 billion (24.6%), and the CBN reserves, US$15.16 billion
(62.8%) (Fig. 21, Table 18).
Figure 21: Gross Official External Reserves


Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
US$ million

Table 17: Gross Official External Reserves (US$ million)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
External Reserves
38,278.6

34,241.5

29,357.2

28,335.2

29,880.2

28,284.8

27,336.4

26,505.4

24,111.3


Gross external
reserves declined
during the third
quarter of 2016.


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Economic Report Third Quarter

6.0 Global Economic Conditions
6.1 Global Output
The decline in momentum of the U.S. economy over the past
few quarters continued amidst failed expectation of a
rebound in the second quarter of 2016. Growth in the
euroarea declined to 1.2 per cent at a seasonally adjusted
annualized rate in the second quarter. Strong start to the
second quarter in the United Kingdom lifted GDP growth to 2.4
per cent at a seasonally adjusted annualized rate, from 1.8
per cent in the first quarter of 2016. Survey indicators for July
and August point to sharp retrenchment in manufacturing
activity in the immediate post-Brexit referendum period,
followed by a rebound, while retail sales have remained
upbeat. Emerging market and developing economies as a
group recorded a slight rebound in momentum. Emerging
Asia registered strong growth, while the situation improved
slightly for stressed economies such as Brazil and Russia. World
Economic Outlook (WEO) 2016, projected global growth at 3.1
per cent and 3.4 per cent in 2016 and 2017, respectively.
6.2 Global Inflation
There was mix development in inflation rates across regions
and countries in the review period. Inflation in the US average
slightly above 2.0 per cent, reflecting the effect of temporary
factor or seasonality, while inflation in the euroarea and
Japan were lower. Gradual diminishing effect of past
exchange rate depreciation in emerging and developing
economies has led to relative stability in inflation, though passthrough of large depreciations has kept inflation in doubledigit levels in few major economies in sub-Sahara Africa.
WEO of October 2016 projected inflation rates in advanced
economies to reach about 0.8 per cent in 2016, from 0.3 per
cent in 2015 reflecting, mostly, a reduced drag from energy
prices. As fuel prices increase modestly and output gaps
gradually shrink, inflation is expected to rise over the next few
years. With the exception of Argentina (where high inflation is
a byproduct of liberalization process) and Venezuela, waning
effect of earlier currency depreciations in emerging market
and developing economies is expected to move inflation to
4.5 per cent in 2016 from 4.7 per cent in 2015.


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Economic Report Third Quarter

6.3 Global Commodity Demand and Prices
World crude oil demand was estimated at 95.15 mbd in the
third quarter of 2016, representing an increase of 1.6 per cent
compared with the 93.7 mbd recorded in the preceding
quarter. World crude oil supply in the review quarter was
estimated at 95.65 mbd, representing an increase of 1.2 per
cent from the level in the preceding quarter.
The price of OPEC Reference Basket (ORB) was US$42.86 per
barrel in the third quarter of 2016, representing an increase of
1.1 per cent, over the level in the preceding quarter. The
development was attributed to positive sentiments arising from
possible cooperation between OPEC and non-OPEC suppliers
towards stabilizing the market and indications of massive
drawdown on crude stock by the US.
6.4 International Financial Markets
Performance of international stock markets in the review
period were largely positive except in Africa. In Europe, the
DAX, FTSE 100, CAC 40 and MICEX indices increased by 8.6,
6.1, 5.0 and 4.6 per cent, respectively. In North America,
Canada S&P/TSX Composite, the US S&P 500 and Mexican
Bolsa Indices all increased by 4.7, 3.3 and 2.8 per cent,
respectively. Similarly, in South America, Argentine Merval
index, the Brazilian Bovespa and Columbian IGBC General all
increased by 13.6, 13.3 and 2.0 per cent, respectively.
In Africa, however, the Kenyan Nairobi NSE 20, Nigerian AllShare, Ghanaian GSE All-Share and South African JSE AS
indices decreased by 10.9, 4.3, 0.7 and 0.5 per cent,
respectively, while the Egyptian EGX CSE 30 index increased
by 13.5 per cent.
Developments in the international foreign exchange market
were mixed in the review period. In Europe, the euro and
Russian ruble appreciated against the dollar, while the British
pound depreciated against the dollar. The Columbian peso,
Canadian dollar, Mexican peso, Japanese yen and Indian
rupee appreciated against the dollar, while the Chinese yuan,
Brazilian real and Argentine peso all deprecated against the
dollar. In Africa, with the exception of the Nigerian naira and
the Kenyan shilling which depreciated, against the dollar,
other major African currencies appreciated against the dollar.


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6.5 Other International Economic Developments and
Meetings
Other major international economic developments and
meetings of importance to the domestic economy during the
review period included, the 2016 meeting of the African
Governors of the IMF and World Bank held at Palais des
Congres, Cotonou, Benin Republic from August 4 - 5, 2016. The
theme of the meeting was “Scaling Up Bretton Woods
Institutions Support to Address Shocks, Robust Growth and
Enhance Transformation in Africa”. At the end of the meetings
the Governors agreed that:

Conduct of development policies on the continent has
proven to be more challenging due to declining
commodity prices, tighter financial conditions in capital
markets and multiplicity of non-economic shocks, mainly
security issues (terrorism) and climate change;

To address the challenges of these shocks, it was
necessary to promote diversity, inclusive growth, and
strengthening our regional economies; and

It was necessary to continue to work for more transparent
governance, while implementing public policies for
development.
Further more, the Association of African Central Banks held its
2016 Annual meetings in Abuja, Nigeria, from August 15 – 19,
2016. The Assembly of Governors of the AACB held its 39th
Ordinary Meeting, on August 19, 2016 at the Central Bank of
Nigeria (CBN) Abuja, Nigeria. The meeting was attended by
twenty-seven central banks and the African Union Commission
(AUC), but preceded by a Symposium which held on 18th
August, 2016 with the theme: “Unwinding Unconventional
Monetary Policies: Implications for Monetary Policy and
Financial Stability in Africa”. The meeting:

Considered the status of the progress report on the
implementation of the African Monetary Cooperation
Programme (AMCP) in 2015 and noted the difficulties of
member countries to fullfil the AMCP‟s primary criteria;

Considered the information provided by the African
Union Commission on the submission to the African Union


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Economic Report Third Quarter

(AU) decision making bodies of the Study Report and the
Joint AUC-AACB Strategy for the creation of the African
Central Bank (ACB);

Elected Mr. Godwin I. Emefiele, Governor of the Central
Bank of Nigeria (CBN) as Chairman of AACB for tiscal
year 2016 – 2017; and

Requested the submission of the Statutes of the African
Institute for Remittances (AIR) to AACB member central
banks for comments by December 31, 2016, among
others.
The 29th Ordinary Meeting of the Economic and Monetary
Affairs Committee and the Administration Committee of
WAMA took place at the Riviera Royale Hotel, Conakry,
Guinea from July 29 - 30, 2016. The Technical Committee
deliberated on critical issues bordering on the ECOWAS
Monetary
Cooperation
Programme
(EMCP)
and
other
administrative issues at WAMA. The 34th meeting of the
technical committee of WAIFEM was also held on July 31, 2016
at the Riviera Royale Hotel, Conakry, Guinea. The meeting
deliberated on developments in WAIFEM for the period
January – June 2016.
Similarly, the 33rd meeting of the Committee of Governors of
the West African Monetary Zone (WAMZ) took place on 4th
August, 2016 to deliberate on the Report of the 39th Meeting of
the Technical Committee of the WAMZ.
Finally, the 31st meeting of the Board of Governors of WAIFEM
held at the Riviera Royale Hotel Conakry, Guinea on August 4,
2016. The meeting considered the report of the 34th Meeting of
the Technical Committee.


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APPENDIX TABLES


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Economic Report Third Quarter

C e n t r a l B a n k o f N i g e r i a

Economic Report Third Quarter

Table A1: Money and Credit Aggregates


1/ Quasi money consist of Time, Savings and Foreign Currency Deposit at Deposit Money Banks excluding Taking from Discount
Houses.

2/ Demand Deposit consist of State, Local and Parastatals Deposits at CBN, State, Local Government and Private Sector Deposits as well
as Demand Deposits of non-financial Public Enterprises at Deposit Money Banks.


Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Domestic Credit (Net)

Claims on Federal Government (Net)

Central Bank (Net)

Banks

Claims on Private Sector

Central Bank

Banks

Claims on Other Private Sector

Central Bank

Banks

Claims on State and Local Government

Central Bank

DMBs

Claims on Non-financial Public Enterprises

Central Bank

DMBs

Foreign Assets (Net)

Central Bank

DMBs and Non Interest Banks

Other Assets (Net)

Total Monetary Assets (M2)

Quasi-Money 1/

Money Supply (M1)

Currency Outside Banks

Demand Deposits 2/

Total Monetary Liabilities (M2)

Memorandum Items:
Reserve Money (RM)

Currency in Circulation (CIC)

Banks' Deposit with CBN

N billion


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Table A2: Money and Credit Aggregates (Growth Rates)
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Domestic Credit (Net)

Claims on Federal Government (Net)

Claims on Private Sector

Claims on Other Private Sector

Claims on State and Local Government

Claims on Non-financial Public Enterprises
Foreign Assets (Net)

Other Assets (Net)

Total Monetary Assets (M2)

Quasi-Money 1/

Money Supply (M1)

Currency Outside Banks

Demand Deposits 2/
-2.98
-10.66

6.8
1.94
9.36
Total Monetary Liabilities (M2)

Memorandum Items:
Reserve Money (RM)

Currency in Circulation (CIC)

DMBs Demand Deposit with CBN

Domestic Credit (Net)

Claims on Federal Government (Net)

Claims on Private Sector

Claims on Other Private Sector

Claims on State and Local Governments

Claims on Non-financial Public Enterprises
Foreign Asset (Net)

Other Asset (Net)

Total Monetary Assets (M2)

Quasi-Money 1/

Money Supply (M1)

Currency Outside Banks

Demand Deposits 2/

Total Monetary Liabilities (M2)

Memorandum Items:
Reserve Money (RM)

Currency in Circulation (CIC)

DMBs Demand Deposit with CBN

Percentage Change Over Preceding Quarter
Percentage Change Over Preceding December

1/ Quasi money consist of Time, Savings and Foreign Currency Deposit at Deposit Money Banks excluding Taking from Discount Houses.
2/ Demand Deposit consist of State, Local and Parastatals Deposits at CBN, State, Local Government and Private Sector Deposits as well as Demand Deposits of
non-financial Public Enterprises at Deposit Money Banks.


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Table A3: Federal Government Fiscal Operations (N billion)
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Retained Revenue

Federation Account

VAT Pool Account

FGN Independent Revenue

Excess Crude

Others/SURE-P

Expenditure

Recurrent

Capital

Transfers

Overall Balance: Surplus(+)/Deficit(-)


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