This document is for CBN internal consumption

CENTRAL BANK OF NIGERIA
ECONOMIC REPORT


Second Quarter

i

This document is for CBN internal consumption
ABOUT THE REPORT

The Central Bank of Nigeria (CBN) Economic Report presents economic
developments in Nigeria, for dissemination to the public. The Report, which
is published on a monthly and quarterly basis, provides insights on current
developments in the real; fiscal; monetary & financial; and external sectors
of the Nigerian economy, as well as, on global issues that impact the
domestic economy. In addition, it reflects the policy initiatives of the CBN
in pursuit of its mandate.

The Report is targeted at a wide range of readers, including economists,
policymakers, financial analysts in the government and private sectors,
and the public. Free download of the Report, including current and past
issues is available at the CBN website: www.cbn.gov.ng. All inquiries
concerning the Report should be directed to the Director, Research
Department, Central Bank of Nigeria, P.M.B. 187, Garki, Abuja, Nigeria.


This document is for CBN internal consumption
Contents


iii

This document is for CBN internal consumption
Tables


Table 2: Currencies of Selected Emerging Markets Economies (EMEs) to the US
Table 3: Indices of Average World Prices of Nigeria's Major Agricultural Export

Figures
Figure 1: Composite Purchasing Manufacturing Indices (PMIs) in Selected
Figure 2: Selected Emerging Markets and Developing Economies’ Composite
Figure 12: Top 13 Subsectors with the Largest Contribution (Percentage point) to
Figure 13: Subsectors with the Least Contributions (Percentage point) to GDP
Figure 20: Consumer Credit Outstanding (₦Billion) and Share of sectoral


iv

This document is for CBN internal consumption
Figure 28: Volume and Value of Traded Securities on the Nigerian Exchange


1 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
EXECUTIVE SUMMARY
The rebound in global economic activities was sustained in Q22023, driven by
the services sector and improvement in global supply chains. This development
was reflected in the average J.P. Morgan’s Global Composite Purchasing
Manager’s Index (PMI), which expanded to 53.77 index points from 51.73
index points in Q12023. Consumer prices across most economies moderated
on account of the tight monetary policy stance, declining energy prices, and
base period effects. The performance of the stock and bond markets was
mixed, as investors move from higher- to lower- risk assets.
The domestic economy sustained the growth momentum, propelled by
activities in the non-oil sector. Real GDP grew by 2.51 per cent (year-on-year),
compared with 2.31 per cent in Q12023, reflecting broad based improvement
in economic activities, particularly in the services and agriculture sub-sectors.
The non-oil sector grew by 3.58 per cent and contributed 3.36 percentage
points to overall GDP growth. The oil sector however, dragged growth and
contracted by 13.43 per cent, with a negative contribution of 0.85 percentage
point. The contraction in the oil GDP was due to legacy challenges confronting
the oil sector. Inflation remained elevated, driven largely by recent marketbased reforms such as the fuel subsidy removal and the introduction of
market-determined exchange rate, which impacted negatively on production,
transportation, and logistics cost. In addition, expectations of further rise in
prices contributed to inflationary pressures. Thus, headline inflation (year-onyear) rose to 22.79 per cent in Q22023 from 22.04 per cent in Q12023 as core
and food inflation rose to 20.27 and 25.25 per cent, from 19.86 and
24. 45 per cent, respectively.
Fiscal, federally collected revenue declined by 8.4 and 39.7 per cent relative to
the level in the preceding quarter and the budget benchmark, respectively.
Although, FGN retained revenue improved by 8.2 per cent compared with the
level in Q12023, it was below the quarterly target by 45.3 per cent. Provisional
FGN expenditure dipped by 26.6 per cent relative to the level in Q12023 and
fell short of the target by 23.5 per cent. Consequently, overall deficit
contracted by 37.9 per cent relative to the preceding quarter. At
₦49,853.69 billion (25.0 per cent of GDP), total public debt, at end-March
2023, remained within the 40.0 per cent domestic threshold.
The financial system was resilient on the back of sustained hawkish policy
stance, consistent supervision, and the implementation of prudential
guidelines. Broad money supply (M3) grew by 24.4 per cent at end-June 2023,
owing to increase in both net foreign and domestic assets, as well as, the effect
of exchange rate reforms. The combined effect of the decline in banking

2 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
system liquidity and the hike in the monetary policy rate resulted in a mixed
trend in key short-term interest rates. The removal of fuel subsidy and the
Bank’s exchange rate reforms engendered positive sentiments and triggered
bullish activities in the capital market. Investors engaged in bargain-hunting,
leading to increased market activity.

Through lower than the preceding period, the current account maintained a
surplus position in the review period, due to significant decline in the
importation of petroleum products and higher inflow of diaspora remittances.
The financial account recorded a net incurrence of financial liabilities, driven
by increased inflow of portfolio capital. The international reserves at
US$33.71 billion could finance 6.5 months of import for goods and services or
8.9 months for goods only. The average exchange rate of the naira to US dollar
at the I&E window depreciated by 9.8 per cent to ₦511.23/US$, compared
with ₦460.93/US$ in 2023Q1. The international investment position recorded
a lower net financial liability of US$53.13billion. Public sector external debt
stock and external debt service payment at end-June 2023 stood at
US$43.16 billion and US$0.37 billion, respectively.
Global growth outlook remains blurry, on account of tight financial conditions,
geo-economic fragmentation, and macroeconomic uncertainties that
continue to trail the Russia-Ukraine War. Thus, the IMF revised global growth
projection to 2.8 per cent in 2023, from an estimated 3.4 per cent in 2022.
Despite some downside risks, Nigeria's economic growth prospects remains
positive. The optimism is contingent upon the continuation of the current trend
in crude oil prices and production, and the successful execution of the MediumTerm National Development Plan (MTNDP). Additionally, the pro-market
policy reforms of the government such as the removal of fuel subsidy, and the
expansion of credit by development finance institutions to growth-enhancing
sectors, are expected to spur growth in the medium term. The headwind to the
growth outlook includes a potential contraction in global demand, ongoing
security issues, and critical infrastructure deficit.


3 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

1.0 GLOBAL ECONOMIC DEVELOPMENTS
Global economic activity rebounded in Q22023, propelled by the easing of
supply-chain and inflationary pressure, and the reopening of Chinese
economy, resulting in marked expansion in services and employment levels
across regions. Also, inflationary pressure moderated in most economies on
the back of easing food and energy costs, as well as, the crystallisation of tight
monetary policy stance. The cooling off of inflation and receding fears of a
possible recession in the Advanced Economies (AEs) led to improvement across
financial market segments, with the strong performance of technology and
energy sectors outweighing the slump in the US banking sector. Crude oil
prices fell, due to increased crude oil supply and investors’ pessimism owing to
uncertainties in the US banking sector.
1.1 Global Economic Activity
The rebound in global economic activities was sustained in the second quarter
of 2023, driven by the services sector, and improvement in global supply chains.
The average global composite Purchasing Managers’ Index (PMI) rose to 53.77
index points from 51.73 index points in Q12023. This growth was fuelled by
the rising consumer demand that sustained the services sector on a growth
trajectory, as inflationary pressures eased further during the quarter.
Specifically, the input prices index declined to 57.40 index points from 59.80
index points, with a concomitant reduction of the output prices index to 54.27
index points from 55.07 index points in Q12023.
The services sector outperformed the manufacturing sector with a notable
expansion as the PMI increased to 54.97 index points, above
52.33 index points in the preceding quarter. All categories of activity covered
namely, business, consumer, and financial services, experienced a broadbased expansion. Also, employment levels in the services sector rose to
52.77 index points from 51.57 index points in the preceding quarter,
indicating improved employment opportunities in the labour market. These
positive economic indicators led to increased optimism for future business
activity. This was reflected in the rise in the future activity index to
65.27 index points in Q22023 from 65.00 index points in the preceding
quarter.
The manufacturing sector, on the other hand, remained below the
benchmark, with the average manufacturing PMI at 49.53 index points.

Summary
Global Economic
Conditions

4 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Table 1: Global Purchasing Managers' Index (PMI)

Q22022
Q12023
Q22023
Composite
52.00
51.73
53.77
Employment Level
53.27
51.30
52.07
New Business Orders
51.90
51.23
53.10
New Export Business Orders
48.93
48.37
48.80
Future Output
63.03
64.33
64.17
Input Prices
70.70
59.80
57.40
Output Prices
61.50
55.07
54.27


Manufacturing
51.87
49.53
49.53
Services (Business Activity)
52.67
52.33
54.97
New Business
52.40
52.13
54.67
New Export Business
50.20
50.20
52.77
Future Activity
63.90
65.00
65.27
Employment
53.90
51.57
52.77
Outstanding Business
52.37
50.33
50.57
Input Prices
70.93
61.40
60.07
Prices Charged
61.33
55.37
55.73
Source: J.P Morgan.


The improvement in global supply-chains and moderation in inflation supported
economic activities in the Advanced Economies. Most AEs recorded upticks in
their output levels in Q22023. For instance, the US PMI rose to 53.63 index
points from 49.73 index points in the preceding quarter. This reflected
improvement in both services and manufacturing activities, as well as,
improved business optimism. Economic activities in Europe was strong during
the quarter, supported by increased consumer demand, job expansion and
waning input prices. Also, PMI levels rose to 54.70 index points, 53.90 index
points, 53.27 index points, and 52.90 index points in Spain, UK, Italy, and
Germany, respectively. In Japan, PMI rose to 52.43 index points in Q22023,
driven majorly by the services sector as the recovery from the COVID-19
pandemic disruptions gained more momentum. In France, a slower expansion
in output was recorded as the PMI which stood at 50.33 index points from
51.60 index points in the preceding quarter, could be attributed to the series
of protests and strikes witnessed during the quarter.
In Canada, economic activities contracted on account of high interest rates
and an uncertain economic outlook which induced a reduction in consumer
demand. Consequently, the PMI declined to 49.33 index points in Q22023
compared with 50.67 index points in the preceding quarter.


Economic activity in
Advanced
Economies

5 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 1: Composite Purchasing Manufacturing Indices (PMIs) in Selected
Advanced Economies

Source: Trading Economics/Various countries’ websites.

Economic activity in most Emerging Markets and Developing Economies
(EMDEs) remained resilient. Specifically, in
India,
PMI
rose
to
60.87 index points in Q22023 from 58.30 index points in the preceding quarter
underpinned by robust domestic and foreign demand, which spurred growth
in both services and manufacturing sectors. In China, falling exports, weak
retail sales and drawbacks in the property sector weighed on growth, resulting
in a softer expansion, as the PMI stood at 53.2 index points from 55.43 index
points in the previous quarter. In Indonesia, improved factory activities,
bolstered
domestic
demand,
albeit
weakening
foreign
demand.
Consequently, PMI rose to 51.83 index points from 51.47 index points in the
preceding quarter. Similarly, Russia and Turkey witnessed expansions in their
economic activities with PMI of 55.10 index points and 51.50 index points,
respectively. The developments in Russia were driven by sharper uptick in
services output, while sustained improvements in domestic demand and a
rebound in economic activity, following the earthquake in February 2023 and
the election period, contributed to the expansion in Turkey during the
quarter.
In Brazil, economic expansion was driven primarily by the services sector, as
PMI inched up to 51.87 index points from 50.10 index points in the preceding
quarter. In Mexico, PMI rose moderately to 50.83 index points from
50.30 index points in the previous quarter, buoyed by an improvement in
underlying demand for natural gas pipeline and liquefaction projects.
Conversely, business activity contracted in South Africa, owing to idiosyncratic
shocks such as, power cuts, supply shortages, and price pressures. Thus, PMI


UNITED
STATES
UNITED
KINGDOM
GERMANY
ITALY
JAPAN
CANADA
SPAIN
FRANCE
Q22022
Q12023
Q22023
50-point Benchmark
Economic activity in
EMDEs

6 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
fell to index 48.73 index points from 49.63 index points in the preceding
quarter.

Figure 2: Selected Emerging Markets and Developing Economies’
Composite Purchasing Manufacturing Indices (PMIs)
Source: Trading Economics/Various countries’ websites.

1.2 Global Inflation
Consumer prices across most AEs moderated, in response to the tight monetary
policy stance, declining energy prices and base effects. The effect of monetary
tightening by most countries, which started manifesting in the first quarter of
2023, became more pronounced in the second quarter. Lower crude oil
prices, reduced consumer demand, reduction in global supply chain
disruptions, and the rate hikes cushioned inflationary pressures in most AEs.
Specifically, in the US, average inflation declined to 3.97 per cent from 5.81
per cent in the preceding quarter, due to the decline in energy prices, and the
base year effect. In Canada, average headline inflation fell to 3.53 per cent
from 5.59 per cent in Q12023, as gasoline prices further declined, coupled
with base year effects.
In the euro area, inflationary pressures eased as average inflation fell in Spain,
France, Germany, and Italy to 3.07, 4.70, 6.57, and 7.40 per cent in Q22023,
respectively, from 5.96, 6.00, 8.24, and 9.56 per cent in Q12023, due mainly
to the slowdown in both energy and food prices, and base year effects. In the
UK, consumer prices moderated to 8.43 per cent from 9.00 per cent in
Q12023, due to a slump in energy prices. Inflationary pressures also
moderated in Japan, falling marginally to 3.30 per cent from 3.80 per cent in
the preceding quarter.


CHINA
INDIA
TURKEY
SOUTH
AFRICA
INDONESIA
MEXICO
BRAZIL
RUSSIA
Q22022
Q12023
Q22023
50-point Benchmark
Advanced
Economies

7 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 3: Headline Inflation in Selected Advanced Economies in Per cent

Source: OECD, Trading Economics.

Inflationary pressures further moderated in most EMDEs, due to the fall in
transport, and energy costs and food prices. Notably, headline inflation in China
fell to 0.10 per cent from 1.55 per cent in the preceding quarter, mainly driven
by a decline in non-food prices. In Indonesia, consumer prices moderated to
3.95 per cent from 5.24 per cent in the preceding quarter, settling at the
central bank’s target due to a major drop in food prices. Similarly, in Brazil,
headline inflation fell to 3.76 per cent from 5.34 per cent in the previous
quarter, falling below the central bank’s upper tolerance band of 4.75 per
cent. The decline was primarily driven by a sharp fall in transportation costs.
The deceleration in energy costs, food prices, and non-alcoholic beverages
reined in headline inflation in Mexico down to 5.72 per cent in Q22023 from
7.46 per cent in the preceding quarter. In India, inflation fell to 4.59 per cent
from 6.16 per cent in the preceding quarter as food prices eased.
In Turkey, inflation declined to 40.50 per cent from 54.46 per cent in Q12023,
following the implementation of unlimited free natural gas for all households
for a year. In Russia, the base year effects of the initial economic impact of
Russia’s invasion of Ukraine pushed consumer prices down to 2.67 per cent
from 8.77 per cent in Q12023. Similarly headline inflation in South Africa, fell
to 6.17 per cent in Q22023, from 7.27 per cent in the previous quarter, with
moderate increase in the prices of food and non-alcoholic beverages and
transportation costs.


United
States
United
Kingdom
Japan
Canada Germany France
Italy
Spain
Q22022
Q12023
Q22023
Emerging Markets
and Developing
Economies

8 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 4: Headline Inflation (year-on-year) in Selected EMDEs in Per cent

Source: OECD, Trading Economics and Staff Computations.

1.3
Global Financial Markets Development
Global stocks and bonds markets experienced significant fluctuations in the
second quarter, due to economic fundamentals and geopolitical tensions.
Specifically, shares gained in the quarter under review with the improvement
driven by the Advanced Economies, notably the US, while stocks of Emerging
Market Economies lagged. In the US, the S&P 500 and NASDAQ increased by
7.6 and 3.4 per cent, respectively, compared to the preceding quarter,
benefiting from strong corporate earnings, fiscal stimulus measures and
moderating inflation. European markets displayed mixed trends, as the UK's
FTSE 100 decreased by 2.0 per cent due to declines in the stock prices of
energy and basic materials groups, amid broad-based weakness in commodity
prices and concerns over the outlook for the Chinese economy.
Stock indices in other European economies increased approximately by
4.0 per cent, supported by improving economic indicators. Eurozone shares
posted gains in Q22023, with the main gainers in the financial and IT sectors:
the financial sector performance was mainly driven by banks, following
increased near-term earnings, while IT was mainly boosted by semiconductor
stocks demonstrating the growth potential stemming from Artificial
Intelligence (AI). The strong momentum for Japanese shares accelerated in
June and the TOPIX index rose by 20.5 per cent within the review period as
yen weakness, coupled with ongoing expectations of corporate governance
reforms and structural shifts in the Japanese macroeconomy, supported a
risk-on mode particularly from foreign investors.


China
India
Turkey
South
Africa
Indonesia Mexico
Brazil
Russia
Q22022
Q12023
Q22023

9 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Data from Reuters showed that EMDEs stocks exhibited mixed movements,
as stocks performance improved in China and Mexico, but declined in Brazil,
Russia, and India. The tension between the US and China, as well as China’s
sluggish economic recovery, were contributory factors behind the
underperformance in EMDEs. Uncertainty surrounding the US debt ceiling
contributed to the negative sentiments at the beginning of the quarter,
although this was resolved in early June 2023. Nevertheless, Chinese stocks
surged in Q22023 following the pledge by the government to support China’s
recovering economy.

Figure 5: Key Global Stock Indices

Source: Reuters Refinitiv Eikon.

The global bond market exhibited mixed movements, underpinned by risk-off
sentiments. Government bond yields in the US surged by approximately 0.8
percentage point compared with the preceding quarter, reflecting concerns
over inflation and expectations of tighter monetary policies by the Federal
Reserve (the Fed). European government bonds experienced mixed trends,
with safe-haven assets like German Bunds witnessing an increase in prices due
to risk-off sentiment. In contrast, peripheral Eurozone bonds faced selling
pressure, leading to a decrease in their prices. Emerging market bonds
experienced volatility due to uncertainties surrounding economic
fundamentals and geopolitical risks. Average yield on these bonds increased
by 1.2 percentage points, leading to price decline. Specifically, Russian bond
yield increased, following the dependence of the government on bonds to
finance its budget deficit. Bond yield, similarly, increased in Turkey following
the increase of policy rate.
-10
-5

US - S&P 500
US - Dow Jones
US - Nasdaq-100
UK - FTSE100
Japan - NIKKEI 225
Japan - TOPIX
Canada -
Euro Area - EUROSTOCKS 50
Germany - DAX
France -
Italy - FTSEMIB Index
Spain - IBEX Index
Brazil - BOVA11 BZ Equity
Russia - MOEX RX
India - BSE IN
China - shangai se
South Africa - JALSH
Mexico - MEXBOL Index
Indonesia - JCI Index
Turkey - XU100
Per cent (%)
Percent change (2023Q1)
Percent change (Q22023)

10 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 6: 10-year Government Bond Yields for Selected Countries

Source: Reuters Refinitiv Eikon.

Selected emerging market currencies depreciated against the US dollar during
the review period. The Russian ruble and South African rand depreciated by
9.7 and 5.0 per cent, respectively, relative to the levels in the preceding
quarter. The depreciation of the Russian ruble was due to trade deficit, falling
export proceeds, and heightened foreign capital outflow, while the
depreciation of the South African rand was due to risk-off sentiments
emanating from high volatility and idiosyncratic shocks. The Chinese RMB also
depreciated by 2.4 per cent due to global market sentiment, domestic factors
like shrinking current account surplus, and the expectation of continued twoway volatility in the yuan exchange rate.

Figure 7: Unit of Currencies of Selected EMEs to the US Dollar
Sources: Central Bank Nigeria & Reuters.

Brazil
Russia
India
China
South Africa
Mexico
Indonesia
Turkey
United States
United Kingdom
Japan
Canada
Euro Area
Germany
France
Italy
Spain
Emerging and Developing Economies
Advanced Economies
Dec-22
Mar-23

Chinese RMB
Nigerian Naira
South African
Rand
Russian Ruble
Depreciation/Appreciation
Q22022
Q32022
Q42022
Q12023
Q22023
Naira against Emerging
Market Currencies

11 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Table 2: Currencies of Selected Emerging Markets Economies (EMEs) to the
US Dollar
Sources: Central Bank of Nigeria & Reuters.

1.4
Global Commodity Market Developments
World crude oil supply rose due to increased production from OECD and other
non-OECD countries. Total world crude oil supply increased by 0.3 per cent
to 101.34 million barrels per day (mbpd), from 101.06 mbpd in the preceding
quarter. This rise was driven, largely, by increased supply from OECD
countries, particularly in Mexico, where supply rose by 0.05 mbpd to
2.12 mbpd, on account of increased offshore oil drilling. In addition, other
non-OECD’s supply also increased by 0.63 mbpd to 14.96 mbpd in Q22023.
OPEC’s crude oil supply fell by 0.2 per cent to 28.40 mbpd in Q22023, from
28.46 mbpd in the preceding quarter. The decline was due, mainly, to the
voluntary production adjustment by Saudi Arabia, Iraq, United Arab Emirates
(UAE), Kuwait, Algeria and Gabon.
On the demand side, total world demand rose by 0.8 per cent to 100.81
mbpd in Q22023, from 99.98 mbpd in the preceding quarter, which was
mainly from China, following the rebound in economic activities.
Crude oil spot prices fell, as uncertainties surrounding global economic
slowdown, as well as, higher global supply, particularly, from the US and
Mexico. The average spot price of Nigeria’s reference crude oil, the Bonny
Light (34.9° API), fell by 4.9 per cent to US$79.78 per barrel (pb) from
US$83.86pb in the preceding quarter. The prices of Brent stood at
US$78.93pb, Forcados US$80.13 pb; WTI US$74.39pb; and OPEC Reference
Basket US$78.17pb; indicative of similar trends as the Bonny Light.


Period
Chinese
RMB
Nigerian
Naira
South
African
Rand
Russian
Ruble
Q2 2022

Q1 2023

Q2 2023

World Crude Supply and
Demand
Crude Oil Prices

12 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 8: Quarterly Crude Oil Prices (US$ per barrel)

Source: Reuters Data, CBN Staff Compilation.

The all-commodity price index increased, due primarily to weather conditions
and supply bottlenecks. Consequently, the average price index of all monitored
commodities was 125.5 points, reflecting a 1.6 per cent rise, compared with
the 123.6 points recorded in the preceding quarter, but a decline of 16.9 per
cent, compared with the 150.9 recorded in the corresponding period of 2022.
The rise in the index was driven by the increase in the prices of coffee, cocoa,
and groundnut which rose by 20.8, 12.3, and 3.5 per cent, respectively.
On the other hand, the prices of soya beans, wheat, palm oil, and rubber
decreased by 5.5, 5.0, 4.7, 3.8, and 3.4 per cent, respectively, largely on the
back of adequate supply of these commodities.

Q22022
Q32022
Q42022
Q12023
Q22023
Bonny Light
Brent
Forcados
WTI
Opec Basket
Agricultural
Commodity Prices

13 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Table 3: Indices of Average World Prices of Nigeria's Major Agricultural Export
Commodities in Q22023 (Dollar Based) (Jan. 2010=100)
COMMODITY
Q22022
Q12023
Q22023
% Change
(1) & (3)
(2) & (3)

All Commodities

Cocoa

Cotton

Coffee

Wheat

Rubber

Groundnut

Palm Oil

Soya Beans

Sources: (1 & 2) World Bank Pink Sheet (3) Staff Estimates.

Average spot prices of gold, silver, platinum, and palladium decreased in
Q22023 as demand for precious metals fell. The average spot prices of gold
and silver declined by 0.3 and 5.9 per cent, quarter-on-quarter, to
US$1,872.98 per ounce and US$22.61 per ounce, compared with
US$1,878.12 per ounce and US$24.02 per ounce, respectively, recorded in the
preceding quarter. The decline was due to interest rate hike by major central
banks to combat inflation, which made treasury bonds more attractive as an
investment asset.

The prices of platinum and palladium fell by 6.8 and 10.2 per cent to
US$957.26 per ounce and US$2,088.12 per ounce in Q22023, from
US$1,026.61 per ounce and US$2,325.43 per ounce, respectively, recorded in
the preceding quarter. The prices declined due to falling demand from the
auto industry, where both metals are used as auto catalyst to reduce pollution
in automobiles.


Other Mineral
Commodity Prices

14 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 9: Price Changes in Selected Metals (%) for Q22023
Source: Refinitiv Eikon (Reuters).

1.5
Monetary Policy Stance
In Q22023, central banks around the world sustained efforts to strike a
balance between supporting economic growth and managing inflationary
pressures. Among the Advanced Economies, the European Central Bank (ECB)
and the Bank of Japan kept the policy rate unchanged, while the US Federal
Reserve (Fed), the Bank of Canada and the Bank of England increased rates
within the reporting period. Specifically, the retention of the policy rate at
3.75 per cent by the ECB was to sustain its emerging economic trends.
Similarly, the Bank of Japan maintained its negative interest rate to support
economic recovery and prop-up inflation. The US Fed hiked the policy rates
by 8 basis points to 5.17 per cent to address inflationary pressures. Also, the
increase in the interest rates in UK and Canada by 0.08 and 0.25 percentage
point, respectively, were in a bid to address surging inflation and concerns
about rising housing prices.
In EMDEs, several economies such as Indonesia, India, Mexico, Brazil, and
Ghana held their policy rates at 5.75, 6.50, 11.50, 13.75, and 29.5 per cent,
respectively. The People’s Bank of China slightly reduced policy rate to
stimulate economic growth, amid external and domestic challenges. Central
banks in Turkey, Russia and Kenya raised their rates to contain surging
inflation and stabilise the local currency. The South African Reserve Bank
reduced rates by 0.17 percentage point from Q12023 to 8.08 per cent in
Q22023, to support the economy.


Gold
Silver
Platinum
Palladium
With corresponding quarter
With preceding quarter

15 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Table 4: Policy Rates of Selected Central Banks in Per cent
Country
Q42022
Q12023
Q22023
United States
5.00
5.25
5.17
Canada
4.50
4.50
4.75
Euro Area
3.50
3.75
3.75
United Kingdom
4.25
4.50
4.58
Japan
-0.10
-0.10
-0.10
Brazil
13.75
13.75
13.75
Russia
7.50
7.50
7.83
India
6.50
6.50
6.50
China
3.65
3.65
3.62
South Africa
7.75
8.25
8.08
Mexico
11.25
11.25
11.25
Indonesia
5.75
5.75
5.75
Turkey
8.50
8.50
13.67
Kenya
9.50
9.50
9.83
Ghana
29.50
29.50
29.50
Source: Various Central Banks’ websites, Trading Economics.


16 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.0 DOMESTIC ECONOMIC DEVELOPMENTS
2.1 Real Sector Developments
The country witnessed sustained growth in Q22023, due mainly to the
contribution from the non-oil sector, following sustained investment in
information and communication, and financial services. Consequently, real
GDP grew by 2.51 per cent (year-on-year) to ₦17.72 trillion, from
2.31 per cent recorded in the preceding quarter. Headline inflation rose
further to 23.79 per cent from 22.04 per cent in the preceding quarter on
account of recent market-based reforms namely, the fuel subsidy removal
and introduction of market determined exchange rate which impacted
negatively on production, transport and logistics cost. Also, expectations of
further rise in prices contributed to inflationary pressures.

Economic growth was sustained in Q22023, driven mainly, by the activities in
the non-oil sector. The growth momentum was supported by increased
investments, especially, in information & communication, and financial
services. Consequently, real GDP grew by 2.51 per cent in Q22023 y-o-y
compared with 2.31 per cent in Q12023, driven by the non-oil sector, which
grew by 3.58 per cent and contributed 3.36 percentage points to overall GDP
growth. The oil sector, however, dragged overall growth, with a negative
contribution of 0.85 percentage points and contracted further by
13.43 per cent, compared with the growth of 4.21 per cent recorded in the
preceding quarter. The contraction was on account of the decline in crude oil
production to 1.14 million barrels per day (mbpd) from 1.28 mbpd produced
in 2023Q1. Moreso, subsisting infrastructural and security challenges
continued to weigh on the sector’s output.

Figure 10: Real GDP Growth Rate (year-on- year)
Source: National Bureau of Statistics.


Q22021 Q32021 Q42021 Q12022 Q22022 Q32022 Q42022 Q12023 Q22023
Percent (%)
Oil GDP
Non-oil GDP
Total GDP
Domestic Output and
Economic Activities
Summary

17 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.1.1 Sectoral Performance
The Services and Agriculture sectors grew, while the industry sector contracted
in Q22023. The services sector continued to drive growth, contributing
2.54 percentage points to the realised growth. The sector grew at a faster
pace by 4.42 per cent in Q22023, compared with 4.35 per cent in Q12023. It
also remained the most dominant sector, accounting for 58.42 per cent of
aggregate GDP.

Figure 11: Sectoral Growth Rate of Real GDP in Per cent
Source: National Bureau of Statistics.

Within the Services sector, Information & Communications, Financial &
Insurance and Trade subsectors, grew by 8.60, 26.84 and 2.41 per cent,
contributing 1.59, 1.14 and 0.41 percentage points, respectively, to the
growth outcome. The growth witnessed in the ICT subsector was due majorly
to the continued investment in deploying the fifth generation (5G) broadband
services by telecom companies nationwide. Although, its contribution to
growth was slower compared with the preceding quarter owing to a drop
in active subscribers by 6,074,762, or 2.69 per cent, due to the continuous
implementation of the Nigeria Communication Commission’s (NCC) policy on
the integration of phone lines to National Identity Numbers (NINs). Also, the
increased patronage of fintech services following improvement in the
payments ecosystem continued to contribute to the growth in the services
sector.
The agriculture sector grew by 1.50 per cent, compared with a contraction
of 0.90 per cent witnessed in the preceding quarter, contributing 0.35
percentage points to the overall growth. This was occasioned by the
continued improvement in crop production and the rebound in fishing
activities. Crop production, forestry and fishery subsectors grew by 1.82, 1.88,

Q22021 Q32021 Q42021 Q12022 Q22022 Q32022 Q42022 Q12023 Q22023
Agriculture
Industry
Services
Total GDP

18 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
and 0.29 per cent, compared with a growth of 1.93, 1.24, and a contraction of
2.92 per cent in Q12023, respectively. The livestock subsector, however,
contracted by 2.30 per cent compared with a contraction of 30.57 per cent
in Q12023.
The industry sector contracted by 1.94 per cent in Q22023, compared with a
growth of 0.31 per cent in Q12023. The dwindling performance in the
industrial sector was mirrored the index of industrial production (IIP), which
decreased by 9.7 per cent to 91.9 points (2010=100) in Q22023, from
101.8 index points in the previous quarter. The overall performance of the
sector was impeded by the contraction in the mining and quarrying subsector
(-12.16 %). This is also mirrored by the Index of mining production, which fell
to 49.6 index points in Q22023, indicating a decline of 13.0 per cent,
compared with 57.0 index points in the preceding quarter. This was attributed
largely to decrease in crude oil production, due to the shutdown of production
activities following the industrial action embarked upon by Exxon Mobil
workers. The manufacturing subsector grew by 2.20 per cent, y-o-y, as shown
in the rise in Index of Manufacturing Production by 2.2 per cent (year-on-year)
to 173.5 index points in Q22023, from 164.8 points in the preceding period.
Likewise, the estimated average manufacturing capacity utilisation increased
by 0.2 percentage points to 54.9 per cent in Q22023, from 54.7 per cent in
the preceding period. Growth was also recorded in electricity (6.10 %),
water supply (20.56 %) and construction (3.42 %) subsectors.

Figure 12: Top 13 Subsectors with the Largest Contribution (Percentage point)
to GDP Growth and their Growth Rates (%) in Q22023

Source: National Bureau of Statistic.


(1.42%) Education
(6.10%) Electricity,Gas,Steam & Air...
(1.69%) Other Services
(2.18%) Public Administration
(20.58%) Water supply, sewage, waste...
(2.89%) Professional, Scientific &...
(1.87%) Real Estate
(3.42%) Construction
(2.20) Manufacturing
(1.82%) Crop Production
(2.41%) Trade
(26.84%) Financial and Insurance
(8.60%) Information and Communication

19 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 13: Subsectors with the Least Contributions (Percentage point) to GDP
Growth and their Growth Rates (%) in Q22023
Source: National Bureau of Statistics.

2.1.2 Consumer Prices
Headline inflation rose further in Q22023, on the back of the removal of
PMS subsidy, and the exchange rate reform policy. The increase was due
to the recent market-based reforms such as the fuel subsidy removal and
introdution of market determined exchange rate which impacted negatively
on production, transport and logistics cost. Also, expectations of a further rise
in prices contributed to inflationary pressures. Thus, headline inflation rose yo-y to 22.79 per cent in Q22023 compared with 22.04 per cent in Q12023.

Figure 14: Headline, Food and Core Inflation (year-on-year) in Per cent

Source: National Bureau of Statistics.

Core inflation inched up to 20.27 per cent compared with 19.86 per cent in
the preceding quarter. The rise was due to accompanying increase in the
-0.04
-0.79
-0.93
Livestock (-2.30%)
Mining and Quarrying (-12.16%)
Transportation and Storage (-50.64%)

Percent (%)
Headline
Core
Food
Headline
Inflation
Core
Inflation

20 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
prices of imported items, following the recent reform in foreign exchange
market and other subsisting structural factors such as insecurity and
infrastructural deficit.
Food inflation similarly rose to 25.25 per cent in Q22023 from 24.45 per cent
in the preceding quarter. This rise was largely due to seasonal effects and the
ripple effects of fuel subsidy removal reflected in high transportation/logistics
costs.

2.1.3 Socio-Economic Developments
In a bid to encourage easy access to education and provide succour to
students that are less privileged, a legislation which seeks to provide a soft
loan to Nigerian students in tertiary institutions was signed into law by the
Federal Government. The legislation provides for the establishment of the
Nigerian Education Loan Fund, which will have the power to administer,
supervise, coordinate, and monitor the management of student loans in the
country. The legislation allows Nigerian students in tertiary institutions to
access interest-free loans from the Nigerian Education Loan Fund.
As a way of improving the business environment and promoting seamless
transaction and financial inclusion, a legal framework for data protection was
signed into law by the President. The Data Protection Act would help in the
regulation and processing of personal data, promoting data processing
practices that safeguard the security of personal data and privacy of data
subjects, that ensured that personal data is processed in a fair, lawful and
accountable manner.

2.1.4 Domestic Crude Oil Market Developments
The energy sector witnessed a decline in electricity and crude oil production
due to legacy infrastructure challenges in the upstream sector. Electricity
generation fell resulting from limited gas supply and low water level from
hydrogeneration plants, higher costs for upgrade and the beaurocratic
maintenance of generation network. There was, however, an increase in
electricity consumption due to improvement in transmission network as
energy loss declined. The average electricity consumption at 3,601.44,
increased by 3.1 per cent in Q22023, relative to 3,494.16 MW/h in the
preceding quarter. Contrastingly, the average electricity generation in
Q22023 at 4,058.93 MW/h, decreased by 6.2 per cent, compared with
4,327.77 MW/h in Q12023.

Food
Inflation
Education
Consumer
Protection
Electricity Generation and
Consumption

21 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Crude oil export declined, quarter-on-quarter, as a result of reduced
production and force majeure on crude oil liftings by Exxon Mobil, following
an industrial action by its in-house workers union.


Crude Oil Production
and Export
Box Information 1☹)
The average price of monitored domestic farm produce increased in Q22023
relative to their levels in the previous quarter. The price spike varied between 3.4
per cent for onions and 9.7 per cent for white garri. This increase was primarily
influenced by two factors: the high cost of energy (PMS), which intensified
pressure on transportation and logistics, and the ongoing security challenges,
particularly in the producing regions.


Domestic Prices of Selected Agricultural Commodity Prices in Second Quarter

Q22022
Q12023
Q22023
%
Change
%
Change

UNIT

(1) & (3)
(2) & (3)
Agric eggs medium size
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
"

Onion bulb
"

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: prepackaged (Golden
Penny)
2kg

Yam tuber
1kg

Sources: National Bureau of Statistics


22 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.2
Fiscal Sector Developments
The fiscal performance improved following a contraction in the overall deficit,
due to improved revenue outturns and lower expenditure. Federally collected
revenue in Q22023, fell by 8.4 per cent relative to the level in the preceding
quarter and was lower than the benchmark by 39.7 per cent. Though, FGN
retained revenue improved by 8.2 per cent compared with Q12023, it was below
the quarterly target by 45.3 per cent. Provisional FGN expenditure dipped by
26.6 per cent relative to the level in Q12023 and fell short of the target by 23.5
per cent. Consequently, overall deficit contracted by 37.9 per cent relative to the
preceding quarter. At ₦87,379.40 billion or 42.3 per cent of GDP, total public
debt, at end-June 2023, remained within the 40.0 per cent domestic threshold.
2.2.1 Federation Account Operations
Federation Account earnings declined, due to the shortfall in earnings from oil
sources. At N3,192.47 billion, gross federation revenue was below the level in
2023Q1 by 8.4 per cent. Similarly, it fell short of the budget benchmark of
N5,293.66 billion by 39.7 per cent. Non-oil revenue continued to dominate
government revenue, accounting for 74.7 per cent, while oil receipts
accounted for 25.3 per cent.
A disaggregation of Federation Account Revenue indicates that oil revenue, at
N809.02 billion, fell by 39.7 per cent relative to Q12023 and was below the
quarterly target by 66.4 per cent. The sub-optimal performance was indicative
of revenue shortfalls from Petroleum Profit Tax and Royalties, following lower
domestic crude oil production.
Conversely, at N2,383.45 billion, non-oil receipts improved by 11.1 per cent
relative to the preceding quarter but was 17.3 per cent short of the quarterly
target of N2,882.76 billion. The improvement was attributed to strong
performance of receipts from Corporate Tax and FGN Independent Revenue,
which exceeded collections in the preceding quarter by 15.4 and
42.9 per cent, respectively. Generally, non-oil revenue performance in the
quarter, mirrored seasonality in tax returns.


Summary
Drivers of Federation
Revenue

23 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Table 5: Federally Collected Revenue and Distribution (N Billion)

Q22022
Q12023 1/
Q22023 1/
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

Less Deductions & Transfers
plus:


Additional Revenue

Balance in Special Account from 2019

Excess Crude Revenue

Non-oil Excess Revenue

Exchange Gain

Total Distributed Balance

Federal Government

Statutory

VAT

State Government

Statutory

VAT

13% Derivation

Local Government

Statutory

VAT

Source: OAGF 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 include cost of revenue collections and JVC cash calls; while transfers entail
provisions for FGN Independent revenue and other Non-Federation revenue.

24 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
A net distributable balance of ₦2,186.72 billion was disbursed to the three
tiers of government, after accounting for statutory deductions and transfers.
Of this amount, the Federal Government got ₦837.50 billion, while State and
Local governments received ₦728.79 billion and ₦536.42 billion, respectively.
The balance of ₦84.01 billion was distributed to oil-producing states as
13.0 per cent Derivation Fund. Total disbursement to the federating units was
11.2 and 33.1 per cent, below the sharing in Q12023 and the quarterly target,
respectively.

2.2.2 Fiscal Operations of the Federal Government
The retained revenue of the FGN improved, largely, on account of higher
receipts from FGN Independent Revenue. Estimated retained revenue of the
FGN, at ₦1,510.89 billion, was 8.2 per cent above receipts in Q12023, but
45.3 per cent below the quarterly target. The development was attributed to
the 42.9 per cent increase in collections from the FGN Independent Revenue
on account of higher receipts of Internally Generated Revenue (IGR) from
Ministries, Departments and Agencies (MDAs), relative to the preceding
quarter.

Table 6: FGN Retained Revenue (₦ Billion)


Q22022
Q12023
Q22023
Budget
FGN Retained Revenue


Federation Account

VAT Pool Account

FGN IR


Excess Oil Revenue

Excess Non-Oil

Exchange Gain

Others*


Source: Office of the Accountant-General of the Federation (OAGF).
Note: * Others include revenue from Special Accounts, Special Levies and share of dividend.
The Budget figures are provisional, IR = Independent Revenue.

Provisional aggregate expenditure of the FGN fell following a decline in capital
expenditure and transfers. The provisional aggregate expenditure of the FGN
in Q22023, at ₦4,174.79 billion was below the level in the preceding quarter
by 26.6 per cent and also fell short of the quarterly target by 23.5 per cent. A
decomposition of FGN spending revealed that recurrent expenditure, capital
Federal Government
Retained Revenue
Federal Government
Expenditure

25 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
expenditure, and transfers accounted for 74.0, 21.0 and 5.0 per cent,
respectively.

Figure 15: Federal Government Expenditure (N Billion)
Source: Office of the Accountant-General of the Federation (OAGF) and CBN Staff Estimates.

The fiscal operations of the FGN, resulted in a contraction in the overall deficit,
on account of improved revenue outturns and lower expenditure. At ₦2,664.70
billion, the provisional fiscal deficit of the FGN in Q22023 was 37.9 per cent
lower than the level in the preceding quarter and 1.1per cent below the
quarterly target.

Table 7: Fiscal Balance (N Billion)

Q22022
Q12023
Q22023
Budget
Retained revenue

Aggregate expenditure

Recurrent

Non-debt

Debt Service

Capital

Transfers

Primary balance

Overall balance

Source: Office of the Accountant-General of the Federation (OAGF) and CBN Staff Estimates
Note: The figures are provisional.


2022Q2
2023Q1
2023Q2
Budget
Aggregate Expenditure
Recurrent
Capital
Transfers
Overall Fiscal Balance

26 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
The public debt profile of the FGN remained anchored on the 2020-2023 MTDS1.
Total public debt outstanding, which comprises of the obligations of Federal
and state governments, at end-June 2023, stood at ₦87,379.40 billion or 42.3
per cent of the GDP, representing an increase of 103.9 and 75.3 per cent,
above the levels at end-June 2022 and end-March 2023, respectively. The
increase was attributed to exchange rate revaluation and restructuring of FGN
Ways and Means Advances. The consolidated debt stock of the Federal
Government (including state governments’ external debt - a contingent
liability of the FGN) was ₦81,563.72 billion or 39.5 per cent of the GDP, while
state governments’ domestic debt stock accounted for the balance of
₦5,815.68 billion or 2.8 per cent of the GDP.
A breakdown of the FGN debt showed that domestic debt was
₦48,314.74billion (59.2%), while external debt stood at ₦33,248.98 billion
(40.8%) or US$43.16 billion. FGN Bond maintained dominance in domestic
debt portfolio, accounting for 86.9 per cent, followed by Treasury Bills (9.8%),
Promissory Notes (1.6%), FGN Sukuk (1.5%), and others2 (0.2%).

Figure 16: FGN External and Domestic Debt (N Billion)
Source: Debt Management Office (DMO).
Holdings of Nigeria’s external debt showed that Multilateral, Commercial and
Bilateral loans accounted for 48.2, 36.2 and 12.8 per cent, respectively, while
‘other’ loans3 constituted 2.8 per cent.


1 The MTDS stipulates a debt-to-GDP threshold of 40.0 per cent, and 70:30 domestic-external debt
portfolio mix, among other sustainability considerations
2 Composed of Treasury Bonds (0.11 %), Green Bonds (0.03 %) and FGN Savings Bond (0.06 %)
3 Includes Promissory notes (2.1 %) and Syndicated loans, arranged by the AFC (0.7 %).

Q32021 Q42021 Q12022 Q22022 Q32022 Q42022 Q12023 Q22023
External Debt
Domestic Debt
Total Debt
Federal
Government Debt

27 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Debt service obligations in Q22023, amounted to ₦754.15 billion, compared
with ₦1,243.50 billion in Q12023. The decrease was attributed to refinancing
of matured FGN Bonds and Treasury Bills.

Figure 17: Composition of Domestic Debt Stock in Per cent
Source: Debt Management Office.


Figure 18: Composition of External Debt Stock in Per cent
Source: Debt Management Office.

2.3
Monetary and Financial Developments
The Bank's hawkish policy stance, coupled with consistent supervision and
implementation of prudential guidelines, ensured the safety, stability, and
resilience of the financial sector. Key monetary aggregates grew significantly
above the levels in the preceding quarter, driven by increased credit expansion
to key sectors of the economy and the effect of exchange rate reforms. The
trend in key short-term interest rates was influenced by both the hike in the
Multilateral
48.2%
Commercial
36.2%
Bilateral
12.8%
Others
2.8%
Summary
FGN Bonds
86.9%
Treasury Bills
9.8%
Promisory Notes
1.6%
FGN Sukuk
1.5%
Others
0.2%

28 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
monetary policy rate (MPR) and the relative decline in liquidity. Banking
system liquidity moderated, leading to reduced subscription in NTBs and FGN
bonds. Furthermore, the removal of fuel subsidy and the exchange rate
reforms generated positive sentiments and triggered bullish activities in the
capital market.

2.3.1 Monetary Developments
Reserve money grew by 8.2 per cent in Q22023, due to the rise in liabilities to
the other depository corporations (ODCs) which outweighed the moderation in
currency-in-circulation (CIC). Liabilities to ODCs rose by 13.2 per cent,
propelled by the 18.9 per cent growth in required reserves as deposit liabilities
increased. Currency-in-circulation on the other hand fell by 13.6 per cent.
Consequently, reserve money grew to ₦17,339.25 billion in the second
quarter of 2023, compared with ₦15,975.74 billion recorded in the first
quarter of 2023.

Table 8: Components of Reserve Money (N Billion)


Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Reserve Money


Currency-in-Circulation


of which:


Notes and Coins


eNaira


Liabilities to ODCs


Reserve Money (%
Growth over Preceding
December)


4.25

12.88

20.59

-0.36

8.15
Broad Money Multiplier
(M3)


3.53

3.29

3.26

3.42

3.74
Source: Central Bank of Nigeria.

The increase in broad money multiplier to 3.74 triggered the growth of
24.4 per cent in broad money supply (M3) to ₦64,906.93 billion compared
with ₦54,628.23 billion at the end of the preceding quarter. On an annualised
basis, the 24.4 per cent growth in M3 translated to 48.7 per cent,
surpassing the 2023 benchmark of 28.21 per cent.
Reserve Money

29 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 19: Composition of Currency-in-Circulation (₦ Billion)
Source: Central Bank of Nigeria.

The analysis of the components of M3 revealed that both net foreign assets
(NFA) and net domestic assets (NDA) grew significantly during the period,
contributing to the overall expansion of M3. NFA and NDA grew by 59.6 and
18.9 per cent, contributing 8.0 percentage points and 16.4 percentage points,
respectively, to the M3 growth. The increase in NFA was due to the 22.6 per
cent rise in claims on non-residents by depository corporations, owing to the
revaluation effect of the assets, following the reforms in the foreign exchange
market. The main drivers of NDA were the growth in net claims on the central
government (39.6%) and claims on other sectors (26.6%).


Jun.-22
Sep-22
Dec-22
Mar-23
Jun-23
N Billion
N Billion
Notes & Coins (RHS)
LODCs (RHS)
eNaira (LHS)

30 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Table 9: Money and Credit Growth over preceding December in Per cent

Jun-

Sep-

Dec-

Mar-

Jun-23
Contributio
n to M3
growth
(Jun-23)
Annualised
Growth
(Jun-23)

Provisional
Benchmark
Net Foreign Assets

Claims on Nonresidents


Liabilities to Nonresidents


Net Domestic
Assets


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


Total Monetary
Assets (M3)

Currency Outside
Depository Corporations


Transferable Deposits


Narrow Money
(M1)


Other Deposits


Broad Money (M2)

Securities Other than
Shares
100.0


Total Monetary
Liabilities(M3)

Source: Central Bank of Nigeria.


31 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
On the liabilities side, the growth in M3 was traceable to the 22.2 and
28.5 per cent growth in transferable deposits and other deposits, respectively.
The growth in ‘other deposits’ was largely, driven by the modification of
operations in the domestic foreign exchange market, which increased the
stock of foreign currency deposits. Transferable deposits sustained an upward
trajectory and contributed 7.7 percentage points to the overall growth in M3.
On the contrary, currency outside depository corporations (CODC) recorded
a decline of 11.9 per cent in the review quarter, reflecting increased adoption
and usage of electronic payments channels.

2.3.2 Sectoral Credit Utilisation
Credit utilisation by the critical sectors of the economy increased considerably
during the review period. The increase was largely on account of the Bank's
initiatives, particularly the continued implementation of the Loan-to-Deposit
Ratio (LDR) policy and revaluation effect of foreign currency denominated
credit. Total credit utilised by key sectors of the economy grew significantly
by 24.2 per cent to N37,479.37 billion, from N30,346.13 billion in the
preceding quarter. Among the key sectors, the services sector remained the
dominant recipient of credit, accounting for the largest share at 51.6 per cent.
The industry sector was next at 43.5 per cent, while agriculture accounted
for 4.9 per cent.
Table 10: Sectoral Credit Allocation to Agriculture, Industry and Services

in N Billion
ITEM
Jun-22
Mar-23
Jun-23

Percentage Share
in Total
₦'Bn
₦'Bn
₦'Bn
Jun-22
Mar-23
Jun-23

[a] Agriculture

[b] Industry
10,591.87
12,334.84
16,313.8

39.45
40.65
43.53
of which
Construction

[c] Services
14,624.15
16,123.34
19,326.0

54.47
53.13
51.56
of which Finance, Insurance
& Capital Market

Trade/General Commerce

TOTAL PRIVATE SECTOR CREDIT
26,846.40
30,346.13
37,479.3

100.0
100.0
100.0
Source: Central Bank of Nigeria.

Consumer credit improved owing to increased demand for personal loans and
strengthened enforcement of the Loan-to-Deposit Ratio (LDR) policy.
Consequently, total consumer credit increased significantly by 12.2 per cent,
to ₦2,637.31 billion in the second quarter of 2023, compared with ₦2,349.88
billion at the end of the preceding quarter. As a share of total credit by ODCs,
consumer credit declined to 7.0 per cent, this was below the 7.7 and
7.8 per cent recorded in the preceding quarter and corresponding period of
2022, respectively. The components of consumer credit revealed that
Consumer Credit
Sectoral Credit
Utilisation


32 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
personal loans accounted for the larger share, totaling ₦1,922.20 billion,
representing 72.9 per cent of the total, while retail loans accounted for 27.1
per cent, equivalent to ₦715.10 billion.

Figure 20: Consumer Credit Outstanding (₦Billion) and Share of sectoral
Credit in Per cent

Source: Central Bank of Nigeria.

Figure 21: Composition of Consumer Credit in Per cent

Source: Central Bank of Nigeria.

Mar.-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Per cent
Billion
Consumer Credit
Share of sectoral credit


Jun.-22
Sep-22
Dec-22
Mar-23
Jun-23
Per cent
Personal
Retail

33 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.3.3 Financial Developments
2.3.3.1 Money Market Developments
Banking system liquidity moderated on the back of the net effect of fiscal and
monetary operations. Average net industry liquidity balance declined by
21.9 per cent to N384.54 billion from N492.57 billion in the preceding quarter.
Daily average request at the standing deposit facility (SDF) declined to
N23.15 billion in the review quarter compared with N30.07 billion in the
preceding quarter. Contrastingly, daily average request at the standing
lending facility (SLF) window increased to N97.43 billion in the review quarter,
compared with N78.67 billion in the preceding quarter. The increase in daily
average activities at the SLF window and decreased daily average activities at
the SDF window reflected the lower average liquidity level in the banking
system.

Figure 22: Transactions at the CBN Standing Facility Window (N Billion)

Source: Central Bank of Nigeria.

The value of transactions for NTBs and FGN bond declined, swayed by investors’
sentiments as it was anchored on inflation expectations. Across the different
tenors (91-, 182- and 364- days), NTBs worth ₦1,010.04 billion, ₦4,601.50
billion, and ₦1,010.04 billion were offered, subscribed, and allotted,
respectively, in the review period, relative to ₦1,289.87 billion, ₦4,892.10
billion, and ₦1,589.87 billion in the preceding quarter. The development
could be attributed to investors’ preference for longer-tenored securities
(364-day), which accounted for ₦4,384.92 billion (95.3%) of total
subscription. Their preference rode on the back of more attractive yields and
inflation expectation.


Jun.-22
Mar-23
Jun-23
SLF
SDF
Primary Market
Industry Liquidity
Condition

34 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 23: Primary Market NTBs (N Billion)

Source: Central Bank of Nigeria.

The FGN bond of 10-, 10-, 15-, and 30-years trenches exhibited downward
trend with total amount offered, subscribed, and allotted at N1,080.00 billion,
N1,460.79 billion and ₦1,163.98 billion in the review quarter, compared with
₦1,080.00 billion, ₦2,605.88 billion and ₦1,996.53 billion, respectively, in the
preceding quarter. The bid and marginal rates stood at 14.8 (±2.3) and
14.9 (±1.0) per cent, compared with 14.3 (±3.3) and 15.0 (±1.0) per cent,
respectively, in the preceding quarter.

Figure 24: Primary Market Auctions of FGN Bond (N Billion)

Source: Central Bank of Nigeria.


Jun.-22
Mar-23
Jun-23
Offered (LHS)
Allotment (LHS)
Subscription (RHS)

Jun.-22
Mar-23
Jun-23
Offered
Subscription
Allotment

35 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Key money market rates experienced a mixed trend in tandem with the level of
banking system liquidity and the hike in monetary policy rate (MPR) in the
review period. The average Interbank call and Open Buy Back (OBB) rates
increased to 12.8 and 12.7 per cent, compared with 12.1 and 12.0 per cent,
respectively, in the preceding quarter. The Nigeria Interbank Offered Rate
(NIBOR 30-day and 90-day) increased to 13.0 and 13.8 per cent, from 12.5 and
13.3 per cent, respectively, in the preceding quarter.

Figure 25: Developments in Short-term Interest Rates in Per cent

Source: Central Bank of Nigeria.

Average prime and maximum lending rates inched up marginally by 0.8 and
0.4 percentage points to 14.0 and 28.6 per cent compared with 13.8 and
28.2 per cent, respectively, in the preceding quarter. The weighted average
term deposit (WAVTD), however, fell to 6.9 per cent, from 7.1 per cent in the
preceding quarter. Consequently, the average spread between the weighted
average term deposit and maximum lending rates widened to
21.8 percentage points, from 21.1 percentage points recorded in the
preceding quarter.

Per cent (%)
Interbank call
OBB
NIBOR-30
NIBOR-90
MPR
Interest Rate
Development

36 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Figure 26: Trend in Average Term Deposit and Lending Rates in Per cent

Source: Central Bank of Nigeria.
Note: PLR= Prime lending rate; MLR= Maximum lending rate; WAVTD= Weighted Average term deposit
rate; and SPRD= Spread.

2.3.4 Capital Market Developments
In the review quarter, activities on the Nigerian Exchange (NGX) Limited were
bullish, driven by investors’ bargain-hunting activity and positive sentiments
following the removal of fuel subsidy by the government and the adoption of a
market determined exchange rate policy by the Bank. Aggregate market
capitalisation increased by 12.3 per cent to ₦59,916.22 billion, from the
N53,326.29 billion recorded in the preceding quarter. A disaggregation of the
components of the aggregate market capitalisation showed that, the equities,
debts, and Exchange Traded Funds (ETF) components rose by 12.4, 12.4 and
13.3 per cent, respectively, to close at N33,203.45 billion, N26,702.50 billion
and N10.30 billion, respectively. The equities, debt, and ETF components
constituted 55.4, 44.5 and 0.1 per cent, respectively, of the aggregate market
capitalisation.
The All-Share Index (ASI), rose by 12.4 per cent to 60,968.27 points in the
review quarter, relative to the 54,232.34 points recorded in the preceding
quarter. The improved performance was driven by the positive Q12023
corporate earnings results, which drove strong buying interest in blue chip
stocks.


Mar.-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
PRL (LHS)

MXLR (LHS)

WAVTD (LHS)

SPRD (RHS)


Percentage points
Per cent (%)
Market
Capitalisation
NGX All-Share
Index

37 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 27: Aggregate Market Capitalisation and All-Share Index

Source: Nigerian Exchange (NGX) Limited.

The performances of all the major indices tracked were bullish, except for the
NGX-Sovereign bond and NGX-Growth, which trended downward, while the
NGX-ASeM remained flat relative to the levels in the preceding quarter. The
improved performances of the major indices reflected the bullish stance of
the capital market.

Table 11: Nigerian Exchange (NGX) Limited Sectoral Indices
Sectoral Indices
Q12023
Q22023
Change (%)
NGX-Insurance
177.51
277.07
56.1
NGX-Oil/Gas
510.83
775.85
51.9
NGX-
AFR
Bank
Value
1,081.54
1,570.77
45.2
NGX- MERI Growth
2,351.76
3,396.92
44.4
NGX- MERI Value
2,484.30
3,543.64
42.6
NGX-Bank
452.97
645.42
42.5
NGX- AFR Div Yield
3,591.60
5,064.38
41.0
NGX-Pension
1,906.49
2,581.82
35.4
NGX-CG
1,363.74
1,788.36
31.1
NGX-Consumer
Goods

2022Q2
2022Q3
2022Q4
2023Q1
2023Q2
Index Points
N'Billion
Aggregate Market Cap (N' Billion)
All-Share Index (Index points)

38 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Table 11 Cont: Nigeria Exchange (NGX) Limited Sectoral Indices
Sectoral Indices
Q12023
Q22023
Change (%)
NGX-Premium
5,280.16
6,256.51
18.5
NGX-Lotus II
3,525.80
4,039.16
14.6
NGX-30
1,933.29
2,201.23
13.9
NGX-Mainboard
2,440.45
2,675.20
9.6
NGX-Industrial
Goods
2,456.45
2,491.31
1.4
NGX-ASeM
659.42
659.42
0.0
NGX-Sovereign
Bond
802.08
762.86
-4.9
NGX-Growth
2,799.23
2,493.13
-10.9
Source: Nigerian Exchange (NGX) Limited.

The level of trading activities increased significantly in the second quarter of
2023, as both the value and volume of traded securities increased by 77.2 and
168.3 per cent, respectively, to N460.77 billion, and 48.41 billion shares, in
398,744 deals relative to the N260.02 billion and 18.04 billion shares in 230,
629 deals recorded in the preceding quarter. The total deals in the review
quarter reflected an increase of 72.9 per cent, relative to the level in the
preceding quarter.

Figure 28: Volume and Value of Traded Securities on the Nigerian
Exchange (NGX)
Source: Nigerian Exchange (NGX) Limited.

Q22022
Q32022
Q42022
Q12023
Q22023
Billion Shares
N Billion
Value of Traded Securities
Volume of Traded Securities

39 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
In the review quarter, there were three (3) new listings and two (2) delistings
on the Exchange, compared with the 25 new listings and no delisting in the
previous quarter. The new listings in the review quarter comprised 2 savings
bonds and 1 rights issue.

Table 12: Listings on the Nigerian Exchange Limited in Q22023
Company/Security
Shares Units/Price
Remarks
Listing
11.032% FGS APR

643,204 Units
Savings
Bonds
New
10.032% FGS APR

436,012 Units
Savings
Bonds
New
Global
Spectrum
Energy Services Plc
Entire Issued Shares
Delisting
Delisting

Sterling
Financial
Holdings Company
Plc’s
(Sterling
HoldCo)
28,790,418,124
at
N1.60 per share.
Rights Issue
New
Sterling Bank Plc
28,790,418,126
Shares at 50 Kobo
each.
Delisting
Delisting
Source: Nigerian Exchange (NGX) Limited.
Notes: FGS=Federal Government of Nigeria Saving Bond; Plc=Public Limited Liability Company; and
APR=April.

2.3.5 Financial Soundness Indicators
The banking industry remained resilient in the review quarter as key financial
soundness indicators were within the regulatory thresholds. The banking
system Capital Adequacy Ratio (CAR) fell by 3.0 percentage points to 11.2 per
cent, relative to the 14.2 per cent recorded in the preceding quarter. The ratio
was above the 10.0 per cent benchmark for banks with national/regional
authorisation, but below the 15.0 per cent threshold for banks with
international authorisation. The development reflected a decline in the banks’
total qualifying capital relative to the increase in risk weighted assets due to
the depreciation of the naira exchange rate, as a result of the adoption of a
market determined exchange rate policy by the Bank.
The banks’ asset quality, measured by the ratio of Non-Performing Loans
(NPLs) fell marginally by 0.4 percentage point to 4.1 per cent in the second
quarter of 2023 from 4.5 per cent in the previous quarter, reflecting sustained
improvement in loan recoveries by banks. The ratio was below the prudential

40 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
benchmark of 5.0 per cent. The Industry Liquidity Ratio (LR) rose significantly
by 10.9 percentage points to 62.2 per cent in the review quarter, compared
with 51.4 per cent, recorded in the preceding quarter. The LR was above the
minimum regulatory benchmark of 30.0 per cent, showing the ability of the
banks to meet their obligations.


41 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.4
External Sector Developments
Nigeria's current account recorded a surplus position in the review period, from
a deficit in the preceding period, due to a significant decline in importation of
petroleum products and higher inflow of diaspora remittances. The financial
account recorded a net incurrence of financial liabilities, driven by increased
inflow of portfolio capital. The international reserves at US$33.71 billion was
equivalent to 6.5 months of import for goods and services or 8.9 months for
goods only. The average exchange rate of the naira at the I&E window
depreciated by 9.8 per cent to ₦511.23/US$, compared with ₦460.93/US$ in
Q12023. The international investment position (IIP) recorded a lower net
financial liability of US$53.13 billion. Public sector external debt stock and
external debt service payment at end-June 2023 stood at US$43.16 billion and
US$0.37 billion, respectively.

2.4.1 Current and Capital Accounts
The current account recorded a surplus position in the second quarter of 2023
from a deficit in the preceding quarter. The current account posted a surplus
of US$2.87 billion (2.8 per cent of GDP), in contrast to a deficit of US$0.41
billion (0.4 per cent of GDP) in Q12023, due to a significant decline in
importation of petroleum products and higher inflow of diaspora remittances.

Figure 29: Current Account Balance (US$ Billion)

Source: Central Bank of Nigeria.

Earnings from merchandise export decreased on account of lower commodity
prices and a drop in domestic crude oil production. Aggregate export earnings
declined by 3.3 per cent to US$13.91 billion, from US$14.38 billion in Q12023.
The development was as result of declines in both oil and non-oil export, due
to lower commodity prices and domestic crude oil production.

Q12022
Q22022
Q32022
Q42022
Q12023
2023Q2
US$ Billion
Export
Performance
Summary

42 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
A breakdown showed that earnings from crude oil and gas export fell by
3.3 per cent to US$12.24 billion, from US$12.66 billion in Q12023, on account
of a dip in both the price and production of Nigeria’s reference crude, bonny
light. Crude oil price declined to an average of US$79.78pb, from US$83.86pb
in Q12023, reflecting increased supply at the international market, while
domestic crude oil production fell to 1.14mbpd, from 1.28mbpd in Q12023,
arising from force majeure on some domestic export terminals.
Non-oil export receipts also decreased by 2.9 per cent to US$1.67 billion, from
US$1.72 billion in the preceding quarter. The development was on account of
decline in the export of cocoa beans, sesame seeds, cement and urea during
the review period.
In terms of share, crude oil and gas export constituted 88.0 per cent of total
export, while non-oil export accounted for the remaining 12.0 per cent.

Merchandise import bills decreased due to lower importation of petroleum
products. Merchandise import fell by 20.1 per cent to US$11.39 billion, from
US$14.25 billion in Q12023, due to lower importation of petroleum products,
particularly premium motor spirit as a result of sustained stockpile.
Importation of non-oil products increased by 8.4 per cent to US$8.11 billion,
from US$7.48 billion in Q12023. Petroleum products import, however,
declined significantly by 51.6 per cent to US$3.28 billion, from US$6.77 billion
in Q12023. Analysis by share showed that non-oil import remained dominant,
accounting for 71.2 per cent of the total, while petroleum products
constituted the balance of 28.8 per cent.
A breakdown of import by sector revealed that raw materials and machinery
import accounted for the largest share of 53.1 per cent, encouraged by the
Bank’s drive to ease the availability of foreign exchange to industrial sector.
Other sectoral import shares were: manufactured products, 17.0 per cent;
food products, 11.0 per cent; petroleum products, 6.6 per cent; minerals,
6.3 per cent; transport, 4.0 per cent; and agricultural products, 2.0 per cent.


Merchandise
Import

43 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 30: Import by Sector (US$ Billion)
Source: Central Bank of Nigeria.

The deficit in the services account decreased due to lower payments for
transportation and travel. The deficit in the services account narrowed by
1.7 per cent to US$3.13 billion, from US$3.18 billion in Q12023 on account for
lower payments for freight as merchandise import declined, and decreased
payments for travels.
An analysis of trade in services revealed that the total payments for services
decreased marginally to US$4.23 billion, compared with US$4.26 billion in the
previous quarter. Payments for transportation, travel, insurance and pension
services and personal, cultural, and recreation services decreased by 16.0,
19.3, 11.3, and 59.3 per cent, respectively, to US$1.76 billion, US$0.80 billion,
US$0.15 billion, and US$0.03 billion. On the other hand, payments for other
business services, telecommunications, computer, and information services,
financial services and government services rose by 87.3, 22.9, 48.4 and 4.3
per cent, to US$1.11 billion, US$0.17 billion, US$0.07 billion, and
US$0.08 billion, respectively.
In terms of the share, transportation accounted for the largest portion of
41.5 per cent, followed by other business services with 26.2 per cent. Travels,
telecommunications, insurance, government, and
financial services
accounted for 18.9, 3.9, 3.5, 2.0, and 1.7 per cent, respectively. Other
categories of services accounted for the balance of 2.3 per cent.


Raw Materials 53.1%
Manufactured
Products
17.0%
Food Products
11.0%
Petroleum Products,
6.6%
Minerals
6.3%
Transport
4.0%
Agricultural Products
2.0%
Services

44 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 31: Share of Service Out-Payments in Per cent

Source: Central Bank of Nigeria.

Receipts from services increased by 2.9 per cent to US$1.10 billion, from
US$1.07 billion in the preceding quarter. This was due, mainly, to higher
receipts from financial services, which rose by 42.8 per cent to US$0.22 billion.
Transportation services, however, declined by 1.3 per cent to US$0.47 billion,
relative to the level in the preceding quarter, due to lower receipts from sea
transportation services. Similarly, receipts from travel services decreased by
12.6 per cent to US$0.19 billion, compared with US$0.22 billion in the
preceding quarter, as personal related travels fell.
In terms of share, receipts from transportation services was 42.7 per cent;
financial services, 20.0 per cent; travels, 17.7 per cent; government services,
10.2 per cent; and telecommunication services, 5.0 per cent. “Others”
services accounted for the balance of 4.4 per cent.

Figure 32: Share of Services Receipts in Per cent

Source: Central Bank of Nigeria.

Transportation
42.7%
Travels
17.7%
Financial
20.0%
Communications
5.0%
Government
10.2%
Others
4.4%
Transportation 41.5%
Travels
18.9%
Insurance
3.5%
Communications, 3.9%
Government
2.0%
Other business
26.2%
Financial
1.7%
Others
2.3%

45 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
The deficit in the primary income account narrowed due to lower investment
income claims by non-resident investors as some companies declared losses.
The deficit in the primary income account fell by 26.4 per cent to
US$2.10 billion in Q22023. This was primarily driven by a 19.7 per cent decline
in investment income payments, which amounted to US$2.57 billion, from
US$3.20 billion in Q12023. Dividend payments declined by 24.3 per cent to
US$1.84 billion, from US$2.43 billion in the preceding quarter. Similarly,
interest payments on portfolio investments decreased to US$0.08 billion,
from US$0.10 billion in Q12023, while interest payments on loans reduced by
2.3 per cent to US$0.65 billion. Interest earnings on external reserves
investments increased by 23.4 per cent to US$0.25 billion, from
US$0.20 billion in the preceding quarter.
On the other hand, the compensation of employees account maintained a
surplus position, though lower by 4.2 per cent to US$0.06 billion, compared
with the level in the first quarter of 2023.

Figure 33: Primary Income Balance (US$ Billion)

Source: Central Bank of Nigeria.

The surplus in the secondary income account rose, due to higher inflow of
personal transfers, particularly remittances. The secondary income account
recorded a higher surplus position, increasing by 1.7 per cent to
US$5.58billion in Q22023, from US$5.49 billion in Q12023. The development
was attributed to higher inflow of personal transfers, which rose by 2.0 per
cent to US$4.95 billion, from US$4.85 billion in Q12023, as migrant host
countries, particularly the United States and parts of Europe increased labour
wage earnings. On the other hand, general government transfers, decreased
by 1.7 per cent to US$0.71 billion, from US$0.73 billion in the preceding
quarter, as inflow of grants declined.


Q2 2 0 2 2
Q3 2 0 2 2
Q4 2 0 2 2
Q1 2 0 2 3
Q2 2 0 2 3
US$ BILLION
Primary Income
Secondary Income

46 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 34: Secondary Income Balance and Remittances Inflow (US$ Billion)

Source: Central Bank of Nigeria.

2.4.2 Financial Account
A significant increase in portfolio investment inflow, particularly for the
purchase of fixed income securities resulted in a higher net incurrence of
financial liabilities position. The financial account recorded a net incurrence of
financial liabilities of US$1.44 billion (1.4 per cent of GDP), in contrast to a net
reduction of financial liabilities of US$0.04 billion in Q12023. This reflected
increased inflow of portfolio investment capital, on account of favourable
investor sentiments, as the uncertainties surrounding the 2023 elections
dissipated.
Inflow into the economy improved as uncertainties waned, following the
successful completion of the general elections, favourable returns on
investments and ongoing reforms, especially, in the foreign exchange market.
An inflow of US$1.97 billion was recorded, against a capital reversal of
US$1.00 billion in the preceding quarter. The development emanated from
improved inflow of portfolio capital for the purchase of debt securities,
particularly, government bonds. Portfolio investment recorded an inflow of
US$1.95 billion, in contrast to a reversal of US$1.17 billion in Q12023,
occasioned by increased investments in bonds by non-resident investors. In
contrast, FDI inflow recorded a divestment of US$0.07 billion, against an
inflow of US$1.12 billion in Q12023, owing to negative reinvested earnings, as
some companies declared losses during the review period. Similarly, ‘Other
Investment’ inflow dipped to US$0.25 billion, as against an inflow of
US$0.07 billion in Q12023, due to withdrawal of currency and deposits placed
in the Nigerian banks by non-residents and higher loan repayments by deposit
taking corporations.

Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
US$ Billion
Secondary Income Balance
Remittances
Government Transfers
Net Incurrence of
Liability
Financial Account
Developments

47 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
Aggregate financial assets recorded an acquisition of US$0.53 billion, in
contrast to a disposal of US$1.04 billion in Q12023. The development
reflected an improvement in the acquisition of other investment assets,
particularly, the increase in foreign currency and deposits holdings by
households. Direct investment assets recorded a net acquisition of US$0.001
billion, against a disposal of US$0.02 billion in Q12023. Portfolio investments
inflow recorded a net acquisition of US$0.05 billion, against a disposal of
US$0.03 billion in 2023Q1. Following the Bank's continued effort to enhance
liquidity in the foreign exchange market and also to meet balance of payments
needs, reserve assets were depleted by US$1.34 billion, relative to
US$1.62 billion in Q12023.

2.4.3 External Debt
Nigeria’s public sector external debt stock and external debt service payment
at end-June 2023 stood at US$43.16 billion or 10.4 per cent of GDP and
US$0.37 billion, respectively. A breakdown showed that the multilateral loans,
from the World Bank, International Monetary Fund, and African Development
Bank Groups, amounted to US$20.79 billion, accounting for 48.1 per cent of
the total. Loans from commercial sources in the form of Euro bonds was
US$15.62 billion or 36.2 per cent. Loans from bilateral sources was
US$5.52 billion, or 12.8 per cent of the total, promissory notes were
US$0.93 billion, or 2.2 per cent of the total, while syndicated loan (arranged
by African Finance Corporation) stood at US$0.30 billion or 0.6 per cent of the
total debt stock.

The external debt service payment stood at US$0.37 billion at end-June 2023,
relative to US$0.80 billion in the preceding quarter. A breakdown showed that
the interest payment was to the tune of US$0.21 billion, accounting for 56.8
per cent of the entire debt service payment. Principal repayment was US$0.13
billion, or 35.1 per cent of the total, while other payments made up the
balance. An analysis of interest payments showed that interest the total
payment on commercial borrowings accounted for 76.2 per cent of the total
at US$0.21 billion, while interest on multilateral loans amounted to
US$0.04 billion or 19.1 per cent of the total. Interest payments to bilateral
institutions accounted for the balance.

2.4.4 International Investment Position (IIP)
Nigeria's International Investment Position recorded a lower net financial
liability of US$53.13 billion. The stock of financial assets decreased to
US$108.77 billion at end-June 2023, compared with US$108.85 billion,
in the preceding quarter, due, largely to the 5.1 per cent decline in portfolio
International
Investment Position
Public Sector
External Debt
Net Acquisition of
Asset

48 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
investment assets to US$3.85 billion, relative to the value in the preceding
quarter. The stock of other investment assets increased by 2.9 per cent to
US$54.80 billion, relative to the preceding quarter, while direct investment
assets rose slightly to US$13.65 billion, from the level at end-March 2023, due
to higher investments in equity by residents.
The total stock of financial liabilities decreased by 11.1 per cent to
US$161.90 billion, from US$182.22 billion at end-March 2023, due, largely to
the decrease in the stock of direct investment liabilities. The stock of portfolio
investment and direct investment liabilities wereUS$72.08 billion and
US$28.46 billion, compared with US$85.86 billion and US$34.95 billion,
respectively. Similarly, the stock of other investment liabilities decreased
slightly by 0.5 per cent to US$57.98 billion, from the level at end-March
2023.

2.4.5. International Reserves
The international reserves remained above the standard benchmark of 3.0
months of import cover. It stood at US$33.71billion, relative to US$34.39
billion at end-March 2023. The level of external reserves could cover 6.5
months of import for goods and services or 8.9 months of import for goods
only.

Figure 35: External Reserves in US$ Billion and Months of Import Cover

Source: Central Bank of Nigeria.

A breakdown of the external reserves showed that the share of CBN was
US$28.98 billion; Federal Government, US$4.73 billion; while the Federation
accounted for the balance of US$0.001 billion.


US$ Billion
External Reserves - LHS
Months of Import (Goods only)
Months of Import (Goods and Services)

49 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 36: External Reserves by Ownership in Per cent
Source: Central Bank of Nigeria.

In terms of currency composition, the US dollar was US$25.11 billion,
(74.5 %); Special Drawing Rights US$5.02 billion (14.9 %); Chinese Yuan
US$3.16 billion (9.4 %); British Pounds US$0.20 billion (0.6%); Euro
US$0.21 billion (0.6 %); while other currencies accounted for the balance.

Figure 37: Currency Composition of External Reserves in Per cent

Source: Central Bank of Nigeria.
84.3%
13.8%
1.9%
CBN
Federation
FGN

USD
SDR
CNY
GBP
EUR

50 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
2.4.6 Foreign Exchange Flows through the Economy
Foreign exchange flows through the economy resulted in a higher net inflow in
the second quarter of 2023. Net foreign exchange inflow through the economy
increased by 20.6 per cent to US$8.69 billion from US$7.20 billion in the
preceding quarter. Net inflow through autonomous sources, similarly, rose to
US$9.64 billion from US$8.89 billion in the preceding quarter. A net outflow
of US$0.96 billion was, however, recorded through the Bank, compared with
a net outflow of US$1.69 billion in the preceding quarter.
Foreign exchange inflow to the economy fell by 6.3 per cent to
US$16.09billion from US$17.18 billion in the Q12023. Foreign exchange
inflow through the Bank declined to US$5.41 billion, from US$7.17 billion in
the preceding quarter. Foreign exchange inflow through autonomous
sources, however, increased to US$10.68 billion from US$10.01 billion in the
preceding quarter.
Foreign exchange outflow from the economy decreased by 25.8 per cent to
US$7.40 billion, relative to US$9.98 billion in the Q12023. Outflow through
the Bank decreased by 28.1 per cent to US$6.37 billion from US$8.86 billion
in the preceding quarter. Similarly, autonomous outflow fell by 7.4 per cent
to US$1.04 billion from US$1.12 billion in the preceding quarter.

Figure 38: Foreign Exchange Transactions through the Economy in the
Second Quarter of 2023 (US$ Million)

Source: Central Bank of Nigeria.

2.4.7 Developments in the Foreign Exchange Market
The average turnover at the Investors’ and Exporters’ (I & E) window of the
foreign exchange market increased by 23.2 per cent to US$0.13 billion,
relative to US$0.10 billion in Q12023.
Q2 2022
Q1 2023
Q2 2023
Inflow
20.08
17.18
16.09
Outflow
10.83
9.98
7.40
Netflow

Inflow
Outflow
Netflow
Turnover in the
Foreign Exchange
Market

51 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption

Figure 39: Turnover in the Investors’ and Exporters’ (I&E) Foreign Exchange
Market (US$ Million)

Source: Central Bank of Nigeria.

The average exchange rate of the naira per US dollar at the I & E window was
₦511.23/US$, compared with ₦460.93US$ in Q12023.The 9.8 per cent
depreciation was attributed to the adoption of a market driven exchange rate
regime in June 2023.


Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
PERCENT
US $ (M)
Average Turnover(LHS)
Rate of Turnover(RHS)
Exchange Rate
Movement

52 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
3.0 ECONOMIC OUTLOOK
3.1 Global Outlook
The Global economic expansion is expected to decelerate to 2.8 per cent in
2023, from 3.4 per cent in 2024. This projection hinges on the assumption
that the recent financial sector turbulence will be effectively contained,
thereby avoiding any disruptions to global economic activity that could lead
to a global recession. There are, however, several downside risks to this
outlook, such as the possibility of crisis in the banking system, resulting in
tighter global financial conditions. Moreover, the combination of increasing
levels of public and private sector debts, coupled with central banks rate
hikes, poses additional concerns. Potential faltering in China's post-COVID-19
recovery, and an escalation of the war in Ukraine could also contribute to the
slower expansion in economic activity.
Growth in AEs is expected to slow down significantly in 2023, decelerating to
1.3 per cent from 2.7 per cent growth in 2022. This is as a result of the tight
policy stances aimed at curbing inflation, repercussions of the recent
deterioration in financial conditions, the ongoing Russia-Ukraine war, and the
increasingly noticeable impacts of climate change.
Economic prospects in EMDEs show a stronger outlook, though at varying
levels across different regions within EMDEs. Nevertheless, based on the
expectation of robust domestic demand in India and some Latin American
countries, even in the face of external challenges such as the escalation of the
Russia-Ukraine war and the deterioration in financial conditions, output
growth is anticipated to remain unchanged at 3.9 per cent in 2023.
Though global headline inflation is projected to remain above the targets of
most central banks and higher than the pre-pandemic level of 3.5 per cent. It
is, however, expected to decrease to 7.0 per cent in 2023 from 8.7 per cent in
2022, owing to continued monetary policy tightening and decrease in global
commodity prices.

3.2 Domestic Outlook
Despite some downside risks, Nigeria's economic growth prospects remains
positive. This optimism is contingent upon the continuation of the current
trend in crude oil prices and production and the successful execution of the
Medium-Term National Development Plan (MTNDP).
Additionally, the pro-market policy reforms of the government such as the
removal of fuel subsidy and the implementation of market-determined

4 IMF WEO (April 2023)

53 | P a g e Central Bank of Nigeria Economic Report
Second Quarter 2023
ECONOMIC REPORT, SECOND QUARTER 2023
This document is for CBN internal consumption
exchange rate, and the expansion of credit by development finance
institutions to growth-enhancing sectors, are expected to spur growth in the
medium-term. Potential challenges could be precipitated through likely
contraction in global demand, ongoing security issues, and subsisting
infrastructural deficit, still pose as downside risks to the economic growth.
Inflationary pressures may subsist in the near-term on account of the removal
of fuel subsidies and subsequent higher prices of premium motor spirit, and
the depreciation of the naira. Moreover, the anticipated upward review of
wages and electricity tariffs, alongside the adverse effects of climate change
on agricultural output, are likely to induce further inflationary pressures.
Notwithstanding, the sustained tight monetary policy stance, coupled with
improvements in global supply chains are both expected to help dampen
inflation.
The financial sector is expected to remain resilient in the second half of 2023.
The outlook mirrors the efforts of the CBN in continuously monitoring
emerging vulnerabilities and risks in the system, including periodic stress-tests
and examination exercises, and the provision of risk mitigants.
The outlook for Nigeria’s external position is optimistic, on the expectation of
favourable terms of trade, occasioned by sustained rally in crude oil prices and
an improvement in domestic crude oil production. The positive outlook is
supported by the sustenance of crude oil price, propelled by the decision to
cut production from May 2023, and gains from capital flows and remittances.
Lower crude oil earnings, abolishing of fuel subsidy removal, rising import bills
and increased external debt servicing obligations could pose downside risks
to the accretion of external reserves. In addition, the sustained monetary
policy tightening by central banks across the Advanced Economies increases
the risk of capital outflow.