CENTRAL BANK OF NIGERIA
ECONOMIC REPORT


Third Quarter

i


FOREWARD

The Central Bank of Nigeria (CBN) Economic Report is a periodic
publication of economic developments in Nigeria, intended for
dissemination to the public. The Report provides insights on current
economic developments in the real, fiscal, financial, and external sectors
of the Nigerian economy, as well as on global issues of interest. It also
reflects the policy initiatives of the CBN in pursuit of its mandate.

The Report is directed at a wide spectrum of readers, including
economists, policymakers, and financial analysts in government circles
and the private sector, as well as the wider public. Subscription to the
Report is available without charge to institutions, corporations,
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can obtain any issue of the publication for free by forwarding a mail to
Please direct all inquiries on the publication to the
Director of Research, Central Bank of Nigeria, P.M.B. 187, Garki, Abuja,
Nigeria. The Report is also available for free download from the CBN
website: www.cbn.gov.ng


Contents


iii


Tables

Table 2: Manufacturing and Non-Manufacturing Sector Purchasing
Table 4: Domestic Prices of Selected Agricultural Commodities in Third

Figures

Figure 4: Inflation Rate in Some Selected Countries in Third Quarter
Figure 5: Monetary Policy Rates of Selected Central Banks (per cent) .... 7
Figure 16: Internally Generated Revenue Effort by States 2020Q1 and


iv


Figure 29: External Reserves and Months of Import Cover for Nigeria .. 48
Figure 30: Foreign Exchange Transactions through the Bank (US$ Billion)
Figure 31: Foreign Exchange Sale to Authorised Dealers in Third Quarter


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ECONOMIC REPORT, THIRD QUARTER 2020

EXECUTIVE SUMMARY
The global economy continued in the path of slow recovery as countries
cautiously opened their economies in different parts of the world. Global
output, according to the J.P. Morgan Global Composite Purchasing
Managers Index (PMI), expanded to 50.8 index points in the third quarter
of 2020. This was above the 50-point index threshold and the 38.87 index
points recorded in the preceding quarter. The strongest economic activity
performance was observed in the investment goods industry, where
production rose at the fastest pace in almost a decade. Growth equally
signaled positive development in business services, financial services,
consumer goods and intermediate goods companies. An increase in
employment for the first time in eight months was recorded in
September 2020. Business outlook remained positive in the euro-area,
Japan, India and South Africa, but fell in the US, the UK, Italy and Nigeria.
Economic activities picked up in the domestic economy in the third
quarter of 2020, following further relaxation of the COVID-19 pandemic
lockdown and the various intervention measures put in place by the
Government and the Central Bank of Nigeria. This was reflected in the
average composite manufacturing PMI, which rose to 46.8 index points
in the third quarter of 2020, from 41.8 index points in the preceding
quarter. Expansion was recorded in subsectors, such as electrical
equipment, transportation equipment, cement, textile, apparel, leather
and footwear, plastic and rubber products and nonmetallic mineral
products.
Consumer demand increased amid heightened inflationary pressures,
which persisted in the review period. The increase in the pump price of
PMS and electricity tariff in the period caused ripples in the economy, as
equilibrium in the market was dislodged, with heightened tension
between the Nigeria Labour Congress (NLC) and the Federal Government.
Prices of most agricultural export commodities continued to rise in the
third quarter of 2020, influenced generally by firmer demand. Crude oil
spot prices also recorded significant gains. The rise in crude oil prices in
the review period was supported by further production cuts by OPEC+.
At N2,268.70 billion, federally collected revenue in the third quarter of
2020, grew by 4.5 per cent, relative to the level in the preceding quarter.
However, it remained considerably below collections in the third quarter
of 2019 and the budget benchmark, by 22.1 per cent and 10.7 per cent,
respectively. Oil receipt accounted for 42.0 per cent of the total
collection, while non-oil revenue made up the balance of 58.0 per cent.

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ECONOMIC REPORT, THIRD QUARTER 2020

The relatively low receipts underscored the lingering effect of the COVID19 pandemic on oil prices.
Also, the revenue of the Federal Government of Nigeria (FGN) was highly
constrained at N842.09 billion and fell short of the budget benchmark
and the level in the third quarter of 2019, by 42.3 per cent and 35.7 per
cent, respectively. The provisional FGN expenditure in the review period
was N2,131.12 billion, representing a shortfall of 21.1 per cent, relative
to the budget. The decline in expenditure reflected challenges in resource
sourcing. Consequently, the fiscal operations of the FGN resulted in an
estimated deficit of N1,289.03 billion. Total FGN debt outstanding as at
end-June 2020 stood at N26,818.95 billion, with the domestic and
external components accounting for 57.6 per cent and 42.4 per cent,
respectively. The prospect for a better performance is brighter, following
the gradual recovery in global oil demand and economic activities.
The Bank maintained an accommodative monetary policy stance in the
third quarter of 2020 to mitigate the effect of the COVID-19 pandemic
and promote economic recovery, with a boost to credit to key sectors of
the economy. Nonetheless, the financial sector remained resilient in the
review quarter as observed in the various financial soundness indicators.
The banking system liquidity ratio remained above the regulatory
benchmark of 30.0 per cent. Activities on the Nigerian Stock Exchange
(NSE) were bullish in the third quarter of 2020 with investors’ growing
optimism about the economy. The bullish run was informed by disclosure
and publication of positive half-year earnings by most quoted companies.
Net foreign exchange flows through the economy marginally increased.
The improvement was due, mainly, to the reduction in outflow through
the CBN and autonomous sources. The average exchange rate, at the
inter-bank, the Bureau-de-Change (BDC), and the Investors and Exporters
(I&E) window, were N379.73/US$, N463.00/US$ and N386.00/US$,
respectively, in the review quarter. Nigeria’s external reserves fell to
US$35.33 billion at the end of the quarter under review from US$35.78
billion in the preceding quarter, driven by interventions in the foreign
exchange market, payments to external creditors and third-party MDAs
transfers. At this level, the foreign reserves could cover 8 months of
import of goods and services.


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ECONOMIC REPORT, THIRD QUARTER 2020

1.0 GLOBAL ECONOMIC DEVELOPMENTS
The global economy continued the path of slow recovery, as countries
opened their economies in almost all parts of the world. Global output
according to the J.P. Morgan Global Composite Purchasing Managers
Index (PMI) rebounded in the third quarter of 2020, compared with
slowed economic activities in the preceding quarter (Table 1). The
strongest economic activity performance was in the investment goods
industry, where production rose at the fastest pace in almost a decade.
Growth equally signaled positive development in business services,
financial services, consumer goods and intermediate goods industries. An
increase in employment for the first time in eight months was recorded
in September 2020. Business outlook remained positive in the euro-area,
Japan, India, Germany and South Africa, but fragile in the US, the UK, Italy
and Nigeria.
The Organisation for Economic Cooperation and Development (OECD)
countries interim report for September 2020, projected a bigger
contraction of 4.5 per cent, as against the forecast of negative 2.4 per
cent in March 2020. This was due to the global output collapse in the first
half of 2020, as the COVID-19 pandemic spread across the world.
However, a recovery is imminent following the easing of COVID-19
restrictions and the reopening of businesses in July 2020. The OECD,
however, forecasts a growth rate of 5.0 per cent for the global economy
in 2021, on the assumption that strong fiscal, monetary and structural
policies would prevail, as opposed to the current lockdown measures.
Regardless, uncertainty remains high, as downside risks, which include;
the resurgence of the COVID-19 pandemic in some countries, renewed
lockdown measures, weak international trade, poor labour market
conditions and oil price volatility, persist.


Global
Economic
Conditions

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ECONOMIC REPORT, THIRD QUARTER 2020

Source: JP Morgan, CBN Staff compilation

Figure 1: Global PMI of Third Quarter 2020

Source: JP Morgan, CBN Staff compilation.

1.1. Global Output
Global economic activity in the third quarter of 2020, gathered
momentum, relative to the second quarter of 2020.
Economic activity in advanced economies showed strong rebound in the
third quarter of 2020, compared with the preceding quarter, due to the
eased effect of COVID-19 pandemic and other factors. The PMI of the
United States, the United Kingdom, Germany and Italy in the third
quarter of 2020 improved, as employees returned to work and
companies reopened, and COVID-19 restrictions eased. In addition, the
Japanese economy contracted at slower pace in the third quarter of 2020,
compared with the level in the second quarter of 2020. However,
Japanese PMI, for the first, second and third quarters of 2020 increased
consecutively but remained below 50-point index benchmark (Figures 2
and 3). On the price front, input costs rose modestly, while output
charges fell slightly.


O U T P U T
C O M P O S I T E
M A N U F A C T U R I N G
S E R V I C E S
( B U S I N E S S
A C T I V I T Y )
E M P L O Y M E N T
L E V E L
2019Q3
2020Q2
2020Q3
50-point Threshold
Table 1: Global Purchasing Managers’ Index (PMI)

2019Q3
2020Q2
2020Q3
Output
51.40
36.87
51.83
Composite
51.40
36.87
51.83
Manufacturing
49.50
43.30
51.57
Services (Business Activity)
51.97
35.73
51.37
Employment Level
50.90
41.93
49.33
Economic
Activity in
Advanced
Economies

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ECONOMIC REPORT, THIRD QUARTER 2020

In the Emerging Market and Developing Economies (EMDEs), there was
greater momentum of economic recovery, as the PMI of China, India,
United Arab Emirates improved in the third quarter of 2020. Factory
activities increased with new export business expanding at the fastest
rate. On the other hand, the Manufacturing PMI for Nigeria in the third
quarter of 2020 indicated a fifth straight month of contraction in factory
activity due to the COVID-19 pandemic, and oil price shocks, among other
factors. To over-turn the trend, policy measures were put in place by both
the monetary and fiscal authorities.
Figure 2: Selected Countries PMIs in Third Quarter 2020

Source: Trading Economics/Various Country Websites, CBN Staff compilation.
Note: US, UK, JP, IT, GM, CH, IN, BR, IND, UAE, SA and NG represent United States, United Kingdom,
Japan, Italy, Germany, China, India, Britain, Indonesia, United Arab Emirates, South Africa and
Nigeria respectively.

Figure 3: Selected Countries PMIs from January to September 2020
Source: Trading Economics/Various Country Websites, CBN Staff compilation:
Note: US, UK, JP, IT, GM, CH, UAE, IND, SA and NG represent United States, United Kingdom, Japan,
Italy, Germany, China, United Arab Emirates, Indonesia, South Africa and Nigeria respectively.

US
UK
CHN
IND
GM
IT
JP
UAE
SA
NG
Jul-20
Aug-20
Sep-20
50-Point Threshold

Jan-20
Feb-20 Mar-20 Apr-20 May-20 Jun-20
Jul-20
Aug-20 Sep-20
IT
UAE
SA
US
UK
CHN
IND
GM
JP
NG
Economic
Activity in
Emerging and
Developing
Economies

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1.2. Global Inflation
COVID-19 Pandemic-induced supply constraints and weaker demand,
though tapering, continued to influence the trajectory of consumer
prices across most economies in the third quarter of 2020. The inflation
outcomes in the third quarter remained mixed for advanced and
emerging and developing economies. Consumer prices in the US
sustained an upward trend through the third quarter of 2020, averaging
1.23 per cent, relative to the 0.33 per cent in the second quarter. The
increase was driven, largely, by higher gasoline price and increased cost
of used cars and trucks. Conversely, the second quarter of 2020 inflation
in the UK was higher than the average recorded in July and August 2020,
on account of declines in prices of restaurants and cafes, airfare and
clothing in the third quarter of 2020. The fall in food, transport and
energy prices in China continued to dampen inflationary pressures, with
average inflation falling to 2.55 per cent in July and August 2020 from
2.73 per cent in the second quarter of 2020. Nigeria and South Africa, on
the other hand, recorded higher domestic price levels in the third quarter
of 2020, relative to the second quarter on account of elevated prices of
food and non-food inflation components in Nigeria, while higher energy
and utility prices accounted for that of South Africa.
Figure 4: Inflation Rate in Some Selected Countries in Third Quarter 2020

Source: Trading Economics/Various Country Websites, CBN Staff compilation.
Note: US, UK, JP, IT, GM, CH, IN, BR, INDO, SA and NG represent United States, United Kingdom,
Japan, Italy, Germany, China, India, Britain, Indonesia, South Africa and Nigeria respectively.


Global Inflation

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1.3. Global Financial Markets
Global financial markets eased significantly, and risk asset prices
rebounded due to the actions of central banks to address severe market
stress. The financial markets easing was propelled by the fall in interest
rates (Figure 5) and rebound of stock prices from their troughs in the first
quarter of 2020, occasioned by swift policy responses by central banks.
This altered the negative market risk perception of investors about global
financial market conditions. Also, stimulus packages, introduced by
governments, moderated the impact of the outflow from the EMDEs and
eased market conditions, especially in advanced economies.

Figure 5: Monetary Policy Rates of Selected Central Banks (per cent)


Source: Various Central Bank Websites, September 2020.
Note: US, UK, EA, CH, SA and NG represent United States, United Kingdom Euro Area, China, South
Africa and Nigeria respectively.

Figure 6: 10-year Government Bond Yields for Selected Countries

Source: Bloomberg Finance


2019 Q1
Q2
Q3
Q4
2020Q1
Q2
Q3
US
UK
EA
CH
SA
NG
Global Financial
Markets

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ECONOMIC REPORT, THIRD QUARTER 2020

Figure 7: Equity Markets
Source: Bloomberg Finance

1.4 Global Oil Market
Market fundamentals pushed crude oil prices to a six-month high in the
third quarter of 2020. The rebound in crude oil prices in international
market was attributed to a further easing of the COVID-19 lockdown,
recovery in refinery operations and utilisation rates in the major regions,
and the agreed supply cut by the Organisation of Petroleum Exporting
Countries (OPEC+).

Figure 8: Global Crude Oil Prices

Source: Reuters, Various Central Bank Websites, September 2020.

US$/bbl
Bonny Light
UK Brent
FORCADOS
Global Oil
Market

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ECONOMIC REPORT, THIRD QUARTER 2020

2.0. DOMESTIC ECONOMIC DEVELOPMENTS
2.1. THE REAL SECTOR
2.1.1. Domestic Output and Business Activities
Economic activities in the domestic economy picked up in the third
quarter of 2020, following further relaxation of the COVID-19 lockdown
and the various intervention measures put in place by the Federal
Government and the Central Bank of Nigeria (CBN). The modest
improvement in business conditions was reflected in the average
manufacturing Purchasing Managers Index (PMI), which rose to 46.8
index points in the third quarter of 2020, from 41.8 index points
recorded in the second quarter of 2020. Expansion was recorded in
subsectors, such as electrical equipment, transportation equipment,
cement, textile, apparel, leather and footwear, plastic and rubber
products and nonmetallic mineral products. Consumer demand
increased amid heightened inflationary pressures, which persisted in
the review period. Demand and supply shocks, continued to impact on
business activities and general economic conditions, owing to the
lingering effect of the COVID-19 pandemic. The increase in the pump
price of PMS and electricity tariff in the period rattled the economy and
heightened tension between the Nigeria Labour Congress (NLC) and the
Federal Government.
The average composite non-manufacturing PMI increased to 43.3 index
points in the third quarter of 2020, compared with 30.5 index points in
the preceding quarter. However, it declined by 15.2 index points
compared to the corresponding period of 2019.
Figure 9: Purchasing Managers’ Index (PMI)

Source: CBN Statistics Department

2019Q3
2020Q1
2020Q2
2020Q3
CBN PMI (Manufacting)
CBN PMI (Non Manufacturing)
PMI Threshold
Domestic Output
and Economic
Activities

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Table 2: Manufacturing and Non-Manufacturing Sector Purchasing
Managers’ Index for Third Quarter 2020
COMPONENTS
2019 Q3
2020 Q2
2020Q3
A. Manufacturing PMI
57.7
41.8
46.8
Production level
58.7
40.6
47.1
New orders
57.2
39.6
46.2
Supplier Delivery Time
58.1
63.1
54.3
Employment level
57.0
31.7
42.9
Raw material Inventory
57.7
39.2
44.1
B. Non-manufacturing PMI
58.7
30.5
43.3
Business Activity
58.6
26.9
45.7
New Orders
58.7
26.1
42.3
Employment level
58.5
34.7
42.3
Inventories
58.9
34.3
43.0
Source: Central Bank of Nigeria
The ease of COVID-19 restrictions led to increase in consumer demand,
which stimulated new orders and production levels in the review
quarter, particularly in nonmetallic mineral products, as well as arts,
entertainment and recreation subsectors. New orders averaged 46.2
index points and 42.3 index points in both manufacturing and nonmanufacturing in the third quarter of 2020, above their respective levels
of 39.6 and 26.1 index points in the preceding quarter.
Following a rise in new orders, inventories for both manufacturing and
non-manufacturing sectors increased. Raw material inventories in the
manufacturing sector, rose to 44.1 index point, while inventories for the
non-manufacturing sector also increased to 43.0 index points in the
review period. This was aided by improved suppliers’ delivery time, as
restrictions on interstate travels were removed.
Employment level in the review quarter improved, following firms’
resumption of production activities and strengthening consumer
demand. Employment level for both manufacturing and nonmanufacturing activities increased to 42.9 index points and 42.3 index
points, respectively.
2.1.2. Consumer Prices
Inflationary pressures persisted in the third quarter of 2020, amid
demand and supply shocks.
Headline inflation rose to 13.7 per cent in the third quarter of 2020, year-
on-year, from 12.6 per cent and 11.2 per cent in the second quarter of
2020 and the third quarter of 2019, respectively. The rise in headline
inflation was driven by food and non-food components. Other factors
that drove the increase included: the increase in pump price of PMS,
Employment
New Orders and
Inventories
Headline
Inflation

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ECONOMIC REPORT, THIRD QUARTER 2020

higher transportation/logistics cost, persistent insecurity conditions in
some parts of the country, as well as farm flooding.
Figure 10: Headline, Food and Core Inflation (Year-on-Year)

Source: National Bureau of Statistics (NBS)
Figure 11: Quarterly Headline, Food and Core Inflation (Month-on-Month)

Source: National Bureau of Statistics


On a year-on-year basis, food inflation in the review period trended
upward to 16.7 per cent, from 15.2 per cent in the preceding quarter. The
rise in the food index was attributed to the prices of bread and cereals,
potatoes, yam and other tubers, meat, fish, fruits, oils and fats, and
vegetables.
Core inflation (All items less farm produce) was 10.6 per cent in the
review period from 10.1 per cent in the preceding quarter. The highest
increase in the prices of the components of core inflation were recorded
in passenger air transport, hospital services, medical services,
pharmaceutical products, maintenance and repair of personal transport
equipment, vehicle spare parts, motor cars, passenger transport by road
and housing utilities (water, electricity and gas).

Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Headline
Food
Core
per cent

March
June
September
December
March
June
september

Headline
Core
Food
Food Inflation

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2.1.3 Industrial Sector Activities
Improved level of economic activities reflected a rise in industrial
production in the review period. The estimated index of industrial
production rose to 104.2 (2010=100) in the third quarter of 2020,
reflecting a 3.6 per cent increase compared with the preceding quarter
but a decline of 10.3 per cent below the level in the corresponding
quarter of 2019. The increase relative to the preceding quarter was
attributed to improved activities, following strengthened consumer
demand.
Manufacturing activities witnessed modest increase in the review
period. At 162.6 (2010=100), estimated index of manufacturing
production in the third quarter of 2020 showed an increase of 2.1 per
cent, compared with the preceding quarter and a decline of 10.3 per cent
compared with the corresponding quarter of 2019. The development was
due, largely, to increase in demand and gradual reopening of economies
that allowed for access to raw materials.
Following increased production activities, capacity utilisation witnessed
an improvement, owing to increase in the number of shifts operated by
firms. The estimated average capacity utilisation for third quarter 2020
was 43.8 per cent, which represented 3.7 percentage points increase,
compared with the level in the preceding quarter, but a decline of 13.9
percentage points below the level in the corresponding quarter of 2019.
The development, relative to the preceding quarter, was attributed to
improvement in the supply and demand chain, following ease of
restrictions. Expansion in the production level was noticeable in some
activity groups in the manufacturing subsectors such as: cement;
chemical & pharmaceutical products; food, beverage & tobacco
products; nonmetallic mineral products; and plastics & rubber products.
Activities in the mining sector declined in the review period. The
estimated index of mining production in the third quarter of 2020 stood
at 71.9 (2010=100), a marginal decline of 0.7 per cent, and 17.3 per cent,
compared with the preceding quarter and corresponding quarter of
2019, respectively. The decline in mining activities was attributed to the
development in the oil sector, arising from the OPEC and its allies
(OPEC+).


Manufacturing
Industrial
Production
Capacity Utilisation

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2.1.4
Energy Sector
The performance of the energy sector improved in the review period,
following enhanced gas supply to gas-fired power plants and effective
water management at the hydro power stations. Electricity generation,
transmission and distribution improved, due to enhanced demand by
industries as production activities resumed. Consequently, the average
estimated electricity generation for the third quarter of 2020 rose to
4368.3 MW/h, showing increases of 19.6 per cent and 23.3 per cent,
compared with the level in the preceding quarter and corresponding
quarter of 2019, respectively.

Similarly, the average estimated electricity consumption increased by
19.2 per cent to 3,704.7 MW/h, compared with the preceding quarter.
Also, the increase of 26.1 per cent was recorded compared with the
corresponding quarter of 2019.

2.1.5 Socio-Economic Development
Although gradual resumption of economic activities continued in the
quarter, the socio-economic sector remained under pressure, as most of
the subsectors, including education, were undermined by the lingering
effects of the COVID-19 pandemic.
The health sector remained under pressure as the spread of the COVID19 pandemic persisted and the National Association of Resident Doctors
(NARD) downed tools over the failure of the government to meet some
demands of the association made in June 2020. However, the Federal
Government approved N8.9 billion for the payment of the COVID-19
hazards and inducement allowances to all medical health workers in the
country. This was in addition to the N9.3 billion premium paid to
Insurance Companies, for Life Group Insurance and payment of death
benefits of health workers agreed on in June 2020.
The number of confirmed COVID-19 cases increased by 127.5 per cent to
58,460 as at September 28, 2020 from 25,694 recorded at the end of the
preceding quarter. However, the number of active cases declined to
7,454 in the review period from 15,358, in the preceding quarter of June
2020, representing a decrease of 51.5 per cent. The number of
discharged cases increased by 411.9 per cent to 49,895 from 9,746 in the
preceding quarter, while deaths stood at 1,111.
Electricity
Generation
Electricity
Consumption
Health

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ECONOMIC REPORT, THIRD QUARTER 2020

Figure 12: Covid-19 Statistics1

Source: NCDC

The Federal Government approved a N10 billion survival fund for road
transport workers and operators, who were severely affected by the
COVID-19 induced movement restrictions. This measure was aimed at
stabilising transportation fares, assisting rural farmers in conveying farm
produce, as well as enhancing job opportunities.
The aviation sector was partially reopened in the review period after
months of inactivity. Full domestic operations resumed in all the airports,
while the Murtala Muhammed International Airport, Lagos and Nnamdi
Azikiwe International Airport, Abuja were reopened for controlled
international flights. To boost aviation activities, the Federal Government
approved the sum of N13.122 billion for the digitalisation of four Nigerian
airports

Similarly, rail transport activities improved in the review period with the
resumption of Abuja-Kaduna and Lagos-Ogun Mass Transit Train Services.
To boost rail services in the country, the Nigeria Railway Corporation
acquired twenty-four new coaches to operate the Lagos-Ibadan Railway
route.
In preparation for the reopening of schools across the country for the
new academic session, the Federal Government ordered State
Governments to conduct risk assessment of schools for possible
resumption. Consequently, academic activities resumed in private and
state-owned schools in Anambra, Akwa Ibom, Benue, Borno, Ekiti, Kogi,
Lagos, Ogun, Osun, Oyo and Taraba states. Also, the National Economic

1 Covid-19 data as at September 28, 2020


16384
65536
March
April
May
June
July
August
September
Total Confirmed Cases
Discharged Cases
Death Toll
Transport
Education

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ECONOMIC REPORT, THIRD QUARTER 2020

Council directed the National Universities Commission to equip Nigerian
universities with the capacity to evolve digital learning platforms. The
National Commission for Colleges of Education and National Board for
Technical Education were also directed to key into the initiative.

2.1.6 Commodity Market Developments
Prices of most agricultural export commodities maintained an upward
trend in the third quarter of 2020, influenced generally by firmer
demand. Provisional data showed that the All-commodity price index (in
US$ terms, 2010=100) averaged 91.5 index points in the third quarter of
2020, up by 13.1 per cent from the level in the preceding quarter and the
highest since the beginning of the year. The price increase ranged from
2.6 per cent for coffee to 13.0 per cent for palm oil. The price increase in
palm oil was due, mainly, to prospective production slowdown in leading
producing countries, and the attendant firmer global import demand,
arising from increased economic activities. Data showed that the prices
of groundnut, cotton, rubber, soya beans and sorghum increased in the
quarter, while the prices of cocoa and wheat fell.

Table 3: Agricultural Export Commodities for Third Quarter 2020
Indices of Average World Prices of Nigeria's Major Agricultural Export
Commodities for Third Quarter, 2020 (in dollars; 2010 = 100)
Commodity
19-Q3
20-Q2
20-Q3
%
Change
(1) & (3)
%
Change
(2) & (3)


All Commodities

Cocoa

Cotton

Coffee

Wheat

Rubber

Groundnut

Palm Oil

Soya Bean

Sorghum

Source: Staff Estimates based on data from Index Mundi


Steeper growth in food prices was recorded in 2020Q3 at the domestic
front. In the domestic market, the prices of selected food crops,
increased significantly in the third quarter of 2020, compared with the
levels in the preceding quarter. The highest increases were recorded for
garri (yellow 12.7 per cent and white 11.7 per cent) and maize grain
(yellow 11.3 per cent and white 11.1 per cent), respectively. Data from
Agricultural
Commodity
Prices

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the Poultry Association of Nigeria (PAN) showed that the price of a metric
tonne of maize more than doubled, from N90,000.00 per metric ton in
January 2020 to about N200,000 (landing cost) in the quarter. However,
with the approval of four companies (Wacot, Chi farms, Crown flour, and
Premier feed mills) to import the commodity, the upward trend in the
price of maize is expected to reverse.
Food prices maintained an upward trend, as food inflation in the quarter
averaged 16.0 per cent, compared with 15.1 per cent and 13.3 per cent
in the preceding and corresponding quarters, respectively. The
development was alluded to the COVID-19 induced demand and supply
shocks in the market. The increase in petrol and electricity prices during
the quarter also contributed (Table 4).
Table 4: Domestic Prices of Selected Agricultural Commodities in Third
Quarter 2020
Food Item

19Q3
20Q2
20Q3
%
Change
%
Change
Unit

(1) & (3)
(2) & (3)
Agric eggs (medium size price of
one)
1kg

Beans brown, sold loose
'

Beans: white black eye, sold
loose
"

Gari white, sold loose
"

Gari yellow, sold loose
"

Groundnut oil: 1 bottle, specify
bottle
"

Irish potato
"

Maize grain white sold loose
"

Maize grain yellow sold loose
"

Palm oil: 1 bottle, specify bottle
"

Rice agric sold loose
"

Rice local sold loose
"

Rice Medium Grained
"

Rice, imported high quality sold
loose
"

Sweet potato
"

Tomato
"

Vegetable oil:1 bottle, specify
bottle
"

Wheat flour: prepacked (golden
penny 2kg)
"

Yam tuber
"


Source: National Bureau of Statistics


17 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Crude oil spot prices recorded significant gains in 2020Q3, as the market
continued to recover from the impact of COVID-19 lockdown measures.
The rise in crude oil prices in the period was supported by production
cuts by OPEC+.
Average quarterly spot price of Nigeria’s reference crude oil, the Bonny
Light (37° API), rose by 55.6 per cent, quarter-on-quarter, to US$43.40 pb
in 2020Q3, compared with US$27.90 pb in 2020Q2. The UK Brent, at
US$43.37 pb; the Forcados, at US$43.39 pb; and the WTI, at US$41.10
pb, exhibited similar trends. The average price of OPEC basket for
thirteen selected crude streams rose by 63.0 per cent, to US$43.46 pb in
the third quarter of 2020, compared with US$26.67 pb in the preceding
quarter (Figure 4). The increase in crude oil spot prices was driven,
largely, by improved demand for crude oil due to the gradual recovery of
economic activities and the production cut implemented by OPEC+ to
stabilise the market. Particularly, there were recoveries in refinery
operations and utilisation rates in the US and China. However, gains in
spot prices were expected to slow in the coming months, as industrywide refinery maintenance season approaches, coupled with concerns
over a second wave of the COVID-19 pandemic.

Figure 13: Trends in Crude Oil Prices

Source: Thomson Reuters


Available data from Reuters indicated significant gains in the prices of
various traded precious metals (Gold, silver, platinum, and palladium),
during the third quarter of 2020.
The average spot prices of gold and silver in the third quarter of 2020 rose
by 11.6 per cent and 48.7 per cent, to US$1,911.62 per ounce (oz) and
US$24.40 per oz, respectively, compared with US$1,712.56 per oz and
US$16.41 per oz in the second quarter of 2020, respectively (Figure 14).

18Q2
18Q3
18Q4
19Q1
19Q2
19Q3
19Q4
20Q1
20Q2
20Q3
US$ per Barrel
Bonny Light
OPEC Basket
Brent
Crude Oil Spot
Market
Prices of Other
Mineral
Commodities

18 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020


Figure 14: Price Changes of some Selected Precious Metals for
Third Quarter 2020 (per cent)
Source: Thomson Reuters

The rise in the prices of gold and silver was due to a weak US dollar, which
resulted to an increase in demand for both precious metals as alternative
store of value. This was coupled with the expectation of interest rates
remaining close to zero for a longer period than previously anticipated,
due to higher tolerance for inflation by the Federal Reserve Bank.
Average spot prices of platinum and palladium also recorded gains of 14.0
per cent and 9.5 per cent, to US$901.5 per oz and US$2,161.45 per oz,
respectively, compared with US$790.75 per oz and US$1,978.36 per oz in
the preceding quarter. The increase in the price of both precious metals
was driven, largely, by stronger demand, following the recovery of
activities in the automobile industry, particularly in China and the US, as
well as supply shortfalls of the metals. Both metals are used mostly in the
production of catalytic converters for petrol cars, electronics and
jewelries.

Domestic crude oil production and export recorded further decline in the
third quarter of 2020, as OPEC and its allies (OPEC+) sustained the
enforcement of agreed production cuts.
Nigeria’s crude oil production, including condensates and natural gas
liquids, at an average of 1.53 mb/d, recorded a decline of 0.21 mb/d or
12.1 per cent relative to the 1.74 mb/d in the preceding quarter. Of the
1.53 mb/d produced, an average of 1.08 mb/d was billed for export, while
the balance was allocated for domestic consumption in the review
period. The decline in production and export was as a result of Nigeria’s

Gold
Silver
Platinum
Palladium
preceding quarter
corresponding quarter
Domestic Crude
Oil Production and
Export

19 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

commitment to fully compensate for its overproduction (0.33 mb/d) in
the second quarter of 2020, to support the rebalancing efforts of the oil
market by OPEC+. Nigeria pledged an additional cut of 0.11 mb/d in July
- September 2020 and compensated for about 0.30 mb/d (93.0 per cent)
in August 2020. Consequently, Nigeria’s production was expected to
rebound to its OPEC+ allowable limit in the coming quarter.
World crude oil supply in the third quarter of 2020 decreased by 1.4 per
cent to an average of 91.03 mb/d, from 92.33 mb/d in the preceding
quarter. OPEC crude supply declined by 7.8 per cent to 23.65 mb/d, from
25.65 mb/d in the preceding quarter. The constrained supply in the
period was driven, mainly, by the high compliance level of OPEC members
and their allies to stabilise the oil market through the elimination of
excess crude stock.
Crude oil demand rose by 11.4 per cent to 94.75 mb/d, from 85.06 mb/d
in the second quarter of 2020. The increase in global crude oil demand
was driven, largely, by the uptick in economic activities and the reopening
of businesses, following the gradual easing of COVID-19 lockdown
measures earlier put in place by most countries. Crude oil demand in the
period was particularly high in OECD countries with demand rising by 15.0
per cent in the period to 43.03 mb/d from 37.41 mb/d in the preceding
quarter.
Overall, the global crude oil market recorded an estimated supply deficit
of 3.72 mb/d in the third quarter of 2020. This was underscored by some
OPEC members during the Joint Ministerial Monitoring Committee
(JMMC) meeting on September 17, 2020, stating that the oil market was
not oversupplied. However, the JMMC reiterated the importance of
members adhering to full compliance level and compensating for
overproduction by December 2020.

2.1.7 Development Financing
Intervention schemes by the CBN continued to focus on credit delivery
to critical sectors, in a bid to enhance productivity and stimulate the
economy.
To curtail the spillover effects of the COVID-19 pandemic and support
business activities, the Federal Government launched a N75 Billion Micro,
Small and Medium Enterprises (MSME) Survival Fund. The Scheme is
estimated to save about 1.3 million jobs across the country and impact
on 35,000 individuals per state. Similarly, the Central Bank of Nigeria
Development
Financing

20 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

approved N200 billion as mortgage financing to Family Homes Fund
Limited (FHF). The Fund was expected to fast-track the construction of
300,000 homes across the country within the next five years and help
create up to 1.5 million direct and 1 million indirect jobs.
For commercial agriculture, in September 2020, the sum of ₦5.46 billion
was released to four lending banks for disbursement to five projects. The
disbursement brought the total number of projects financed under the
Commercial Agriculture Credit Scheme (CACS) to 627 and the total
amount released to ₦665.37 billion. During the same period, eight
lending banks repaid the sum of ₦6.45 billion in respect of sixty-nine
projects, bringing the cumulative repayment under CACS from inception
in 2009 to ₦435.94 billion. Analysis of the number of projects financed
under CACS showed that production accounted for 60.9 per cent, while
processing, storage, input and marketing accounted for 29.1 per, 4.5 per
cent, 3.4 per cent and 2.6 per cent, respectively.
Total disbursement under the Paddy Aggregation Scheme (PAS) Phase 2
from inception in 2018 was ₦55.90 billion as at September 20, 2020,
while the sum of ₦200 million was released to a project under the Maize
Aggregation Scheme (MAS). For the Agricultural Credit Guarantee
Scheme (ACGS), the sum of ₦731.8 million was guaranteed to 5,142
farmers during the quarter, bringing the cumulative for the year to ₦2.2
billion for 14,783 farmers and the cumulative from inception in 1978 to
₦120.5 billion for 1,175,486 farmers.
To further strengthen the intervention in the agricultural sector, the CBN,
during the quarter, amended the Agricultural Credit Guarantee Scheme
Fund (ACGSF). The amendment increased the maximum amount granted
to collateralised loans under the scheme from N10 million to N50 million,
and N100,000 for non collaterised loans. The amendment also allows the
scheme to finance all aspects of agricultural value chain.
Similarly, towards increasing agricultural productivity and ensuring a
sustainable income for farmers, the Nigeria Incentive-Based Risk Sharing
System for Agricultural Lending (NIRSAL Plc), in collaboration with the
Royal Exchange General Insurance Company (REGIC), developed a Hybrid
Multi-Peril Crop Indemnity-Index Insurance (HM-II). The new product is
designed to protect farmers from losses during planting seasons caused
by bad weather (low & high rainfall, early & late season dry spells), pest,
disease and fire outbreaks, as well as permanent disability or death of
farmers.

21 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Under the Agri-Business Small and Medium Enterprise Investment
Scheme (AGSMEIS), a total of ₦10.41 billion was released to the NIRSAL
Microfinance Bank in favour of 2,234 beneficiaries at end-August 2020.
Cumulatively, releases to PFIs for onward disbursement stood at ₦51.85
billion in favour of 13,867 beneficiaries, as against ₦41.44 billion
disbursed to 11,633 beneficiaries in July 2020. For the Creative Industry
Financing Initiative (CIFI), disbursement for 36 projects was put at
₦210.52 billion, while the Targeted Credit Facility (TCF) received a total
of ₦23.23 billion.
The improved credit delivery and intervention programmes were
expected to stimulate output and dampen prices in the market.
2.1.8. Domestic Economic Outlook
Nigeria’s outlook for the rest of the year will be shaped by the twin
shocks of COVID-19 pandemic and oil price volatility (particularly
decline in crude oil prices and OPEC supply cut deal). Nigeria’s growth is
expected to remain subdued for the rest of the year as economic
activities remain tepid and lingering structural challenges continue to
accentuate the impact of the COVID-19 pandemic. Despite efforts by the
Government to boost economic activities, growth is projected to contract
in 2020. The contraction in economic activity could be exacerbated by
decline in crude oil prices as a result of non-compliance with OPEC
production cut and the second wave of COVID-19 pandemic in crude oil
importing economies. Specifically, real GDP is expected to contract in the
third quarter of 2020, premised on the fact that the economy is operating
at sub-optimal level in the forecast horizon.
Headline inflation, which has been on a steady rise since the start of the
year, is expected to continue along its upward trajectory until the end of
the year, accelerating to 14.5 per cent by end-December 2020. The
month-on-month inflation will follow the same trajectory. Food supply
shocks associated with flooding and insecurity, hikes in PMS prices and
seasonal effects, are expected to drive inflation.
A rebound of output depends on the effectiveness of the various
stimulus packages and intervention measures put in place to spur
productivity, output and improve livelihoods. The subsisting policy on
loan-to-deposit ratio (LDR), adjustment of corporate tax rates for MSMEs
under the 2019 Finance Act and continued intervention in the real sector
by the CBN are expected to stimulate investment and consumption
during the period. In addition, the development of the Gold Purchase
Framework by the CBN under the Presidential Artisanal Gold Mining

22 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Development Initiative (PAGMDI), would help to diversify the revenue
base, improve foreign exchange earnings and accretion to external
reserves.


23 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

2.2 FISCAL SECTOR DEVELOPMENTS
2.2.1 Federation Account Operations
At N2,268.70 billion, federally collected revenue in the third quarter of
2020 grew by 4.5 per cent, over the level in the preceding quarter.
However, it was below collections recorded in the same quarter of 2019
and the budget benchmark by 22.1 per cent and 10.7 per cent,
respectively. Oil receipt accounted for 42.0 per cent of the total
collection, while non-oil revenue made up the balance of 58.0 per cent.
The relatively low oil receipts underscored the lingering effect of the
COVID-19 pandemic on oil prices, thereby dwindling the finances of the
general government.
The retained revenue of the Federal Government of Nigeria (FGN), at
N842.09 billion, fell short of the budget benchmark and the level in the
third quarter of 2019 by 42.3 per cent and 35.7 per cent, respectively.
The provisional FGN expenditure in the period was N2,131.12 billion,
representing a shortfall of 21.1 per cent, relative to the Budget. The
decline in expenditure underscores the imperative of prioritising
spending amidst persisting revenue challenges. Consequently, the fiscal
operations of the FGN resulted in an estimated deficit of N1,289.03
billion. Total FGN debt outstanding2 at end-June 2020 stood at
N26,818.95 billion, with the domestic and external components
accounting for 57.6 per cent and 42.4 per cent, respectively. The prospect
for better fiscal policy performance is brighter as crude oil prices begin to
recover.
The rising momentum in economic activities, sequel to the relaxation of
COVID-19 restrictions, resulted in a 4.5 per cent growth in federation
revenue in the third quarter of 2020, relative to the level in the second
quarter.
At N2,268.70 billion, receipt federation revenue was below both the
budget benchmark of N2,540.51 billion and the third quarter of 2019
collection of N2,912.73 billion, by 10.7 per cent and 22.1 per cent,
respectively. The observed shortfall in collections, relative to the revised
budget benchmark, was attributed, largely, to low collections from nonoil revenue. Specifically, receipts from Customs & Excise, Education Tax,
VAT and FGN Independent Revenue, which were below their budget
benchmarks. The low receipts were symptomatic of the ongoing ravaging
effect of the Pandemic on businesses.
Despite the relatively low federally collected revenue (gross) in the third
quarter of 2020, disbursements to the three tiers of government, at

2 This includes the external debt of states and the FCT guaranteed by the FGN, which constitutes
about 6.7 per cent of the total
Summary of Fiscal
Operations
Federation
Revenue

24 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

N1,867.88 billion, was 8.1 per cent and 0.4 per cent above allocations in
the preceding quarter and the budget benchmark, respectively.
Table 5: Federally Collected Revenue and Distribution (N Billion)

Q3-19
Q2-20
Q3-20
Budget
Federation Revenue (Gross)

Oil

Crude Oil & Gas Exports

PPT & Royalties

Domestic Crude Oil/Gas Sales

Others

Non-oil

Corporate Tax

Customs & Excise Duties

Value-Added Tax (VAT)

Independent Revenue of Fed. Govt.

Others*

Total Deductions/Transfers

Federally Collected Revenue (Net)
Less Deductions & Transfers

plus:


Additional Revenue

Balance in Special Account from 2019

Excess Crude Revenue

Non-oil Excess

Exchange Gain

Total Amount Distributed

Federal Government

State Government

Local Government

13% Derivation

Source: Compiled from OAGF figures and CBN Staff Estimates
Note: * Includes Education Tax, Customs Special Levies (Federation Account), National Technology Development,
Customs Special Levies, Solid Mineral & Other Mining revenue, and other Non-regular earnings; ** Deductions includes
cost of revenue collections and JVC cash calls; while transfers entails provisions for FGN Independent revenue and
other Non-Federation revenue.


25 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Table 6: Allocations to Subnational Governments (N’ Billion)
Source: Compiled from OAGF figures.
Source: CBN compiled from NBS data
The total allocations of N560.91 billion and N418.86 billion to the State
and Local governments, respectively, in the third quarter of 2020, were
above the disbursements in the preceding quarter. However, the
amounts were below their benchmarks by 3.1 per cent and 2.2 per cent,
respectively. Factors that accounted for declines in federation revenue,
also affected internally generated revenue (IGR) out-turns at the
subnational levels. Aggregate IGR of the 36 states of the federation, and
the FCT, shrank by 26.5 per cent, from the N353.14 billion collected in the
first quarter of 2020 to N259.73 billion in the second quarter3, and the
performances across the states, were uneven (Figure 14).


3 Based on the latest available data as published by the National Bureau of
Statistics (NBS)

State Government

Local Government

Statutory
VAT
Total

Statutory
VAT
Total
Q3-19
440.845
139.62
580.46

339.87
97.73
437.61
Q2-20
352.39
148.17
500.55

271.68
103.72
375.39
Q3-20
369.48
191.43
560.91

284.86
134.00
418.86
Benchmark
325.28
253.67
578.95

250.77
177.57
428.35
Figure 15: Internally Generated Revenue Effort by States 2020Q1 and 202
(N Billion)

26 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Federally collected revenue in the third quarter of 2020 was driven,
largely, by non-oil revenue sources. While oil revenue accounted for 42.0
per cent of the federation revenue, non-oil revenue sources constituted
the balance of 58.0 per cent. The declining share of oil to the total
federation revenue, reflected Nigeria’s compliance with OPEC’s oil
production cut, which lowered domestic crude oil production, coupled
with lower average crude oil price of US$43.4 per barrel in the review
period.
Petroleum Profit Tax (PPT) and Domestic Crude Oil & Gas Sales at
N660.48 billion and N185.99 billion, respectively, jointly accounted for
88.8 per cent of the total oil revenue in the period. Although receipts
from the two major drivers of oil revenue surpassed their revised
benchmarks, they were below the levels recorded in the third quarter of
2019 by 30.3 per cent and 42.6 per cent, respectively. At N79.27 billion,
Crude Oil & Gas Exports was 51.7 per cent below its benchmark,
reflecting the substantial drop in oil demand and the associated decline
in global crude oil prices. Overall, total revenue from oil related activities
in the third quarter of 2020 amounted to N953.09 billion. This was 25.0
per cent and 28.9 per cent lower than receipts in the second quarter of
2020 and the third quarter of 2019, respectively, but represented a 7.6
per cent increase above the revised benchmark of N886.16 billion.
Non-oil revenue performance, on the other hand, was driven by
increased collections from Corporate Tax and Value-Added Tax (VAT),
which amounted to N586.46 billion and N411.68 billion, respectively, and
jointly accounted for 75.9 per cent of total non-oil receipts. Collections
from VAT rose by 29.2 per cent relative to the level in the second quarter.
Receipts from Corporate Tax exceeded its benchmark and the level in the
second quarter by 30.4 per cent and 110.3 per cent, respectively, but was
10.0 per cent below the level in the third quarter of 2019. The relatively
impressive performance in non-oil revenue was attributed to the swift
implementation of the 2019 Finance Act, including the introduction of an
equitable corporate income tax regime, as well as the increase in VAT rate
from 5.0 per cent to 7.5 per cent. Collections from Customs & Excise
Duties and the FGN Independent Revenue at N239.76 billion and N56.21
billion, were below their respective budget benchmarks by 4.5 per cent
and 75.9 per cent.
Overall, non-oil revenue (gross), at N1,315.60 billion, was 46.2 per cent
above its level in the preceding quarter. It, however, was 20.5 per cent
below the quarterly budget benchmark of N1,654.35 billion.
Drivers of
Federation
Revenue

27 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

2.2.2. Fiscal Operations of the Federal Government
Given declining revenue and relatively high expenditure profile, the
fiscal operations of the FGN in the review period resulted in a
provisional deficit of N1,289.03 billion. This represented 3.6 per cent and
47.0 per cent increase above the revised budget benchmark and the
level in the corresponding period of 2019, respectively (Table 7). The
deterioration in the overall fiscal deficit, relative to the budget
benchmark followed increased government spending aimed at curtailing
the negative effect of the COVID-19 pandemic and restarting growth,
through social intervention programmes and stimulus packages, and
reducing infrastructural deficits.

Table 7: Fiscal Balance (N’ Billion) Third Quarter 2020

Q3-19
Q2-20
Q3-20
Benchmark
Retained revenue

Aggregate expenditure

Primary balance

Overall balance

Source: Compiled from OAGF figures and CBN Staff Estimates
Note: The figures in second quarter and third quarter 2020 are provisional.

The prolonged revenue challenge of the FGN lingered in the review
period, as the estimated retained revenue of the Federal Government
at N842.09 billion fell short of the budget benchmark of N1,458.75
billion by 42.3 per cent.
The shortfalls in the retained revenue of the Federal Government were
attributed, largely, to the poor performance in collections from the FGN
Independent Revenue sources, which at N56.21 billion, was 75.9 per cent
and 72.9 per cent below the benchmark of N233.21 billion and N207.34
billion in the corresponding period of 2019, respectively. Also, projected
receipts of N508.14 billion from ‘Other’ sources, including revenues from
Special Account and Special Levies, were not realised in the review
period, owing to the lingering effect of COVID-19 on economic activity
(Table 8).


Federal
Government
Retained Revenue
Federal
Government
Expenditure

28 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Table 8: FGN Retained Revenue (N’ Billion) Third Quarter 2020

2019Q3
2020Q2
2020Q3
Benchmark
FGN Retained Revenue*

Federation Account

VAT Pool Account

FGN Independent Revenue

Excess Oil Revenue

Excess Non-oil

Exchange Gain

Others**

Source: Compiled from OAGF publications
Note: ** 2020 figures are provisional, *Includes revenue from Special Accounts and
Special Levies

Given the need to rationalise its spending amidst subsisting fiscal
constraints, the provisional aggregate expenditure of the FGN at
N2,131.12 billion, in third quarter of 2020, was lowered by 21.1 per cent,
relative to the revised budget benchmark.
The estimated aggregate expenditure was marginally below the levels in
the preceding quarter and the corresponding period of 2019, by 0.6 per
cent and 2.6 per cent, respectively (Figure 17 and Table 9). The reduction
in aggregate expenditure in the period, was driven, largely, by a 45.3 per
cent drop in capital expenditure, relative to the budget benchmark.

Analysis of the components of aggregate expenditure revealed that
recurrent expenditure maintained its dominance in total government
spending, accounting for 77.4 per cent of total expenditure, with capital
expenditure and transfers having shares of 16.0 per cent and 6.6 per cent,
respectively.

Figure 16: Federal Government Expenditure (N’ Billion)
Third Quarter 2020

Source: Compiled from OAGF figures and CBN Staff Estimates

Q3-19
Q2-20
Q3-20
Benchmark
Aggregate Expenditure
Recurrent
Fiscal Operations
of the Federal
Government

29 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020


Table 9: Federal Government Expenditure (N’ Billion)
Third Quarter 2020

Q3-19
Q2-20
Q3-20
Benchmark
Aggregate Expenditure

Recurrent

of which:


Personnel Cost

Pension and Gratuities

Overhead Cost

Interest Payments

Domestic

External

Special Funds & others

Capital Expenditure

Transfers

Source: CBN Staff Estimate


The trajectory of the FGN debt profile in the review period was driven
by the effects of currency adjustments and new borrowings to mitigate
the effect of the COVID-19 pandemic on the Nigerian economy. At
N26,818.95 billion4, the total debt stock of the FGN as at end-June 2020
rose by 9.4 per cent and 23.4 per cent, relative to the N24,522.05 billion
and N21,735.45 billion recorded in the preceding quarter and
corresponding period of 2019 (Figure 18). Domestic and external debt
obligations accounted for 57.6 per cent and 42.4 per cent of the total
debt stock, respectively, compared with the target 70:30 ratio projected
in the 2020-2023 Debt Management Strategy (DMS) of the FGN.
FGN Bond issues accounted for 72.7 per cent of total domestic debt,
while Multilateral and Commercial loans jointly represented 87.5 per
cent of total external debt stock, as shown in figures 19 and 20.
Interest payment obligations amounted to N416.43 billion in the second
quarter of 2020, compared with respective amounts of N779.73 billion
and N267.28 billion paid in 2020Q1 and 2019Q2. The reduction in interest
payment in the period was due to the moratorium on interest payment
obligations extended to Nigeria by some of its creditors, in consideration
of the negative effect of the COVID-19 pandemic on the fiscal operations
of indebted countries.

4 About 6.7 per cent of the total FGN debt consists of States and FCT external
debt guaranteed by the FGN.
Federal
Government
Debt

30 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 17: FGN External and Domestic Debt Composition
(N Trillion)

Source: Compiled from DMO figures
Figure 18: Composition of Domestic Debt Stock by Instrument

Source: Compiled from DMO figures

Figure 19: Composition of External Debt Stock by Holders

Source: Compiled from DMO figures


2019Q1
2019Q2
2019Q3
2019Q4
2020Q1
2020Q2
Domestic debt
External debt
Total debt oustanding
17.9%
72.7%
9.4%
Treasury Bills
FGN Bonds
Others
52.0%
12.5%
35.5%
Multilateral
Bilateral
Commercial

31 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

2.2.3. Fiscal Outlook
The stress on the fiscal space for the rest of the year is expected to
moderate, anchored on the growth momentum in the global economy,
and expected improvements in crude oil prices. Also, measures to curtail
the COVID-19 pandemic and ensure rebound in economic activities are
expected to revamp the economy. Given the narrow fiscal space and with
little or no improvement in global economic conditions, additional
borrowing by the FGN may not be ruled out, even with deliberate policy
measures to diversify the revenue base and expand the tax net.


Fiscal
Outlook

32 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
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2.3. MONETARY AND FINANCIAL DEVELOPMENTS
2.3.1 Monetary Developments
The Bank maintained an accommodating monetary policy stance in the
third quarter of 2020 to mitigate the effect of the COVID-19 pandemic
and promote economic recovery, boosting credit disbursement to key
sectors of the economy to support growth. Broad money supply (M3) on
quarter-on-quarter basis, grew by 4.0 per cent at end-September 2020,
in contrast to the 0.02 per cent decline at the end of the preceding
quarter. The development reflected 6.6 per cent and 2.4 per cent
increase in net foreign assets and domestic claims on the banking system,
respectively, compared with growth rates of 10.1 per cent and 0.1 per
cent at end-June 2020.
The rise in net foreign assets resulted from the 20.4 per cent decline in
liabilities to non-residents, relative to assets by depository corporations,
arising mainly, from portfolio realignments by non-residents. Similarly,
the growth in domestic claims reflected the 8.7 per cent rise in the net
claims on the Central Government, in contrast to the decline of 11.1 per
cent at end-June, wholly, on account of increased claims on monetary
authorities. Credit to other sectors grew marginally by 0.5 per cent in the
review period, compared with 4.0 per cent at end-June 2020. Credit to
states and local governments, non-financial corporations and other
private sector grew by 9.2 per cent, 3.5 per cent and 4.8 per cent,
respectively, reflecting increased efforts at credit delivery by the Bank.
Currency outside depository corporations, transferrable deposits, and
‘other deposits’ largely propelled growth in monetary liabilities at the end
of the review period, as securities other than shares plummeted by 28.9
per cent, attributable to the low demand for CBN bills due to relatively
low yields. Narrow money supply (M1) expanded by 9.3 per cent,
compared with the 10.3 per cent growth at the end of the second quarter
of 2020. The growth in M1 was due to the 8.0 per cent and 9.5 per cent
increases in currency outside depositary corporations and transferable
deposits, respectively, reflecting demand for transaction balances,
amidst macroeconomic uncertainties surrounding the COVID-19
pandemic.
Relative to the preceding December, M3 grew by 6.7 per cent, compared
with 2.6 per cent and 4.6 per cent increase at the end of the preceding
quarter and the corresponding period of 2019, respectively. M1 grew by
27.1 per cent at end-September 2020, arising wholly from 33.5 per cent
growth in transferable deposits.

Growth in
Monetary
Aggregates

33 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 20: Growth of Narrow Money (M1) and Broad Money (M3)
Source: Central Bank Nigeria

Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
per cent
M1
M3

34 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Table 10: Money and Credit Aggregates Growth Rates (per cent)
Source: Central Bank of Nigeria

GROWTH RATES OVER PRECEDING DECEMBER (%)

Q2 19
Q3 19
Q4 19
Q1 20
Q2 20 Q3 2O
Net Foreign Assets

Net Domestic Asset (NDA)

Domestic Claims

Net Claims on Central Government

Claims on Central Government

Liabilities to Central Government

Claims on Other Sectors

Claims on Other Financial Corporations

Claims on State and Local Government

-3.07 5.8O
Claims on Public Nonfinancial Corporations

Claims on Private Sector

Broad Money Liabilities

Currency Outside Depository Corporations

Transferable Deposits

Other Deposits

Securities Other Than Shares

Other Items (Net)

Total Monetary Assets (M3)

Monetary Base

Currency in Circulation

Liabilities to Other Depository Corporations

Narrow money (M1)

Broad money (M2)

Quasi Money (QM)

GROWTH RATES OVER PRECEDING Quarter (%)

Q2 19
Q3 19
Q4 19
Q1 20
Q2 20 Q3 20
Net Foreign Assets

Net Domestic Asset (NDA)

Domestic Claims

Net Claims on Central Government

Claims on Central Government

Liabilities to Central Government

Claims on Other Sectors

Claims on Other Financial Corporations

Claims on State and Local Government

Claims on Public Nonfinancial Corporations

Claims on Private Sector

Broad Money Liabilities

Currency Outside Depository Corporations

Transferable Deposits

Other Deposits

Securities Other Than Shares

Other Items (Net)

Total Monetary Assets(M3)

Monetary Base

Currency in Circulation

Liabilities to Other Depository Corporations

Narrow money (M1)

Broad Money(M2)

Broad Money (M3)

Quasi Money (QM)


35 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Of the components of broad money supply, domestic claims made the
principal contribution to the growth rate. Net foreign assets and
domestic claims grew by 27.5 per cent and 7.4 per cent, respectively, and
contributed 4.7 percentage points and 7.8 percentage points to the
growth in M3, at end-September 2020; compared with 6.9 percentage
points and 5.0 percentage points at end-June 2020. Similarly, narrow
money supply grew by 27.3 per cent and contributed 8.3 percentage
points to the growth in broad monetary assets, compared with 5.0
percentage points at end-June 2020. Growth in narrow money supply
reflected the uptick in economic activities, leading to increased demand
for precautionary balances. Thus, currency outside depository
corporations and transferable deposits increased by 2.4 per cent and 3.4
per cent, respectively. However, while the former contracted by 0.01
percentage point, the latter contributed 8.4 percentage points to the
growth in broad money supply. Net claims on the Central Government
fell by 4.1 per cent, and made a negative contribution of 1.2 percentage
points to the growth in M3.
In terms of credit utilisation, industrial and services sectors accounted
for the largest share in 2020Q3. Bank credit to the core private sector
grew by 4.8 per cent at end-September 2020, compared with 1.7 per cent
at end-June 2020. Analysis of the credit composition showed that
industry accounted for 37.2 per cent, compared with 37.7 per cent at
end-June 2020. Services and agriculture remained unchanged at 38.4 per
cent and 4.8 per cent, at end-June 2020 and end-September 2020,
respectively. Construction, trade & general commerce, and government
accounted for 4.9 per cent, 6.5 per cent, and 8.2 per cent, respectively,
at end-September 2020, compared with 4.6 per cent, 6.5 per cent, and
8.0 per cent, at end-June 2020. It was observed that government sector’s
share grew slightly from 8.0 per cent at end-June 2020 to 8.2 per cent at
end-September 2020, reflecting the slight growth in domestic borrowing
during the review period.


Drivers of
Money
Supply
Sectoral Utilisation of
Credit

36 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Table 11: Sectoral Credit Utilization

Dec-19
Jun-20
Sep-20
Agriculture
4.6
4.8
4.8
Industry
37.3
37.7
37.2
Construction
4.1
4.6
4.9
Trade/General Commerce
7.2
6.5
6.5
Government
8.8
8.0
8.2
Services
37.9
38.4
38.4
Source: Central Bank of Nigeria

Figure 21: Consumer Credits


Source: Central Bank of Nigeria

Consumer credit outstanding, at ₦1,498.42 billion in 2020Q2, rose by 0.9
and 16.6 per cent above the levels at the end of the preceding quarter
and the end of the corresponding period of 2019, respectively. However,
the ratio of outstanding consumer credit to claims on the private sector,
fell to 8.11 per cent below both the level at the end of the preceding
quarter and corresponding quarter of 2019. It is noteworthy that
although, consumer credit grew quarter-on-quarter, its ratio to claims on
private sector fell owing to increase in claims on the private sector. The
breakdown of consumer loans indicated that personal loan was the main
form of consumer credit advanced to customers with low risk of default.


2019Q3
2020Q2
2020Q3
₦' Trillion
Per cent (%)
Total consumer credit
Ratio of consumer credit to claims on private sector
Consumer Credit


37 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 22: Composition of Consumer Credit in Nigeria (per cent)

Source: Central Bank of Nigeria.

As a result of the monetary policy actions of the CBN, reserve money
grew moderately at end-September 2020. On quarterly basis, reserve
money grew by 2.5 per cent to N13,576.88 billion at end-September
2020, compared with a growth of 30.4 per cent at end-June 2020. At
N11,149.55 billion, liabilities to other depository corporations grew by
1.9 per cent, compared with the growth of 39.3 per cent at end-June
2020, while the currency component grew by 5.5 per cent, compared
with 0.2 per cent at end-June 2020. The corresponding factors were: net
foreign assets, which grew by 6.7 per cent, as a result of the significant
decline in the liabilities to non-residents; net claims on the Central
Government; public financial corporations; and the private sector, which
grew by 16.0 per cent, 30.8 per cent and 15.8 per cent, respectively.

2.3.2 Financial Developments
The loosening of the monetary policy stance in the third quarter
enhanced the supply of credit to the real sector of the economy, and
boosted liquidity to the banking system. Consequently, the financial
sector remained resilient in the review quarter as shown by key financial
soundness indicators.
The health of banks was generally good, as asset quality, measured by
the ratio of Non-Performing Loans (NPLs) to industry total outstanding
loans improved to 6.0 per cent at end-September 2020, albeit above the
5.0 per cent prudential requirement. The industry Capital Adequacy Ratio
(CAR) rose marginally to 15.4 per cent at end-September 2020, relative
to the level at end-June 2020 and above the regulatory benchmark of

2019Q3
2020Q2
2020Q3
Per cent (%)
Personal
Retail
Reserve
Money
Financial
Soundness

38 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

10.0 per cent. The liquidity ratio, at 61.8 per cent, remain above the 30.0
per cent benchmark.
Money Market Developments
Though average banking system liquidity moderated in 2020Q3, it
remained above the Bank’s benchmark of ₦313.8 billion. Industry net
liquidity position closed at an average of N329.11 billion in the third
quarter of 2020, compared with the average of N372.77 billion in the
preceding quarter Liquidity in the system was moderated by provisioning
and settlement of foreign exchange purchases, auctions of CBN bills, FGN
Bonds and Nigerian Treasury Bills (NTBs), as well as Cash Reserve Ratio
(CRR) obligations. The industry liquidity position was positively impacted
by repayments of matured CBN bills, and Nigerian Treasury Bills (NTBs),
as well as fiscal disbursements to the three tiers of Government.

The Bank managed liquidity via direct OMO and discount window
activities in the third quarter of 2020. Thus, the Bank sold CBN bills of
tenors ranging from 75 to 362 days. Total amount offered, subscribed and
allotted were N640.00 billion, N1,390.42 billion and N625.13 billion,
respectively, with a bid rate of 6.4 per cent, while the stop rate was 6.9
per cent. Repayment of matured CBN bills stood at N3,297.91 billion,
translating to a net injection of N2,672.78 billion through this medium.
Deposit Money Banks (DMBs) and merchant banks continually accessed
the standing facilities window to square-up positions in 2020Q3. The
trend at the CBN standing facilities window indicated more activities at
the Standing Deposit Facility (SDF) window, compared to the Standing
Lending Facility (SLF) window, owing to liquidity surfeit in the banking
system. Following the MPC meeting of September 2020, applicable rates
for the SLF and SDF changed from 14.5 per cent and 7.5 per cent to 12.5
per cent and 4.5 per cent, respectively. Total SLF granted during the
review quarter was N1,700.46 billion, made up of N866.93 billion direct
SLF and N833.53 billion Intraday Lending Facilities (ILF) converted to
overnight repo. Daily SLF ranged from N0.13 billion to N384.41 billion and
averaged N58.64 billion in 29 transaction days from July 1 to September
25, 2020. Total SDF granted, during the review quarter, was N1,765.22
billion with a daily average of N27.55 billion in 61 transaction days from
July 1, 2020 to September 25, 2020. Daily request ranged from N0.73
billion to N50.00 billion. Cost incurred on SDF in the quarter stood at
N0.51 billion.

Liquidity
Management
Standing
Facilities

39 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

At the Government securities market, NTBs and long-term FGN Bonds
were issued at the primary market on behalf of the Debt Management
Office (DMO). NTBs of 91-, 182- and 364-day tenors, amounting to
₦1,003.05 billion, ₦1,794.78 billion and ₦1,003.05 billion, respectively,
were offered, subscribed and allotted. The bid-cover ratio was 1.8 for all
the tenors. For all maturities, the stop rate stood at 2.2 per cent.
FGN Bonds of 5-, 15- and 30-year maturities were offered for sale in the
review quarter. Terms to maturity of the bonds were 5 years 4 months to
29 years 28 months. Total amount offered, subscribed and allotted, were
N425 billion, N1,072.58 billion and N397.46 billion, respectively.
Allotment on non-competitive basis was N13.36 billion. The bid rate on
all tenors stood at 8.63 per cent, while the marginal rate was 7.98 per
cent.
As a result of the ample liquidity in the banking system during the
review quarter, money market rates generally trended downwards.
Short-term money market rates traded below the MPR rate of 11.5 per
cent for a major part of the period. Average inter-bank and OBB rates
were 4.7 and 7.3 per cent, respectively, in the third quarter of 2020,
indicating 1.2 percentage points and 0.1 percentage point below their
levels in the preceding quarter. Both NIBOR call and 30-day weighted
average rates declined to 8.0 per cent and 3.8 per cent, respectively, in
the review quarter.
In comparison with the preceding quarter, average interbank and OBB
rates for April, May and June were 7.3 per cent and 4.4 per cent; 5.8 per
cent and 6.1 per cent; and 5.8 per cent and 10.9 per cent, respectively,
while 30-day NIBOR traded at averages of 9.9, 6.1 and 5.9 per cent in the
same period.
Figure 23: Money Market Rates
0.00
10.00
20.00
Q2 19
Q3 19
Q4 19
Q1 2020
Q2 20
Q3 20
Per cent
Interbank Call Rates
NIBOR CALL
NIBOR - 30-Day Weighted Ave.
Open Buy Back (OBB)

Source: Central Bank of Nigeria
Interest Rate
Developments
Primary
Market

40 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

The fall in lending rates is an incentive for real sector growth. Average
prime and maximum lending rates declined by 4.1 and 2.1 percentage
points to 11.6 per cent and 28.5 per cent, respectively, in 2020Q3.
Average term-deposit rate also fell by 0.9 percentage point to 2.94 per
cent. The spread between the average term-deposit and average
maximum lending rates widened by 0.3 percentage point to 24.6
percentage points at the end of 2020Q3. With inflation rate at 13.7 per
cent in September 2020, these implied negative real rates for deposits
and prime lending rate, but positive real rates for the maximum lending
rate.
Figure 24: Lending and Deposit Rates (per cent)

Source: Central Bank of Nigeria
Capital market activities on the Nigerian Stock Exchange (NSE) were
bullish in the third quarter of 2020, as investors’ sentiments in the
market remained optimistic. The bullish run was due to the disclosure
and publication of positive half-year earnings of most quoted
companies, as well as, increased patronage of blue-chip stocks.

The All Share Index (ASI) and aggregate market capitalisation rose in the
review period. However, the COVID-19 pandemic negatively affected
the volume and value of traded securities on the Exchange. Thus,
volume and value of traded securities fell by 11.4 per cent and 18.3 per
cent to 15.20 billion shares and N148.29 billion respectively, in 228,070
deals, compared with 17.15 billion shares worth N181.52 billion, in
270,712 deals, at the end of the second quarter of 2020 (Figure 26).
There were four supplementary listings in the review period.


Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Prime
Average Term Deposit Rates
Max Lending - Average Term Deposit(rhs)
Maximum
Deposit and
Lending Rates.
Capital Market
Developments


41 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 25: Volume and Value of Traded Securities

Source: Nigerian Stock Exchange

Table 12: Supplementary Listings on the Nigerian Stock Exchange
at end- September 2020
Company
Additional
Shares (Units)
Reasons
Listing
Consolidated
Hallmark Insurance
Plc
2.03 billion
Ordinary Shares
Rights Issue
Supplementary
Listing
AIICO Insurance
PLC
4.36 billion
Ordinary Shares
Rights Issue
New Listing
Transcorp Hotels Plc
2.66 billion
Ordinary Shares
Rights Issue
Supplementary
Listing
C & I Leasing Plc
0.38 billion
Ordinary Shares
Rights Issue
Supplementary
Listing
Stanbic IBTC
Holdings Plc
0.60 billion
Ordinary Shares
New Issue
Supplementary
Listing
Source: Nigerian Stock Exchange

Increased demand for undervalued high capital stocks, and anticipated
high return on investments propelled investors’ rush, causing market
capitalisation to appreciate in the third quarter 2020. Thus, aggregate
market capitalisation rose by 11.1 per cent to N30.53 trillion at endSeptember 2020, compared with the N27.48 trillion recorded at endJune 2020. The equities’ market capitalisation also rose by 9.8 per cent
to N14.04 trillion and constituted 46.0 per cent of the aggregate market
capitalisation, compared with the N12.78 trillion (46.5 per cent of
aggregate market capitalisation) at end-June 2020.

The rebound in oil prices, price gains by some blue-chip stocks due to
low yield environment and disclosure of half-year earnings from
quoted companies, as well as continued investors’ positive sentiment
were the main drivers of ASI growth. Consequently, the ASI, which
opened at 24,479.22 at the beginning of the review quarter, rose by 14.9


Q3-18
Q4-18
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Value (N billion)
Volume (Billion)
Volume of traded securities (LHS)
Value of securities (RHS)
Market
Capitalisation
NSE All-Share
Index

42 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

per cent to 26,831.76 at end-September 2020.

All sectoral indices trended upward, with the exception of the NSE-
AseM index, which fell by 1.8 per cent to 728.51. The NSE-Banking, NSEPension, NSE-Lotus, NSE-Premium, NSE-Insurance, NSE-Consumer
Goods, NSE-Industrial and NSE-Oil and Gas indices, rose by 10.1 per cent,
10.3 per cent, 5.9 per cent, 11.5 per cent, 7.0 per cent, 11.6 per cent, 8.1
per cent and 0.7 per cent to 310.39, 1,051.48, 1,933.41, 2,370.26,
138.81, 942.96, 1,193.76 and 195.14, respectively, at end-September
2020 (Figure 27).

Figure 26: Market Capitalisation and All-Share Index

Source: Nigerian Stock Exchange


Q3-18
Q4-18
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Index
N billion
Market Capitalization (LHS)
All-Share Index (RHS)

43 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

2.4. EXTERNAL SECTOR DEVELOPMENTS
2.4.1. External Balance
The pressure witnessed in Nigeria’s external account persisted in the
review period, despite global easing of economic activities. The effect
of the COVID-19 pandemic continued to weigh down on global demand
and supply, as well as on commodity prices, particularly crude oil. Thus,
the overall balance of payments position remained in deficit. The deficit
in the current account also persisted in the third quarter of 2020, while
the financial account recorded a net acquisition of financial assets. The
external reserves level at end-September 2020 was US$35.96 billion,
relative to US$35.78 billion at end-June 2020 and could finance 8.4
months of goods only or 6.9 months of goods and services of import.
Public external debt remained at end-June level of US$31.48 billion or 8.1
per cent of GDP, which was within the sustainable threshold of 40.0 per
cent of GDP. In the Foreign exchange market, the average naira exchange
rate at the I&E and the BDC windows depreciated to N386.60/US$ and
N461.94/US$ in the third quarter of 2020, from N386.39/US$ and
N447.71/US$ in the second quarter, respectively.
2.4.2. Current & Capital Account
The reopening of economies across the world during the review period
led to resurgence of pressure in the current and capital account.
Consequently, the deficit in the current account narrowed by 7.2 per cent
to US$3.34 billion (3.2 per cent of GDP), compared with US$3.60 billion
(3.8 per cent of GDP) in the preceding quarter. The development was
attributed to decreased deficit in the services account by 29.8 per cent to
US$1.82 billion (1.8 per cent of GDP), on account of lower receipt from
all sub sectors except transportation and insurance services occasioned
by sluggish pick-up in economic activities during the quarter under
review.
Figure 27: Current Account Balance GDP Ratio (per cent)

Source: CBN

Q1 2020
Q2 2020
Q3 2020
-4.2
-3.8
-3.2
US$ Million
Current and
Capital Account
Developments
Nigeria’s
External Balance

44 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

In the third quarter of 2020, Nigeria’s export performance improved, as
global crude oil demand picked up, owing to improvement in the global
economy, particularly in China, and the positive effect of the OPEC+
production cut. Aggregate export earnings at US$8.01 billion, showed an
increase of 27.3 per cent, compared with US$6.29 billion in the second
quarter of 2020. It, however, declined by 54.7 per cent, relative to the
corresponding quarter of 2019. Further disaggregation showed that the
export value of crude oil rose by 40.6 per cent to US$7.36 billion, from
US$5.23 billion in the preceding quarter. This was mainly, attributed to
increase in the average price of Nigeria’s reference crude, the Bonny
Light, to US$43.40 per barrel in the review period, from US$27.90 per
barrel in the preceding quarter. A further disaggregation showed that gas
export also increased by 4.2 per cent to US$0.96 billion in the quarter
under review, from US$0.92 billion in the preceding quarter. Non-oil
export receipts declined further to US$0.65 billion, from US$1.06 billion
and US$3.92 billion in the second quarter of 2020 and the corresponding
of 2019, respectively, as a result of the flooding and lingering insecurity
challenges. The share of crude oil and gas export was 79.9 per cent and
12.0 per cent, respectively, while non-oil export accounted for the
balance of 8.1 per cent.

With gradual improvement in the domestic economy, Nigeria’s imports
rose, as demand for both refined petroleum products and non-oil goods
increased during the review period. The value of merchandise import
increased by 24.3 per cent to US$12.92 billion in the third quarter of
2020, from US$10.40 billion in the preceding quarter. Import of
petroleum products increased significantly to US$1.56 billion, from
US$0.63 billion in the second quarter of 2020. It, however, declined by
45.9 per cent, compared with US$2.89 billion in the third quarter of 2019.
Non-oil import also increased by 16.3 per cent to US$11.36 billion in the
review period, from US$9.77 billion in the preceding quarter. Non-oil
imports remained dominant, accounting for 87.9 per cent of the total
import, while petroleum products accounted for the balance of 12.11 per
cent.
A breakdown of non-oil import by sector revealed that importation of raw
materials and machinery for industrial use accounted for the highest
share of 45.4 per cent, followed by manufactured products, which
constituted 23.7 per cent. Importation of food and petroleum products
accounted for 14.3 per cent and 11.2 per cent, respectively, while import
of transport, agricultural and mineral sectors accounted for 2.8 per cent,
1.6 per cent and 1.0 per cent, respectively.
Merchandise
Import
Export
Performance

45 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

The slow pace of global economic recovery continued to weigh on the
activities in the services sub-sector in the review period. Consequently,
the deficit in services sub-account narrowed to US$1.82 billion in the
third quarter of 2020, from US$2.56 billion in the preceding quarter,
indicating a decrease of 29.8 per cent in the third quarter of 2020 relative
to the preceding quarter. This was as a result of a significant decline in
other business, particularly, technical services. Payments for travel and
other business constituted 53.2 per cent of the total in the review period.
Higher payments of dividends and interest to non-resident investors
resulted in a widened deficit in the primary income sub-account. The
deficit in the primary income sub-account widened by 19.5 per cent to
US$ 0.97 billion in the third quarter of 2020, from US$0.81 billion in the
second quarter of 2020, showing an increase of US$0.16 billion. The
development reflected higher payment of dividends by 24.4 per cent to
US$1.23 billion. In addition, payments of interest to foreign portfolio
investors increased by 26.5 per cent to US$0.16 billion in the third quarter
of 2020.
The surplus of the secondary income sub-account, mainly driven by the
inflow of personal transfers, including workers’ remittances, increased
in the review period. The secondary income account recorded a higher
surplus of US$4.35 billion, compared with US$3.90 billion in the second
quarter. Inflow of personal transfers in the form of workers’ remittances
increased significantly by 14.8 per cent to US$3.87 billion, relative to
US$3.37 billion in the second quarter of 2020. This reflected improved
economic conditions world over. However, general government receipts
declined by 1.0 per cent to US$0.63 billion in the review period,
compared with US$0.64 billion in the preceding quarter.
2.4.3. Financial Account
The financial account recorded a net disposal of financial assets during
the review period, largely, driven by reduction in the foreign currency
holdings of the private sector. A lower disposal of US$2.66 billion (2.5
per cent of GDP) was recorded, compared with US$6.36 billion (6.7 per
cent of GDP) in the second quarter of 2020 and US$6.40 billion (5.1 per
cent of GDP) in the corresponding quarter of 2019.
Due to loan repayments by banks and the private sector, as well as
drawdown on foreign currency placements in deposit taking
corporations, the country recorded a reduction in financial liabilities
during the review period. Net liability incurred during the review period
declined significantly to US$0.33 billion, relative to US$4.79 billion in the
second quarter.
Financial Account
Developments
Primary Income
Net Incurrence of
Liability
Secondary Income

46 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

A breakdown showed that inflow of FDI declined to US$0.78 billion in the
third quarter of 2020, relative to US$0.90 billion in the previous quarter,
largely driven by decline in the inflow of equity and other capital,
indicating the lingering uncertainty of the Covid-19 pandemic. Inflow of
FPI, on the other hand, increased significantly by 156.9 per cent to
US$1.74 billion, from US$0.68 billion in the second quarter of 2020, as a
result of the higher purchase of short-term money market instruments to
US$1.94 billion, from US$0.0.41 billion in the previous quarter, reflecting
renewed foreign investors’ confidence in the economy.
Other investment liabilities recorded an outflow of US$2.19 billion, due,
mainly, to the repayment of loans by banks and the private sector, as well
as drawdown on foreign currency in deposit taking corporations by nonresidents. Drawdown in currency and deposits amounted to US$0.23
billion, as against a placement of US$0.01 billion in the previous quarter.
In addition, repayment of loans by the private sector increased
significantly to US$0.97 billion, relative to US$0.55 billion in the
preceding quarter. Similarly, repayment of loans by banks increased to
US$0.90 in the review period, from US$0.78 billion in the second quarter
of 2020.
Aggregate financial assets recorded a reduction of US$2.23 billion
during the review period, compared with US$1.56 billion in the
preceding quarter. A disaggregation showed that a marginal accretion of
US$0.14 billion in external reserves asset was recorded in the review
period, compared with US$2.08 billion in the second quarter of 2020. FDI
in foreign entities decreased by 16.4 per cent to US$0.31 billion, relative
to the level in the second quarter of 2020. In contrast, portfolio
investment asset increased to US$0.07 billion in the review period,
compared with US$0.02 billion in the preceding quarter. Other
investments registered a disposal of US$2.86 billion in the review
quarter, lower than the US$4.03 billion in the second quarter of 2020,
due, largely, to the drawdown of foreign currency holdings of the private
sector in the review period.

2.4.4. External Debt
Nigeria’s public sector external debt stock remained at end-June 2020
level of US$31.48 billion (8.1 per cent of GDP). A breakdown showed that
the loans from multilateral sources, mainly the World Bank, IMF and
African Development Bank Groups, was US$16.36 billion, constituting
52.0 per cent of the total. Loans from commercial sources in the form of
Euro and Diaspora Bonds was US$11.17 billion (35.5 per cent), while that
Net Acquisition of
Asset
Public Sector
External Debt

47 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

from bilateral sources, mainly the China EXIM Bank accounted for the
remaining US$3.95 billion (12.5 per cent).

2.4.5. International Investment Position (IIP)
Nigeria’s International Investment Position (IIP) posted a higher net
financial liability of US$74.83 billion in the review period, compared
with US$71.46 billion in the preceding period and US$50.02 billion in the
corresponding period of 2019. The country’s stock of financial assets
declined marginally by 2.3 per cent to US$99.90 billion at end-September
2020, from US$102.23 billion at end-June 2020. This movement was
mainly due, to the reduction in stock of portfolio and other investments
during the review period. This signaled a reduction in claims on the rest
of the world, and a re-direction of domestic investor’s finances. The stock
of financial liabilities representing claims of foreign investors on the
domestic economy increased by 0.6 per cent to US$174.73 billion at endSeptember 2020, compared with US$173.69 billion at end-June 2020. The
development reflected an increase in the stock of money market
instrument held by foreign investors. This increased the stock of portfolio
investment liabilities to US$28.66 billion, from US$26.68 billion at endJune 2020. Stock of FDI liabilities showed an increase of 0.8 per cent, to
US$100.56 billion, compared with US$99.79 billion at end-June, 2020.

2.4.6. External Sector Risks
The global economic uncertainty might reduce the expected capital flows
to the domestic economy. Investors may prefer to channel their
resources to developed economies with a more robust financial system.
The expected reduction in capital flows could increase pressure in the
foreign exchange market and undermine exchange rate stability.
With declining oil prices and dwindling fiscal revenues, public debt has
been on the increase. This poses a risk to the economy, as external debt
and servicing burden might rise to unsustainable levels.
2.4.7. International Reserves.
During the quarter under review, the bank resumed intervention in the
I&E and the BDC windows. Consequently, Nigeria’s international
reserves increased to US$35.96 billion as at end-September 2020 from
US$35.78 billion at end-June 2020, driven by foreign exchange swap
transactions. The external reserves position would cover 6.9 months of
import of goods and services and 8.4 months of import of goods only. A
comparative analysis of reserves per capita in September 2020 showed
that Nigeria’s reserves per capita was US$174.4, compared with
International
Reserves
International
Investment
Position

Rising External
Debt

48 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

US$330.9, US$403.5 and US$789.4 for Egypt, Angola and South Africa,
respectively, in the review period.
Figure 28: External Reserves and Months of Import Cover for Nigeria

Source: CBN & Reuters
Table 13: International Reserves of Selected Countries in Africa
Source: CBN & Reuters
A breakdown of the external reserves by ownership shows that, the CBN
had the largest share of US$30.94 billion (86.0 per cent), followed by the
Federal Government with US$4.95 billion (13.8 per cent). The Federation
share accounted for the balance of US$0.07 billion (0.2 per cent). In terms
of currency composition, the US dollar at US$29.34 billion, accounted for
81.6 per cent; Chinese yuan, US$4.14 billion (11.5 per cent); special
drawing rights, US$2.11 billion (5.9 per cent); GB pounds, US$0.23 billion
(0.6 per cent); Euro US$0.14 billion (0.4 per cent); Japanese Yen, US$0.01
billion (0.03 per cent) and other currencies made up the balance.

Foreign Exchange Flow through the Economy
Net foreign exchange flows through the economy marginally increased.
The improvement in net flows was due, mainly, to a reduction in
outflows through the CBN and through autonomous sources. At
US$21.46 billion, aggregate foreign exchange inflow to the economy
declined by 2.2 per cent and 30.4 per cent below US$21.95 billion and
US$30.83 billion in the preceding quarter and corresponding quarter of


Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
US$ Billion
External Reserves - LHS
Months of Import (Goods only)
Months of Import (Goods and Services)
Country
Q3

Q2

Q3

Reserve
(US$
bn)
Reserve/
Capita
(US$)
Reserve
(US$
bn)
Reserve/Capita
(US$)
Reserve
(US$ bn)
Reserve/Capita
(US$)
Nigeria

South
Africa

Angola

Egypt

Currency
Composition
Foreign Exchange
Flows through the
Economy

49 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

2019, respectively. The development relative to the preceding quarter
was influenced largely by the 30.7 per cent fall in inflow through the CBN.
Compared with the respective levels in the preceding and corresponding
quarter of 2019, foreign exchange outflow also fell by 14.42 per cent and
57.3 per cent to US$7.70 billion in the review period. The development
was attributed to the decline in outflow through the Bank and
autonomous sources for most of the period in the review quarter. The lull
in economic activity led to lower demand for foreign exchange.

However, the overall foreign exchange flow through the economy
resulted in a net inflow of US$14.05 billion, indicating increases of 5.7 per
cent and 4.1 per cent over the net inflow of US$13.29 billion in the
preceding quarter and US$13.50 billion in the corresponding quarter of
2019, respectively. The development was attributed to the gradual easing
of the partial lockdown and improvement in economic activities in the
third quarter of 2020.

Foreign Exchange Flow through the Central Bank of Nigeria
Foreign exchange inflow through the CBN decreased in the third quarter
of 2020, largely due to a reduction in non-oil inflow. During the review
period, aggregate foreign exchange inflow through the CBN stood at
US$6.97 billion, a decrease of 30.7 per cent and 43.6 per cent below the
levels in the second quarter of 2020 and the corresponding quarter of
2019, respectively. The development was attributed to a decline in both
oil and non-oil receipts by 9.7 per cent and 44.7 per cent, respectively,
below the levels in the preceding quarter and corresponding quarter of
2019. The decrease in non-oil receipts followed reversion to normal trend
after the one-off IMF facility in the previous quarter, while that of oil
receipts was as a result of the weak global demand for crude oil, owing
to fragile global economic recovery.

Disaggregation of inflow through the Bank indicated that oil and non-oil
receipts were US$2.35 billion and US$4.62 billion, respectively. Further
analysis of non-oil receipts showed that interbank swaps, other official
receipts, and TSA & third-party receipts increased by 255.6 per cent, 40.4
per cent and 6.8 per cent to US$1.60 billion, US$0.99 billion and US$0.95
billion over their respective levels in the second quarter of 2020.
However, foreign exchange purchases, DMB cash receipts and unutilised
IMTO funds, declined by 14.9 per cent, 68.1 per cent and 11.5 per cent to
US$0.56 billion, US$0.10 billion and US$0.24 billion, below the levels in
the preceding quarter, respectively. Unutilised funds from FX
Foreign Exchange
Flow through the
CBN

50 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

transactions, returned payments and interest on reserves & investments
fell to US$0.09 billion, US$0.02 billion and US$0.06 billion, respectively,
below the levels in the preceding quarter.

Aggregate foreign exchange outflow through the CBN declined by 12.6
per cent, from US$7.95 billion in the second quarter of 2020 to US$6.95
billion in the third quarter of 2020. The decline was due to the lull in
economic activities arising from the COVID-19 lockdown and subsequent
reduction in foreign exchange needs by the private and public sectors. A
breakdown of the outflow through the Bank during the review period
showed that: interbank utilisation was US$4.37 billion; public
sector/direct payments (US$0.78 billion); third party MDA transfers
(US$0.90 billion); external debt service (US$0.51 billion); forex special
payment (US$0.05 billion); national priority projects (US$0.002 billion);
and Bank & SDR charges/Fees (US$0.0001 billion). Other sources of
outflow through the Bank included drawings on L/Cs and funds returned
to remitter amounting to US$0.33 billion and US$0.006 billion,
respectively, in the review period.
The interbank utilisation, which constituted 62.8 per cent of outflow
through the CBN fell by 2.3 per cent to US$4.37 billion in third quarter
2020, compared with US$4.47 billion in the preceding quarter. The
development was attributed, largely, to the reduction of wholesale
forward intervention. Further disaggregation showed that matured swap
transactions and SMIS intervention rose by 50.8 per cent and 0.7 per cent
to US$1.24 billion and US$1.96 billion, respectively, from the levels in the
preceding quarter. Foreign exchange cash sales to BDCs was US$0.34
billion in the review period. However, relative to the respective levels in
the preceding quarter, interbank sales, interventions at the I & E window
and SME fell by 22.3 per cent, 18.7 per cent and 3.5 per cent to US$0.15
billion, US$0.39 billion and US$0.30 billion, respectively. The decrease
was necessitated by the need to conserve external reserves against
dwindling foreign exchange earnings.
Overall, foreign exchange flow through the Bank during the review period
resulted in a net inflow of US$0.02 billion, compared with a net inflow of
US$2.10 billion and net outflow of US$3.84 billion in the preceding
quarter and corresponding period of 2019, respectively.

51 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 29: Foreign Exchange Transactions through the Bank (US$
Billion) for Third Quarter 2020
Source: Reserves Management Department
Foreign Exchange Flow through Autonomous Sources
Financial interventions in the real sector seem to be yielding results as
non-oil receipts increased considerably in the third quarter of 2020,
hence an improvement in foreign exchange flows through autonomous
sources. Overall, foreign exchange flows through autonomous sources
resulted in a net inflow of US$14.03 billion, an increase of 25.4 per cent,
but a decrease of 19.1 per cent compared with the net inflow of US$11.19
billion and US$17.35 billion in the preceding quarter and the
corresponding quarter of 2019, respectively.
Aggregate Inflow through autonomous sources amounted to US$14.49
billion, indicating an increase of 21.8 per cent over the level in the
preceding quarter, but a decrease of 21.6 per cent below the level in the
corresponding period of 2019. The flow through autonomous sources
accounted for 67.5 per cent of the total foreign exchange flow into the
economy. The development was due to 19.7 per cent rise in proceeds
from invisible purchases to US$13.60 billion relative to the preceding
quarter. Invisible purchases comprised ordinary domiciliary accounts and
total OTC purchases valued at US$3.78 billion and US$9.83 billion,
respectively. Total OTC purchases comprised capital importation
(US$1.46 billion) and home remittances (US$0.25 billion), which
increased by 11.9 per cent over the level in the preceding quarter, but
decreased by 31.9 per cent below the level in the corresponding quarter
of 2019. The higher level of capital importation reflected the growing
investment appetite by non-resident investors even as COVID-19
Pandemic worsened in many parts of the world. The decline in home
remittances could be attributed to a fall in wages and loss of jobs by some
migrant workers who tend to be more vulnerable to loss of employment
and wages during economic crises in a host country. Other OTC purchases
Q3 2019
Q2 2020
Q3 2020
Inflow
12,359.43
10,052.57
6,971.01
Outflow
16,203.64
7,952.42
6,954.18
Netflow

Inflow
Outflow
Netflow
Invisible
Transactions

52 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

(US$8.11 billion) increased by 31 per cent. Inflow through ordinary
domiciliary account, rose by 8.2 per cent to US$3.78 billion, due to higher
repatriation of export and investment proceeds. Non-oil export inflow to
banks amounted to US$0.87 billion, rising by 110.3 per cent compared
with US$0.41 billion in the preceding quarter. This development was due
to interventions in the real sector to boost non-oil earnings to cushion
the negative impact of COVID-19 on the price of oil. Similarly, external
account purchases at US$0.009 billion, increased by 60.8 per cent, from
US$0.006 billion in the second quarter of 2020.
Outflow through autonomous sources at US$0.45 billion declined by 35.6
per cent and 59.8 per cent relative to the levels in the preceding quarter
and the corresponding period of 2019, respectively. This was due to a fall
in invisible and visible imports to US$0.35 billion and US$0.09 billion from
US$0.47 billion and US$0.23billion in the preceding quarter, respectively.
The development was traced to the continued lockdowns, which
lessened economic activities.

Sectoral Utilisation of Foreign Exchange
The COVID-19 induced supply and demand disruptions in global
economic activities, which led to a decline in the foreign exchange
utilisation across major sectors in previous quarters, stretched to the
third quarter. Sectoral foreign exchange utilisation in the third quarter of
2020 showed an increase of 13.3 per cent to US$3.83 billion, above the
level in the preceding quarter. Of this, visible imports fell by 5.8 per cent
to US$2.22 billion while invisible imports rose by 57.6 per cent to US$1.60
billion, constituting 58.7 per cent and 49.1 per cent of the total foreign
exchange utilisation, respectively.

A disaggregation of foreign exchange utilisation for visible transactions
showed that the amount utilised for industrial, manufactured products,
food products, oil, transport, agriculture and mineral sub-sectors
amounted to US$2.22 billion, US$0.51 billion, US$0.32 billion, US$0.23
billion, US$0.06 billion, US$0.02 billion and US$0.04 billion, respectively.
On the other hand, a disaggregation of the foreign exchange utilisation
under the invisible component showed that financial service was US$1.31
billion (4.8 per cent); educational service, US$0.09 billion (2.4 per cent);
transport service, US$0.01 billion (0.3 per cent); and other service was
US$0.02 billion (0.4 per cent). Furthermore, communication service was
US$9.61 million; construction and related engineering service, US$0.12
Sectoral
Utilisation of
Foreign Exchange
Visible
Transactions

53 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

million; and, health related and social service, US$0.61 million,
respectively.

Foreign Exchange Market Developments
The Bank sustained interventions in the foreign exchange market and
resumed foreign exchange cash sales to the BDC operators, to boost
liquidity and ease demand pressure. The exchange rate of the naira visà-vis the dollar was further adjusted during the review period from
N361 /US$ to N381/US$. The Bank also introduced measures to curb
abuses and ensure prudent use of foreign exchange. The Bank directed
all authorised dealers to desist from opening Forms M with payments
routed through third parties. This policy was aimed at eliminating
occurrences of over invoicing, transfer pricing, double handling charges
and avoidable costs, which are ultimately passed on to Nigerian
consumers. In addition, Deposit Money Banks were directed to block
domiciliary accounts of some companies involved in foreign exchange
abuses, for investigation.
Transactions in the Foreign Exchange Market
The Bank through its periodic interventions in the foreign exchange
market continued to boost the supply side of the market, as COVID-19
crisis weakened the private sector supply chain segment of the market.
During the third quarter of 2020, total foreign exchange sales to
authorised dealers by the Bank amounted to US$4.37 billion, a decline of
2.3 per cent from the level in the preceding quarter. This was attributed
largely to the decrease in wholesale forward intervention and interbank
sales. The total foreign exchange sales represented a decrease of 56.4 per
cent, compared with the corresponding quarter of 2019. Further
disaggregation showed that matured swap transactions and SMIS
intervention rose by 50.8 per cent and 0.7 per cent to US$1.24 billion and
US$1.96 billion, from the levels in the preceding quarter. However,
interbank sales, interventions at the I&E window and SME fell by 22.3 per
cent, 18.7 per cen and 3.5 per cent to US$0.15 billion, US$0.39 billion and
US$0.30 billion relative to their levels in the preceding quarter. Foreign
exchange cash sales to BDCs was US$0.33 billion in the review period.
Foreign Exchange
Market
Developments

54 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 30: Foreign Exchange Sale to Authorised Dealers in Third
Quarter 2020 (US$ billion)
Source: Trade and Exchange Department

Exchange Rate Movement
The foreign exchange market experienced increased demand pressure
attributed to gradual recovery of economic activities and lower foreign
exchange inflow. As a result, the naira depreciated in all the segments
of the foreign exchange market. In the quarter under review, the CBN
further adjusted the interbank exchange rate from N361/US$1 to
N381/US$1 in July 2020, to bring about convergence across all segments
of the market. Consequently, the average exchange rate of the naira
against the US dollar, at the interbank segment was N379.73/US$, a
depreciation of 4.9 per cent and 19.2 per cent, relative to N361.00/US$
and N306.93/US$ in the second quarter of 2020 and the third quarter of
2019, respectively. At the BDC segment, the average exchange rate
depreciated by 5.8 per cent and 22.7 per cent to ₦464.33/US$, in contrast
to the levels in the preceding quarter and corresponding quarter of 2019.
Similarly, at the I&E window, the average exchange rate depreciated by
0.2 per cent and 6.3 per cent to ₦386.47/US$, compared with the levels
in the second quarter of 2020 and the corresponding quarter of 2019.
This development was attributed to the increased demand pressure in
the foreign exchange market as a result of liquidity shortages, induced by
decline in crude oil receipts and capital inflows. The premium between
the average interbank/BDC rates, widened from 21.1 per cent in the
preceding quarter to 22.3 per cent in the third quarter of 2020.

The average turnover at the Investors and Exporters’ Foreign Exchange
(IEFX) market increased by 30.2 per cent to $0.06 billion, from $0.04
billion in the second quarter of 2020. This also indicated a decrease of
76.3 per cent below the level in the corresponding period of 2019.


US$ Billion
Average
Exchange Rate

55 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Figure 31: Turnover in the I&E Foreign Exchange Market
(Sept. 2019 – Sept. 2020)

Source: Central Bank of Nigeria
The end-period exchange rate of the naira to the US dollar at the
interbank segment depreciated by 5.3 per cent to ₦381.00/US$ from
₦361.00/US$ in the second quarter of 2020. Similarly, at the BDC
segment, the end-period exchange rate depreciated by 1.9 per cent to
₦464.00/US$ compared with ₦455.00/US$ at the end of the second
quarter. The end-period premium between the interbank/BDC rates,
narrowed to 21.8 per cent, from 26.0 per cent in the second quarter. This
was due to resumption of supply of foreign exchange by the Bank to BDCs
during the review period. The rate at the I & E window appreciated by 0.1
per cent to ₦386.00 /US$ compared with ₦386.50/US$ at the end of
second quarter of 2020. The development was as a result of increased
intervention by the Bank at the I&E window.
Analysis of the average exchange rate of the naira against selected major
international currencies in the review period indicated that the naira
depreciated by 8.8 per cent, 10.6 per cent and 6.1 per cent against the
British pounds, the Euro and the Japanese yen, respectively, compared
with the levels in the preceding quarter. This could be attributed to
market perception about the country’s ability to shore up the foreign
exchange market and boost domestic economic activity after a drastic fall
in oil revenues. Also, given that emerging economies have poor
infrastructure relative to advanced countries to withstand the impact of
the COVID-19 pandemic, investors engaged in flight to safety by moving
to more advanced economies, as reflected in the currency movement. At
the regional level, the naira, also depreciated against the CFA franc and
WAUA by 19.4 per cent and 14.8 per cent, respectively, relative to the
values in the second quarter of 2020.


PERCENT
US $ (M)
Average Turnover
Rate of Turnover
End- Period
Exchange Rate
Naira against
Selected
International
Currencies

56 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

Following the gradual re-opening of the global economy in the quarter
under review, some emerging market currencies bounced back against
the greenback. Consequently, the South African rand recovered from
14.3 per cent depreciation in the second quarter of 2020 to 6.3 per cent
appreciation against the dollar in the third quarter of 2020. Similarly, the
Chinese RMB appreciated by 3.1 per cent as the economic data released
in September 2020 gave hope for a steady recovery in China. However,
the average exchange value of the naira at the interbank segment of the
foreign exchange market depreciated by 4.9 per cent, from N361.00/US$
in the second quarter to N379.73/US$ in the third quarter of 2020.
Likewise, the Russian rouble depreciated by 3.7 per cent in the review
period.
Figure 32: EMEs Currencies’ Values to the US dollar
Source: CBN & Reuters
Table 14: EMEs Currencies’ Rates to the US dollar
Source: CBN & Reuters
2.4.8. External Sector Risks
The external sector was yet to recover from the lingering effects of the
COVID-19 pandemic. The impact of unsteady crude oil prices, global
demand, global financial market instability, reverse capital flows,
remittances and external debt accumulation, continued to weigh heavily
on the performance of the external sector.

Q2 2019
Q3 2019
Q2 2020
Q3 2020
Depreciaiton/Apprecia
tion
Chinese RMB
Nigerian Naira
South African Rand
Russian Rouble
Period
Chinese
RMB
Nigerian
Naira
South
African
Rand
Russian
Rouble
2019 Q3

2020 Q2

2020 Q3

Risks to the
External Sector
Emerging Market
Currencies

57 | P a g e Central Bank of Nigeria Economic Report Third Quarter 2020
ECONOMIC REPORT, THIRD QUARTER 2020

COVID-19 cases have spiked in several countries leading to a second
round of lockdown. This has created anxiety that the pandemic may last
longer than envisaged, causing more damage to economies by
contracting GDP, increasing public debt and decreasing aggregate
demand.
The Energy Information Administration (EIA) expects inventory draws in
the fourth quarter of 2020 of 3.1 million b/d before markets become
relatively balanced in 2021, with forecast draws of 0.3 million b/d.
Despite expected inventory draws in the coming months, EIA expects
high inventory levels and surplus crude oil production capacity to limit oil
price increases.
The lull in global trade in the medium-term has economic implications for
investment and productivity growth, especially in developing countries
relying on trade-led growth strategies. This development accounted for
the dearth of foreign capital inflow witnessed in most developing
economies and emerging markets. This consequently resulted in
exchange rate pressure.
According to a World Bank reporting, global trade growth could be even
more negative in 2020 than initially predicted. It is expected that weak
economic and financial fundamentals prior to the COVID-19 crisis would
lead to declines in foreign exchange reserves as central banks try to
stabilise their currencies. Thus, the conditions in the oil market,
exchange rate pressure, Bank’s intervention in the foreign exchange
market as well as the state of international financial markets and
productivity of the economy, would continue to determine the level of
external reserves.
The general insecurity, occasioned by insurgency, banditry and
kidnapping have remained a big challenge in the country, as it continues
to affect the productive sectors, especially, the agricultural sector,
making it unattractive to both foreign and local investors.
Exchange Rate
Pressure
Insecurity
Low Oil Prices
External Reserves
Accumulation
COVID- 19
Crisis