RESEARCH DEPARTMENT

CENTRAL BANK OF NIGERIA
Volume 4, Issue 2
Volume 4, Issue 2
Volume 4, Issue 2
Volume 4, Issue 2
June 2009
June 2009
June 2009
June 2009
ECONOMIC REPORT FOR
THE SECOND QUARTER OF

CENTRAL BANK OF NIGERIA

QUARTERLY ECONOMIC REPORT


EDITORIAL BOARD

Editor-In-Chief
C.N.O. Mordi

Managing Editor
B. S. Adebusuyi

Editor
S. N. Ibeabuchi

Assistant Editor
S. A. Olih

Associate Editor
U. Kama

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

Subscription to the Quarterly Economic Report is available without charge to institutions, corporations, embassies and development agencies. Individuals, on written request, can obtain any particular issue without a charge. Please direct all inquiries on the
publication to the Director of Research, Central Bank of Nigeria, P.M.B. 187, Garki,
Abuja, Nigeria.


i


TABLE OF CONTENTS


EDITORIAL BOARD ...


...

i

TABLE OF CONTENTS ...


...

1.0
SUMMARY


...


...

2.0
FINANCIAL SECTOR DEVELOPMENTS
...
...

2.1
Monetary and Credit Developments ... ...

2.2
Currency-in-Circulation and Deposits at the CBN
...
...

2.3
Money Market Developments


2.3.1 Interest Rate Developments


2.3.2
Commercial Papers (CPs)


2.3.3
Bankers Acceptances (Bas)


2.3.4
Open Market Operations


2.3.5
Primary Market


2.3.6
Bonds Market


2.3.7
CBN Standing Facilities ...


2.4.
Deposit Money Banks’ Activities
...
...
...

2.5
Discount Houses’ Activities
...
...

...

2.6
Capital Market Developments


2.6.1 Secondary Market


2.6.2
Over-The-Counter (OTC) Bonds Market
...
...
...

2.6.3
New Issues Market


2.6.4
Market Capitalization


2.6.5
NSE All-Share Index


3.0
FISCAL OPERATIONS
...

...

3.1
Federation Account Operations


3.2
The Fiscal Operations of the three tiers of Government
...

3.2.1
The Federal Government


3.2.2
Statutory Allocations to State Governments
...
...

3.2.3
Statutory Allocations to Local Government Councils ...
...

3.3
Consolidated Federal Government Debt
...
...
...

3.3.1
Domestic Debt


...
...
...

4.0
DOMESTIC ECONOMIC CONDITIONS
...
...

4.1
Agricultural Sector


4.2
Industrial Production


4.3
Petroleum Sector


Consumer Prices
...


...
... 10
5.0
EXTERNAL SECTOR DEVELOPMENTS
...
... 10
5.1
Foreign Exchange Flows ...


...
... 10


5.2
Non-Oil Export Proceeds by Exporters
...

...

5.3
Sectoral Utilisation of Foreign Exchange

Foreign Exchange Market Developments

...
...

6.0
GLOBAL ECONOMIC CONDITIONS
...
...

6.1
Global Inflation


6.2
Global Commodity Prices ...


6.3
International Financial Markets... ...
...
...
...

6.4
Other International Economic Developments and Meetings
...

F I G U R E S

1.
Aggregate Money Supply in Nigeria


...

2.
Aggregate Domestic Credit to the Economy

...

3.
Selected Bank Interest Rates


... 4
4. Treasury Bills’ Holdings
...

5.
Volume and Value of Traded Securities


...

6.
Market Capitalization and Value Index


...

7.
Components of Federally Collected Revenue

...

8.
Trends in Oil and Non-Oil Share of GDP


...

9.
Index of Industrial Production


...

10.
Trends in Crude Oil Price


...

11.
Quarterly Consumer Price Indices in Nigeria

... 10
12.
Inflation Rate in Nigeria


... 10
13.
Foreign Exchange Flows through the CBN

... 11
14.
Sectoral Utilisation of Foreign Exchange


...

15.
Demand for and Supply of Foreign Exchange

...

16.
Average Exchange Rate Movements
...
...
...

17.
WDAS-BDC Exchange Rate Premium
...
...
...

17.
Selected Macroeconomic Indicators Tables

...

iii


1.0 Summary

Provisional data from the National Bureau of Statistics
(NBS) estimated GDP growth in the second quarter of 2009
at 5.13 per cent, compared with 4.85 per cent in the preceding quarter. The projected growth was driven mainly by the
non-oil sector, particularly agriculture which constituted
43.9 per cent of total GDP and contributed 2.4 percentage
points to the growth in real GDP in the quarter. Broad
money (M2) grew by 0.9 per cent, relative to the preceding
quarter. The increase in M2 was attributed largely to the
rise in aggregate banking system credit to the domestic
economy (net). Narrow money (M1), however, contracted by
3.9 per cent from the level in the preceding quarter.

Available data indicated a general decline in banks’ deposit
rates, while lending rates increased. The spread between
the weighted average term deposit and maximum lending
rates widened from 9.97 percentage points in the preceding
quarter to 11.00 percentage points. The margin between the
average savings deposit and maximum lending rates, also,
widened from 19.33 to 19.96 percentage points during the
period. The weighted average inter-bank call rate fell to
14.76 per cent from 15.27 per cent in the preceding quarter, reflecting the liquidity condition in the inter-bank funds
market.

The value of money market assets outstanding rose by 9.8
per cent over the level in the preceding quarter to
=N=3,164.9 billion. The increase was attributed largely to
the rise in outstanding FGN bonds and Nigerian Treasury
Bills (NTBs). Activities on the Nigerian Stock Exchange
were bullish as all the major market indicators trended
upward.

Total federally-collected revenue in the first quarter, 2009
stood at =N=1,044.89 billion, representing a decline of
21.2 and 11.6 per cent from the proportionate budget estimate and the preceding quarter’s level. At =N=696.61 billion, oil receipts constituted 66.7 per cent of the total revenue, and was lower than the budget estimate and the level
in the preceding quarter. The fall in oil receipts relative to
the budget estimate was attributed to the decline in crude
oil and gas sales as well as petroleum profit tax and royalties. Non-oil receipts, at =N=348.29 billion or 33.3 per
cent of the total, exceeded the receipts in the preceding
quarter, but lower than the level in the budget estimate. The
decline in non-oil receipts relative to the preceding quarter
was attributed to the fall in Companies Income Tax (CIT)
and Value-Added-Tax. Federal Government retained revenue for the second quarter, 2009 was =N=519.36 billion,
while total expenditure was =N=901.59 billion. Thus, the
fiscal operations of the Federal Government resulted in an
estimated overall deficit of =N=382.23 billion, compared
with =N=57.96 billion in the preceding quarter and the
budgeted deficit of =N=209.15 billion.

The major agricultural activities in the review quarter
included harvesting of tree crops and the clearing and
preparation of irrigated land for the cropping season.
Nigeria’s crude oil production, including condensates and
natural gas liquids, was estimated at 1.70 million barrels
per day (mbd) or 154.70 million barrels for the quarter.
Crude oil export was estimated at 1.25 mbd or 113.75 million barrels for the quarter, while deliveries to the refineries for domestic consumption remained at 0.445 mbd or
40.50 million barrels. The average price of Nigeria’s reference crude, the Bonny Light (370 API), estimated at
US$61.14 per barrel, rose by 32.5 per cent over the level in
the preceding quarter. The end-period inflation rate for the
second quarter, 2009, on a year-on-year basis, was 11.2
per cent, compared with 14.4 and 12.0 per cent recorded at
the end of the preceding quarter and the corresponding
quarter 2008, respectively. Inflation rate on a twelve-month
moving average basis for the second quarter, was 13.7 per
cent, compared with 13.1 and 7.0 per cent recorded in the
preceding quarter and the corresponding quarter, 2008,
respectively.

Foreign exchange inflow and outflow through the Central
Bank of Nigeria (CBN) amounted to US$5.47 billion and
US$9.16 billion, respectively, resulting in a net outflow of
US$3.69 billion during the quarter. Foreign exchange sales
by the CBN to the authorized dealers amounted to US$7.84
billion in the review quarter. The weighted average exchange rate of the Naira vis-à-vis the US dollar, depreciated by 0.6 per cent to =N=147.76 per dollar at the RDAS.
In the bureaux de change segment of the market, the naira
also depreciated from =N=160.37 per dollar to =N=175.68
per dollar. Non-oil export earnings by Nigerian exporters
increased by 46.4 per cent over the level in the preceding
quarter to US$379.06 million. . The development was attributed largely to the increase in the prices of all the commodities traded at the international commodities market
during the period.

There was modest growth globally in the quarter under
review, though the recession persisted and the recovery was
uneven and likely to be sluggish. This was because financial
systems remained impaired and support from public policies will gradually diminish. Also, the investments made by
companies between 2002 and 2007 that have now turned
into surplus capacity, following the global financial crisis,
if not eliminated, might result into more jobs losses and
surge in corporate bankruptcies, as spending and investments slide.

Other major international economic developments of relevance to the domestic economy during the quarter included:
the meeting of the Leaders of the Group of Twenty (G-20) in
London on April 2, 2009 to discuss the global economic
crisis and its challenges (see April 2009 Report). The Ordinary Meeting of the Bureau of the Association of African
Central Banks (AACB) was held in Addis Ababa, Ethiopia
on April 9, 2009 (see April 2009 Report).


In a related development, the second meeting of the Joint
Committee of the African Union Commission and the
AACB took place in Addis Ababa, Ethiopia on April 9,
2009 (see April 2009 Report). The 2009 Spring Meetings
of the Board of Governors of the World Bank Group and
the International Monetary Fund (IMF) took place in
Washington, D. C, USA from April 25-26, 2009 (see April
2009 Report). The Global Monitoring Report (GMR)
2009, a development emergency report released by the
International Monetary Fund (IMF) and the World Bank
on April 24, 2009 warned that the global financial crisis
was imperiling the attainment of the 2015 Millennium Development Goals (MDGs) and creating an emergency for
development (see April 2009 Report). Also, the 24th Meeting of the Convergence Council of Ministers and Governors of the West African Monetary Zone (WAMZ) was held
in Abuja, Nigeria on May 23, 2009. The meeting was preceded by the 21st Meeting of the Committee of Governors
of Central Banks of the WAMZ (see May 2009 Report).
The ECOWAS Convergence Council, comprising Ministers of Finance and the Governors of Central Banks of
member states held an Extraordinary Meeting on May 25,
2009. The Convergence Council approved a revised road
map for the realisation of a single currency for West Africa by 2020 (see May 2009 Report). The Association of
African Central Banks Continental Seminar on Liquidity
Management was held in Abuja from May 7 – 9, 2009. The
153rd Extraordinary Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC)
was convened in Vienna, Austria in the review quarter
(see May 2009 Report).


In another development, the Second Joint Annual Meeting
of the African Union Conference of Ministers of Economy
and Finance and the United Nations Economic Commission for Africa (ECA) Conference of African Ministers of
Finance, Planning and Economic Development was held in
Cairo, Egypt from June 6-7, 2009.

Also, the 5th Session of China-Nigeria Economic and
Technical Cooperation Joint Commission was held in Beijing, China from June 22 – 26, 2009. Collaborative issues
were discussed on economic cooperation, banking and
finance, energy, solid minerals, and infrastructure development. In a related development, the 79th Regular Council Session, 139th Executive Committee Meeting and the
19th Meeting of the Consultative Board on the World Cocoa Economy of the International Cocoa Organisation
(ICCO) were held in Moscow from June 1 – 5, 2009. The
Meeting considered the following amongst others: membership of the International Cocoa Organization; distribution of votes; review of observer status of non-member
countries; special Reserve Fund; relocation of the ICCO
Headquarters to Ivory Coast; cocoa production and consumption; and proposals for a future cocoa agreement.

Lastly, a special ECOWAS – Spain Summit was held in
June 2009. It was attended by Heads of State and Government of ECOWAS and the Prime Minister of Spain. The
summit agreed to take steps towards strengthening cooperation in areas of infrastructural development, renewable
energy, war against malaria and illicit trafficking in persons, drugs and arms.

2.0 FINANCIAL SECTOR DEVELOPMENTS

2.1 Monetary and Credit Developments
Provisional data indicated growth in monetary aggregate
in the second quarter, 2009. Broad money (M2) rose by
0.9 per cent to =N=9,077.0 billion, as against the decline
of 1.8 per cent in the first quarter of 2009. Narrow money
(M1), however, fell by 3.9 per cent to =N=4,328.5 billion
from the level in the preceding quarter. The rise in M2
was accounted for largely by the 17.8 per cent increase in
aggregate banking system credit to the domestic economy
(net) (fig. 1 and table 1).

At =N=5,677.2 billion, aggregate banking system credit
(net) to the domestic economy increased by 17.8 per cent
in the second quarter of 2009, as against the decline of
2.6 per cent in the preceding quarter. The development
reflected largely the 15.4 per cent rise in claims on the
Federal Government, reinforced by the 3.6 per cent increase in private sector.

Banking system’s credit (net) to the Federal Government
increased by 15.4 per cent to negative =N=2,879.8 billion, as against the decline of 9.6 per cent in the preceding quarter. The rise was attributed to the increase in deposit money banks’ (DMBs) holding of Federal Government securities.

Banking system’s credit to the private sector rose by 3.6
per cent to =N=8,305.3 billion, compared with the increase of 1.3 per cent in the preceding quarter. The rise
reflected largely the 3.5 per cent increase in bank’s claims
on the sector (fig 2).

At =N=7,643.6 billion, foreign assets (net) of the banking
system fell by 5.7 per cent, compared with the decline of
5.2 per cent in the preceding quarter. The development
was attributed largely to the 4.6 per cent decline in the
CBN’s holdings.

Quasi money increased by 6.0 per cent to =N=3,319.9
billion, compared with the increase of 0.5 per cent in the
preceding quarter. The development was attributed to the
rise in all the components namely, time, savings and foreign currency deposits of the DMBs.

Other assets (net) of the banking system, increased by
8.0 per cent to =N=4,243.8 billion, in contrast to the
decline of 9.4 per cent in the preceding quarter. The
fall reflected largely the decline in unclassified liabilities of both CBN and DMBs during the quarter.


2.2 Currency-in-circulation and Deposits at
the CBN

At =N=1,006.6 billion, currency in circulation fell by
3.0 per cent in June 2009 over the level in March
2009. The decline was due wholly to the fall of 7.2 per
cent in currency outside the banking system during the
period.

Total deposits at the CBN amounted to =N=5,388.7
billion, indicating a decline of 5.2 per cent from the
level in the preceding quarter. The development was
attributed largely to the fall in Federal Government
deposits, reinforced by the decline in banks’ deposits.
The shares of the Federal Government, banks and
“others” in total deposits at the CBN were 89.3, 5.2
and 5.4 per cent, respectively, compared with the
shares of 89.0, 6.1 and 4.9 per cent, in March 2009.

M ajor monetary aggregate rose, while
banks’ deposit and lending rates declined in the second
quarter of 2009. The value of money market assets increased, following largely the rise in outstanding FGN
bonds and Nigerian Treasury Bills (NTBs). Transactions
on the Nigerian Stock Exchange (NSE) were bullish as
the major market indicators trended upward.
4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

QCP

QCG

QAC

CCP
90.8


CCG

CAC


Per cent
Figure 2: Aggregate Domestic Credit to the Economy (Quarterly and
Cummulative Growth Rate)

2.3
Money Market Developments

Activities in the money market slowed in the quarter as
the effects of the actions taken by the Bank in the preceding quarter to inject liquidity in the banking system
fizzled out. Direct auctions were conducted in the review period, which helped to boost tradable maturities
at the secondary market. Deposit money banks also
continued to access the standing lending, tenored repo
and Expanded Discount Window facilities to square up
their positions.

Provisional data indicated that the value of money market
assets
outstanding
at
end-June

was
=N=3,164.9 billion, representing an increase of 9.8 per
cent over the level at end-March 2009. The increase
during the period was attributed to the 12.2 and 36.0 per
cent increase in FGN Bonds and NTBs, respectively.


2.3.1
Interest Rate Developments

Available data indicated a general decline in banks’
deposit rates, while lending rates increased in the second quarter, 2009. With the exception of the average
savings deposit rate, which rose by 0.01 percentage
points to 2.93 per cent, all other rates on deposits of
various maturities declined from a range of 6.97 – 13.58
per cent in the preceding quarter to 6.74 – 13.14 per
cent. Similarly, at 11.89 per cent, average term deposit
rate fell by 38 basis points from the level in the preceding quarter. On the other hand, the average prime and
maximum lending rates rose by 67 and 65 basis points
to 19.01 and 22.89 per cent, respectively. Consequently,
the spread between the weighted average term deposit
and maximum lending rates widened from 9.97 percentage points in the preceding quarter to 11.00 percentage
points. The margin between the average savings deposit
and maximum lending rates, also, widened from 19.33
percentage points in the preceding quarter to 19.96 percentage points.

At the inter-bank call segment, the weighted average
rate, which stood at 15.27 per cent in the preceding
quarter, fell to 14.76 per cent, reflecting the liquidity
condition in the inter-bank funds market. Similarly, the
weighted average rate for the Open Buy Back (OBB)
fell by 53 basis points from the level in the preceding
quarter to 7.32 per cent. In tandem with developments
at the inter-bank market, the Nigeria Inter-Bank Offer
Rate (NIBOR) on 7- and 30-day tenors declined to
15.81 and 17.00 per cent from 16.14 and 17.30 per cent
in the preceding quarter. With headline inflation rate at
11.2 per cent at end-June, all deposit rates, with the
exception of savings and 7-day rates, were positive in
real terms.


2.3.2 Commercial Papers (CPs)
Investment in Commercial Papers (CPs) as a supplement to bank credit to the private sector fell in the review period. The value of CPs held by the DMBs fell
by =N=69.9 billion to =N=678.4 billion at end-June
2009, compared with the decline of =N=74.4 billion at
end-March 2009. Thus, CPs constituted 21.4 per cent of
the total value of money market assets outstanding at
end-June 2009, compared with 25.9 per cent at the end
of the preceding quarter.

2.3.3 Bankers’ Acceptances (BAs)

Holdings of BAs by the DMBs fell by 15.1 per cent to
=N=65.8 billion at end-June 2009, as against the increase of 16.7 per cent in the preceding quarter. The fall
reflected the decline in investments by deposit money
banks and discount houses. Consequently, BAs accounted for 2.1 per cent of the total value of money
market assets outstanding at the end of the second quarter, compared with 2.7 per cent in the preceding quarter.

2.3.4 Open Market Operations

Open market operations (direct auctions and tenored
repurchase transactions) were complemented by the
standing lending facility and cash reserve requirements.
There was no purchase of government securities
through the two-way quote platform due to the unattractiveness of the offer rates quoted at the trading sessions.
2nd
Qtr

3rd
Qtr

4th
Qtr

1st
Qtr

2nd
Qtr

3rd
Qtr

4th
Qtr

1st
Qtr

2nd
Qtr

Avg. Term Deposits 8.97
8.99
8.69
9.35 10.78 11.06 11.67 12.27 11.89
Prime
16.92 16.46 16.9 16.05 15.86 15.97 16.03 18.34 19.01
Inter-bank
8.00
8.13
8.25 10.21 10.4 12.83 14.01 15.79 14.76
Maximum
18.74 18.27 18.24 18.17 17.9
18.1 19.79 22.24 22.89

Per cent
Figure 3: Selected Bank Interest Rates (Per cent
Average)

However, in order to boost tradable maturities at the
secondary market and deepen activities among money
market dealers, direct auctions were conducted four
times. Consequently, total NTBs offered in the second
quarter was =N=205.80 billion, while total subscription and allotment were =N=331.00 and =N=185.20
billion, respectively. In the preceding quarter,
=N=60.00 billion was offered, while subscription and
allotment were =N=139.50 billion and =N=62.29 billion, respectively.


2.3.5 Primary Market

Nigerian Treasury Bills of 91-,182- and 364-day tenors
were offered fortnightly during the review period. Total NTBs offered in line with the issue programme of
bi-monthly auctions was =N=341.60 billion. Public
subscription and allotment were =N=560.30 billion
and =N=341.60 billion, respectively, compared with
=N=667.75 billion and =N=275.58 billion subscribed
to and allotted in the first quarter.

The range of issue rates for the 91- and 182-day NTBs
were from 3.135 to 5.15 per cent and from 5.898 to
6.75 per cent at the 364-day segment. All the auctions
were oversubscribed as market players showed strong
preference for government securities considering the
bearish performance of equities at the capital market.
The need for market players to shore up their holdings
of government securities also buoyed activities at that
segment.

2.3.6 Bonds Market

FGN Bonds, of 3-, 5- and 20-year tenors were reopened in line with the restructuring of the domestic
debt profile to longer tenors and offered to the public
in the period under review. A total of =N=170.00 billion, made up of =N=75.00 billion, 3-year, =N=55.00
billion, 5-year and =N=40.00 billion, 20-year FGN
Bonds were offered and allotted at marginal rates of
10.10 to 11.00, 10.70 to 11.85 and 11.50 to 12.79 per
cent, respectively. The total public subscription for all
the auctions stood at =N=349.97 billion. The coupon
rates ranged from 9.92 to 10.95 per cent for the 3-year
Bond, 11.40 to 12.00 per cent for the 5 year Bond and
13.21 to 13.45 per cent for the 20-year Bond. The impressive subscription, especially for the 20-year tenor,
reflected market players’ sustained confidence in the
Nigerian economy. The preference for longer-tenored
securities, whose yields were perceived to be stable
and attractive, also buoyed subscription at the auctions.


2.3.7 CBN Standing Facilities

The deposit money banks and discount houses continued to access the standing lending facility. The
lending and repo rates were fixed at 8.00 per cent
after its reduction from 9.75 per cent on April 8,
2009. However, interest payment on overnight deposit by the DMBs remained at zero per cent.

Analysis of CBN lending to the deposit money
banks and discount houses showed that daily lending was initially high, but declined after the series of
actions taken by the Bank to inject liquidity into the
banking system and the release of excess crude oil
proceeds in the latter part of the quarter. Consequently, total lending facility granted to the DMBs
for the quarter stood at =N=10, 299.24 billion.


2.4
Deposit Money Banks’ Activities

Available data indicated that total assets/liabilities
of the DMBs amounted to =N=15,519.9 billion,
representing a decline of 0.1 per cent from the level
in the preceding quarter. The development was attributed largely to the 26.5 per cent decline in reserves, reinforced by the 12.3 per cent fall in foreign
assets.

Funds, which were sourced mainly from claims on
other financial institutions and mobilisation of deposits were used mainly for the extension of credit
to the private sector.

At =N=9,438.2 billion, credit to the domestic economy rose by 5.4 per cent over the level in the preceding quarter. The development was attributed
largely to the 17.3 and 3.5 per cent decline in claims
on the Federal Government and private sectors, respectively.

Central Bank’s credit to the DMBs rose by 23.1 per
cent to =N=169.8 billion in the review quarter, reflecting the increase in CBN’s loan & advances to
the DMBs.

Total specified liquid assets of the DMBs stood at
=N=3,037.5 billion, representing 34.7 per cent of
their total current liabilities. At that level, the liquidity ratio fell by 0.9 percentage points from the preceding quarter’s level, but was 9.7 percentage points
above the stipulated minimum ratio of 25.0 per cent.
The loans-to-deposit ratio fell by 2.1 percentage
points to 84.5 per cent from the level in the preceding quarter, and exceeded the prescribed minimum
target of 80.0 per cent by 4.5 percentage points.

2.5
Discount Houses’ Activities

Total assets/liabilities of the discount houses stood at
=N=466.0 billion in the second quarter of 2009, indicating a decline of 24.0 and 8.7 per cent from the
levels in the preceding quarter and the corresponding
period of 2008, respectively. The fall in assets was
accounted for largely by the 34.9 per cent decline in
claims on banks during the quarter.

Correspondingly, the fall in total liabilities was attributed largely to the 36.6 per cent decline in borrowings
during the period. Discount houses’ investments in
Federal Government securities of less than 91 days
maturity rose by 15.0 per cent to =N=30.3 billion,
representing 7.6 per cent of their total deposit liabilities. At this level, discount houses’ investments fell by
0.9 per cent from the level in the preceding quarter.
This level of investment was 52.4 percentage points
below the prescribed minimum level of 60.0 per cent
for fiscal 2009.
Total borrowing by the discount houses was =N=65.1
billion, while their capital and reserves amounted to
=N=39.5 billion. Thus, resulting in a gearing ratio of
5.1:1, compared with the stipulated maximum target
of 50:1 for fiscal 2009.

2.6
Capital Market Developments

2.6.1
Secondary Market

Available data indicated that activities on the Nigerian
Stock Exchange (NSE) in the second quarter of 2009
were bullish as all the major market indicators trended
upward. The volume and value of traded securities
rose by 41.7 and 84.3 per cent to 27.2 billion shares
and =N=199.4 billion, respectively, compared with
19.2 billion shares and =N=108.2 billion in the first
quarter of 2009. In the first half of the year, total turnover volume and value stood at 46.4 billion shares and
=N=310.5 billion, respectively. The banking subsector was the most active on the Exchange with
traded volume of 16.1 billion shares valued at
=N=133.5 billion exchanged in 269,968 deals. There
were no transactions on the Federal Government and
industrial loans/preference stocks.

2.6.2 Over-the-Counter (OTC) Bonds Market


Transactions on the over-the-counter (OTC) bond segment of the market indicated that a turnover of 4.4 billion units worth =N=4.2 trillion in 23,405 deals was
recorded in the review quarter, compared with a total of
4.2 billion units valued at =N=4.3 trillion exchanged
during the preceding quarter. The most active bond
measured by turnover volume was the 6th FGN Bond
2012 Series 1 with traded volume of 241.0 billion units
valued at =N=236.9 billion in 2,016 deals.

2.6.3 New Issues Market
In the new issues market, a total of 4,035,497,307
shares in favour of Afromedia Plc was admitted at the
price of =N=2.92 per share by way of introduction. The
Company was listed in the Media sub-sector. Also,
4,966,666,668 shares in favour of MTECH Communications Plc were admitted to the Daily Official List at a
price of =N=2.50 per share by way of introduction. The
Company was listed in the Information, Communication and Telecommunications subsector. In a related
development, 3,205,725,266 Units of Lotus Capital
Halal Investment Fund was admitted on the Daily Official List under Memorandum Listing at =N=0.87 per
unit during the review quarter. By this action, the number of Managed Funds granted under Memorandum
Listing status increased to 25. During the review quarter, there were eight (8) supplementary listings, same as
in the preceding quarter.


In another development, the Council of the Nigerian
Stock Exchange approved the delisting of nine (9) dormant companies during the review period.

2.6.4 Market Capitalization

The total market capitalization of the 295 listed securities rose by 22.2 per cent to =N=8.8 trillion from the
preceding quarter’s level. The increase in market capitalization was attributed to the price gains recorded by
the highly capitalized stocks. The 208 listed equities
accounted for =N=6.1 trillion or 69.6 per cent of the
total market capitalization.

2.6.5 NSE All-Share Index

The NSE All-Share Index, which opened at 19,851.89,
closed at 26,861.55, representing an increase of 35.3
per cent over the level in the preceding quarter. Relative to the closing value of 31,450.78 on December 31,
2008, the year-to-date fall in the NSE All-Share-Index
stood at 14.6 per cent. Also, the NSE Insurance Index
fell by 8.6 per cent to close at 367.32. The NSE-30
Index rose by 42.9 per cent to 903.88, while the NSE
Food/Beverage Index also increased by 25.1 per cent to
close at 504.00. The NSE Banking Index and NSE Oil/
Gas Index rose by 43.8 and 34.6 per cent to close, respectively, at 459.08 and 419.09.

Figure 5: Volume and value of traded securities

2nd
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3rd
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'07
4th
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'07
1st
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2nd
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'08
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No.

N'billion
Volume of traded securities
Value of securities


3.0
FISCAL OPERATIONS

3.1
Federation Account Operations

Available data showed that total federally-collected
revenue during the second quarter of 2009 stood at
=N=1,044.89 billion, representing a decline of 21.2 and
11.6 per cent from the proportionate budget estimate
and receipts in the preceding quarter, respectively. At
=N=696.61 billion, oil receipts, which constituted 66.7
per cent of the total, was lower than the proportionate
budget estimate and the receipts in the preceding quarter by 10.5 and 17.3 per cent, respectively. The fall in
oil receipts relative to the preceding quarter was attributed to the decline in receipts from crude oil and gas
sales as well as petroleum profit tax and royalties occasioned by militant activities in the Niger Delta.

Non-oil receipts, at =N=348.29 billion or 33.3 per cent
of the total, was lower than the budget estimate by 36.4
per cent but exceeded the receipts in the preceding
quarter by 2.7 per cent. The decline relative to the
budget estimate was attributed largely to the fall in
Value-Added tax (VAT) and Companies Income Tax
(CIT) (fig 7).

As a percentage of GDP, oil revenue was 13.7 per cent,
while non-oil revenue stood at 6.8 per cent in the second quarter of 2009. The decline in revenue relative to
the level in the preceding quarter was due to the fall in
oil receipts during the review quarter.

Of the total federally-collected revenue during the review quarter, the sum of =N=655.98 billion was transferred to the Federation Account for distribution among
the three tiers of government and the 13.0 per cent derivation fund. The Federal Government received
=N=311.47 billion, while the state and local governments received =N=157.98 billion and =N=121.80
billion, respectively.
The balance of =N=64.73 billion went to the 13.0 per
cent derivation fund for distribution by the oil producing states. To bridge the shortfall in revenue for the
period, the sum of =N=328.09 billion was augmented
by monetization of part of the excess crude account and
shared as follows: Federal Government (=N=150.37
billion), state governments (=N=76.27 billion), local
governments (=N=58.80 billion) and oil producing
states (=N=42.65 billion).

3.2
The Fiscal Operations of the Three
Tiers of Government

3.2.1
The Federal Government

At =N=519.36 billion, the Federal Government retained
revenue for the second quarter 2009, was lower than the
proportionate budget estimate and the receipts in the
preceding quarter by 13.5 and 30.5 per cent, respectively.

At =N=901.59 billion, total expenditure for the review
period rose by 11.4 and 30.8 per cent over the proportionate budget estimate and the level in the preceding
quarter, respectively. The rise in total expenditure relative to the budget estimate and the preceding quarter
was attributed largely to the increase in capital releases
during the quarter. A breakdown of total expenditure
showed that the recurrent component accounted for 63.1
per cent, capital component 31.3 per cent, while statutory transfers accounted for the balance of 5.6 per cent.
As a percentage of GDP, recurrent expenditure was 8.4
per cent, while capital expenditure and transfers stood at
4.2 and 0.8 per cent, respectively.

The fiscal operations of the Federal Government in the
second quarter 2009, resulted in an overall deficit of
=N=382.23 billion, compared with the deficits of
=N=57.96 billion in the preceding quarter and the budgeted sum of =N=209.15 billion.

As a percentage of GDP, the fiscal deficit was 5.7 per
cent in the review quarter. The fiscal deficit was financed from additional issuance of FGN Bonds and
other funds.

Figure 7: Components of Federally Collected Revenue(=N= Billion)

OIL
NON OIL
Figure 6 : M arket capit alizatio n and value ind ex

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Mkt capitalization
Value index


3.2.2 Statutory Allocations to State Governments

During the second quarter of 2009, total receipts, including the 13.0 per cent Derivation Fund and share of
VAT by the state governments from the Federation
Account stood at =N=393.86 billion. This represented a
decline of 8.7 and 32.8 per cent from the levels in the
preceding quarter and the corresponding period of
2008, respectively.

Further breakdown showed that at =N=52.23 billion,
receipts from the VAT Pool Account declined by 4.0
per cent from the level in the preceding quarter, while
receipts from the Federation Account stood at
=N=341.63 billion. On monthly basis, the sum of
=N=160.94 billion, =N=113.78 billion and =N=393.86
billion were allocated to the 36 state governments in
April, May and June 2009, respectively.

3.2.3 Statutory Allocations to Local Government Councils


Total receipts by the local governments from the Federation and VAT Pool Accounts during the second
quarter of 2009, stood at =N=217.16 billion. This was
lower than the level in the preceding quarter and the
corresponding quarter of 2008 by 8.0 and 30.0 per cent,
respectively. Of this amount, allocation from the Federation Account was =N=180.60 billion or 83.2 per
cent of the total, while VAT Pool Account accounted
for =N=36.56 billion or 16.8 per cent. On monthly basis, the sums of =N=86.14 billion, =N=63.40 billion
and =N=67.62 billion were allocated to the 774 local
governments in April, May and June 2009, respectively.

3.3
Consolidated Federal Government Debt

At =N=3,364.06 billion or 14.8 per cent of GDP, the
estimated total Federal Government debt as at end-June
2009, rose by 11.3 per cent over the level at end-March
2009. The breakdown comprised of domestic debt of
=N=2,812.79 billion and external debt of =N=551.27
billion (US$3.72 billion). The rise in total debt was
accounted for by the issuance of additional FGN
Bonds, increase in treasury bills outstanding as well as
naira exchange rate depreciation during the quarter.

3.3.1
Domestic Debt

The domestic debt stock of the Federal Government
outstanding at the end of the second quarter, 2009 was
estimated at =N=2,812.79 billion, representing an increase of 13.1 per cent over the level at the end of the
first quarter. As a percentage of GDP, total domestic
debt was 12.4 per cent.

The increase in total domestic debt was attributed
largely to the issuance of additional FGN Bonds and
the rise in treasury bills outstanding during the quarter.

4.0
DOMESTIC ECONOMIC CONDITIONS

4.1
Agricultural Sector

The weather situation improved during the review
quarter as rainfall stabilized in the second month of the
quarter in the coastal areas and the Federal Capital Territory (FCT). Agricultural activities in the Southern
States centered on harvesting of tree crops and the
clearing of land for the cropping season, while farmers
in the Northern States were engaged in the preparation
of land for cultivation.

A ggregate output growth in the economy
measured by the gross domestic product (GDP) was
estimated at 5.13 per cent in the second quarter of
2009, compared with 4.85 per cent in the preceding
quarter. The projected growth was driven mainly by the
non-oil sector, particularly agriculture which constituted 43.9 per cent of total GDP and contributed 2.4
percentage points to the growth in real GDP. Agricultural activities centered on harvesting of tree crops,
clearing and the preparation of irrigated land for cultivation. Crude oil production was estimated at 1.70
million barrels per day (mbd) or 154.7 million barrels
for the quarter. The end-period inflation rate for the
second quarter of 2009, on a year-on-year basis, was
11.2 per cent, compared with 14.4 per cent in the preceding quarter. The inflation rate on a 12-month moving average basis was 13.7 per cent, compared with the
preceding quarter’s level of 13.1 per cent.


During the review period, a total of =N=891.6 million
was guaranteed to 4,920 farmers under the Agricultural Credit Guarantee Scheme (ACGS). This amount
represented an increase of 20.7 per cent over the level
in the preceding quarter, but a decline of 37.6 per cent
from the level in the corresponding quarter of 2008.
A sub-sectoral analysis of the loans guaranteed indicated that the food crop sub-sector had the largest
share of =N=446.1 million or 50.0 per cent to 3,862
beneficiaries, while the livestock sub-sector received
=N=251.2 million or 28.3 per cent to 488 beneficiaries. Also, 228 beneficiaries in the fisheries sub-sector
obtained =N=105.5 million or 11.8 per cent. In the
cash crops sub-sector, 182 beneficiaries got =N=47.7
million or 5.4 per cent, while 160 beneficiaries in
‘others’ had =N=41.0 million or 4.5 per cent. Further
analysis showed that 27 states benefited from the
scheme during the quarter, the highest and lowest
sums of =N=137.6 million (15.4 per cent) and
=N=1.1 million (0.1 per cent) went to Kaduna and
Ondo States, respectively.

The retail prices of most staples recorded increase in
the second quarter of 2009. Thirteen of the fourteen
commodities monitored recorded price increase,
which ranged from 0.7 per cent for groundnut oil to
89.8 per cent for millet over their levels in the preceding quarter, while vegetable oil recorded a price decline of 4.3 per cent. The rise in the price of most
commodities was attributed to the subsisting food
situation in the country.

4.2
Industrial Production

Industrial activities during the second quarter of
2009, declined relative to the preceding quarter. At
114.6 (1990=100), the estimated index of industrial
production fell by 1.2 and 3.2 per cent from the levels
attained in the preceding quarter and the corresponding period of 2008, respectively. The fall reflected the
poor performance in manufacturing activities, mining
output and electricity generation.

The estimated index of manufacturing production, at
88.6 (1990=100), declined by 1.4 and 2.6 per cent
from the levels in the preceding quarter and corresponding period of 2008, respectively. The estimated
capacity utilization also fell by 2.3 percentage points
to 53.5 per cent during the review quarter. The decline was accounted for by poor electricity supply
which constrained production and weak demand as a
result of the impact of the global recession.

At 125.9 (1990=100), the index of mining production declined by 1.3 and 2.7 per cent from the levels
attained in the preceding quarter and the corresponding period of 2008, respectively. The decline was
attributed to the fall in crude oil and gas production,
resulting from the crisis in the Niger Delta region.
At 1,503.4 MW/h, estimated average electricity generation fell by 26.1 per cent from the level attained
in the preceding quarter. The decline reflected the
malfunctioning of some units of the nation’s hydro
electric power generating plants and the decline in
supply of gas to thermal stations as well as the
breakdown of turbines at the Egbin thermal station.

At 1,324.7 MW/h, estimated average electricity consumption declined by 23.1 per cent from the level in
the preceding quarter. Of the total, residential consumption accounted for 52.6 per cent, commercial &
street lighting accounted for 27.1 per cent, while industrial consumption accounted for 20.3 per cent.
The fall in electricity consumption was attributed to
epileptic power supply due to the decline in gas supply to the thermal stations occasioned by drop in water level at the reservoirs of the hydro power stations,
as well as poor maintenance of the transmission and
distribution facilities during the review quarter.

4.3 Petroleum Sector

Nigeria’s crude oil production, including condensates
and natural gas liquids was estimated at 1.70 million
barrels per day (mbd) or 154.70 million barrels (mbd)
during the second quarter of 2009, compared with
1.78 mbd or 160.20 mbd in the preceding quarter.
This represented a decline of 4.5 per cent. The development was attributed to the continued disruption in
oil production in the Niger Delta region as a result of
militant activities. Crude oil export was estimated at
1.25 mbd or 113.75 million barrels in the review period, compared with 1.33 mbd or 121.03 million barrels in the preceding quarter. The development was
attributed to the continued attacks on oil export facilities, including the Trans Ramos Pipeline facility belonging to the Shell Petroleum Development Company (SPDC). Deliveries to the refineries for domestic consumption remained at 0.445 mbd or 40.95 million barrels in the review quarter.

At an estimated average of US$61.14 per barrel, the
price of Nigeria’s reference crude, the Bonny Light
(37o API), rose by 32.5 per cent over the level in the
preceding quarter.

The average prices of other competing crudes namely,
the West Texas Intermediate, the U.K Brent and the
Forcados also rose by 45.5, 36.8 and 29.2 per cent to
US$59.44, US$59.76 and US$60.32 per barrel, respectively. The average price of OPEC’s basket of eleven
crude streams also, rose by US$15.79 dollars to
US$58.25 over the level in the preceding quarter. The
increase in price was attributed to the high expectations
of global economic recovery as well as the falling inventories in top oil consuming nation, the United States
of America.
4.4
Consumer Prices

Available data showed that the all-items composite
Consumer Price Index (CPI) for the end of the second
quarter of 2009, was 204.7 (May 2003=100), representing an increase of 4.3 and 11.2 per cent over the
levels in the preceding quarter and the corresponding
period of 2008, respectively. The development was
attributed largely to the increase in the prices of some
staple food items, household goods and miscellaneous
services.

The urban all-items CPI at the end of the second quarter of 2009, was 223.5 (May 2003=100), indicating an
increase of 3.6 and 9.2 per cent over the levels in the
preceding quarter and the corresponding quarter of
2008, respectively. Similarly, the rural all-items CPI
for the quarter, at 196.6 (May 2003=100), represented
an increase of 4.7 and 12.2 per cent over the levels in
the preceding quarter and the corresponding period of
2008, respectively.

The end-period inflation rate for the second quarter of
2009, on a year-on-year basis, was 11.2 per cent, compared with 14.4 and 12.0 per cent in the preceding
quarter and the corresponding quarter of 2008, respectively.

The inflation rate on a twelve-month moving average
basis for the second quarter of 2009, was 13.7 per
cent, compared with 13.1 and 7.0 per cent recorded in
March 2009 and the corresponding period of 2008,
respectively.


5.0
EXTERNAL SECTOR DEVELOPMENTS

5.1
Foreign Exchange Flows

Foreign exchange inflow and outflow through the CBN
in the second quarter of 2009 amounted to US$5.47
billion and US$9.16 billion, respectively, representing
a net outflow of US$3.69 billion. Relative to the respective levels of US$5.72 billion and US$11.26 billion in the preceding quarter, inflow and outflow fell by
4.4 and 18.7 per cent. The decline in inflow was attributed to the 24.0 per cent fall in oil receipts, while the
fall in outflow was attributed largely to the 100.0 per
cent decrease in inter-bank sales at the foreign exchange market during the review quarter.

Jun.

Sep.

Dec.

Mar.

Jun.

Sep.

Dec.

Mar.

Jun.

Composite 164.3 170.2 167.4 171.6 184.1 192.4 192.6 196.2 204.7
Urban
183.5 186.9 191.4 196.3 204.7 212.1 213.1 215.8 223.5
Rural

160.9 175.2 183.8 183.7 187.8 196.6

Number
Fig. 11: Quarterly Consumer Price Indices in
Nigeria (2003=100)
P rovisional data indicated that foreign
exchange inflow and outflow through the CBN in the
second quarter of 2009 fell by 4.4 per cent and 18.7
per cent, respectively. However, total non-oil export
earnings receipts by banks rose by 46.4 per cent over
the level in the preceding quarter. The weighted average exchange rate of the Naira vis-à-vis the US dollar,
depreciated by 0.6 per cent to =N=147.76 per dollar
at the Retail Dutch Auction System (RDAS).


Available data on aggregate foreign exchange flows
through the economy indicated that total inflow
amounted to US$12.23 billion, representing a decline of
31.8 and 52.0 per cent from the levels in the preceding
quarter and the corresponding period of 2008. Oil sector
receipts, which accounted for 26.4 per cent of the total,
stood at US$3.23 billion, compared with the respective
levels of US$4.25 billion and US$10.31 billion in the
preceding quarter and corresponding period of 2008.
Non-oil public sector inflows, which accounted for 18.3
per cent of the total, however, rose by 51.4 per cent,
while autonomous inflow, which accounted for 55.3 per
cent decline by 44.6 per cent.

At US$9.47 billion, aggregate foreign exchange outflow
from the economy declined by 17.4 and 17.2 per cent
from the levels in the preceding quarter and the corresponding period of 2008, respectively. The fall in outflow relative to the preceding quarter was attributed
largely to the lull in activities at the inter-bank segment
of the foreign exchange market during the review quarter.

5.2 Non-Oil Export Proceeds by Exporters

Total non-oil export earnings by Nigeria’s exporters
increased by 46.4 per cent to US$379.06 million over
the level in the preceding quarter. A breakdown of the
proceeds in the review quarter showed that the proceeds
of industrial, food products, manufactured products,
transport, agricultural, and minerals stood at US$158.70
million, US$7.92 million, US$74.79 million, US$0.17
million, US$70.68 million and US$66.80 million, respectively.

The shares of industrial, food products, manufactured
products, transport, agricultural, and minerals subsectors in non-oil export proceeds were 41.9, 2.1, 19.7,
0.1, 18.6 and 17.6 per cent, respectively, in the review
quarter. The development was attributed largely to the
increase in the prices of the goods traded at the international market.
5.3 Sectoral Utilisation of Foreign Exchange


The invisibles sector accounted for the bulk (26.4 per
cent) of total foreign exchange disbursed in the first
quarter of 2009, followed by the industrial sector
(24.1 per cent). Other beneficiary sectors, in a descending order of importance, included: manufactured
products (22.1 per cent), food (10.6 per cent), minerals & oil (10.6 per cent), transport (5.3 per cent) and
agricultural products (0.9 per cent) (Fig.14).
5.4 Foreign Exchange Market Developments

Foreign exchange demand by the authorized dealers
stood at US$9.53 billion, indicating a decline of 14.5
per cent from the level in the preceding quarter. Relative
to the level in the corresponding period of 2008, demand rose by 85.7 per cent. Consequently, a total
amount of US$7.84 billion was sold by the CBN during
the period, indicating a fall of 3.4 per cent from the
level in the preceding quarter.

Under the RDAS, the weighted average exchange rate
of the Naira vis-à-vis the US dollar depreciated by 0.6
per cent to =N=147.76 per dollar from =N=146.86 per
dollar in the preceding quarter. It also showed a depreciation of 20.2 per cent from the level in the corresponding period of 2008. In the bureaux-de-change segment
of the market, the naira traded at an average of
=N=175.68 per dollar, compared with =N=160.37 and
=N=118.81 per dollar in the preceding quarter and the
corresponding quarter of 2008, respectively. Consequently, the premium between the official and the bureaux-de-change rates widened from 9.2 per cent in the
preceding quarter to 18.9 per cent (fig. 16).

Fig. 14 : Sect oral Ut ilisat io n of Foreign Exchange
( Percent age o f T ot al)


1st Qtr 2009

2nd Qtr 2009

2nd Qtr 2008

Industr i
al
Agr i cul
tur al
Food
M anuf a
ctur es
T r ansp
or t
Invi si bl
es
M i n. &
Oi l


6.0 GLOBAL ECONOMIC CONDITIONS

There was modest growth globally in the quarter under
review, though the recession was not over and the recovery was uneven and likely to be sluggish. This was
because financial systems remain impaired and support
from public policies would gradually diminish, while
households in countries that suffered asset price bursts
would rebuild savings. It has been observed that investments made by companies between 2002 and 2007
have now turned into surplus capacity, following the
financial crisis, which if not eliminated, might lead to
more jobs losses and surge in corporate bankruptcies as
spending and investments slide.

The main policy priority remained restoring financial
sector health. Macroeconomic policies need to stay
supportive, while preparing the ground for an orderly
unwinding of extraordinary levels of public intervention.
At the same time, given weak internal demand prospects in a number of current account deficit countries,
including the United States, policies need to sustain
stronger demand in key surplus countries.

Advanced economies as a group is still projected not to
show a sustained recovery in activity until the second
half of 2010, consistent with the April 2009 World
The global recession has hit the euro area harder than
the US, partly because the majority of euro area countries are more dependent on exports for growth and
consequently more vulnerable to drops in global demand. Accordingly, the present economic situation is
assessed unanimously as bad in all euro area countries.
In the case of the United States, the economy appeared
to be bottoming out and may start to recover in the
second half of 2009.
Asian countries have experienced lower growth because of large year-on-year decline in exports. In the
region, economic expectations have been upgraded
except in Indonesia and Bangladesh. In Japan, following a dismal first quarter growth, there are signs that
output is stabilizing. Improved consumer confidence,
progress in inventory adjustment, aggressive fiscal
policies, and strong performance by some other Asian
economies are expected to lift growth in the coming
quarters.

Latin America’s largest economies, particularly Brazil,
have experienced about 30.0 per cent decline in exports
and consequently, about 1.9 per cent decline in GDP.
In addition, the decline in U.S. housing construction
has caused a drop of remittances and foreign direct
investment has dried up.

Low income African countries are also experiencing
fall in remittances and decline in development assistance inflow. Growth will be lower and budgets
strained, while the remarkable gains achieved over the
past decade in poverty reduction could be reversed and
the MDGs put under threat. The priority for all African
countries would be directed toward containing the adverse impact of the crisis on growth and poverty, while
preserving the hard won gains of recent years, including macroeconomic stability.

6.1 Global Inflation

Inflation pressures have continued to ease with the continued weakness of the global economy. Year-on-year
inflation moderated to 1.7 per cent in May, down from
6.0 per cent in the preceding year. In the advanced
economies, headline inflation fell below zero per cent
in May as oil prices remained far below levels in the
preceding year, despite their recent recovery. Core inflation was 1.5 per cent, down from 2.0 per cent in the
preceding year.

Similarly, headline and core inflation in the emerging
markets have moderated, falling below 4.5 per cent and
to around 1.0 per cent in May, respectively.

However, developments have been uneven, with inflation falling more in China, India and the Middle East
than elsewhere.

2nd
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1st
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2nd
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2nd
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Average RDAS 128.128.128.128.127.126.120. 118 117.117.121.146.147.
Average BDC
142.130. 130 129.128.127.123.119.118.119.125.160.175.

Rate (=N=/$)
Period
Figure 16: Average Exchange Rate Movements
Figure 17: WDAS-BDC Exchange Rate Premium
(Quarterly)

'4th Qtr-06
2nd Qtr-'07
4th Qtr-07
2nd Qtr 08
4th Qtr 08
2nd Qtr 09
Premium


Despite upward pressure from recovering commodity
prices, global inflation is expected toremain subdued
through 2010. Risks of sustained deflation are small, as
core inflation and inflation expectations in most major
economies were still within the range of 1to 2 per cent.

6.2
Global Commodity Prices

The growth of the global economy and commodity
prices are correlated. Since the beginning of the second
quarter when the global recession started to bottom out,
global commodity price decline also started to decelerate. World crude oil output in the second quarter 2009,
was estimated at 84.30 million barrels per day (mbd),
while demand was estimated at 83.10 mbd, compared
with 84.60 and 84.40 mbd supplied and demanded in the
preceding quarter, respectively. The marginal decline in
demand was due to the continued deterioration of economic activities in the world economy. Indeed, crude oil
prices rose from below $50 to over $60 per barrel. China
took advantage of the low prices to stock pile thus engendering prices to improve over the first quarter levels.
Forecasts of sluggish global economic growth through
2010 hindered the commodities futures market and kept
prices generally low.

6.3
International Financial Markets
The risks to the global financial system moderated from
the extreme levels of the first quarter. Unprecedented
policy actions undertaken by central banks and governments world-wide succeeded in stabilizing the financial
condition of banks, reduced funding pressures and counterparty risk concerns, and supported aggregate demand.
These interventions reduced the risk of another systemic
failure similar to the collapse of Lehman Brothers.
Bank debt and inter-bank markets resumed functioning,
albeit with massive public sector support.
Concerns regarding liquidity and counter-party risks in
the banking sector declined, as evidenced by the narrowing of LIBOR-overnight index and credit default
swap spreads. Goldmansachs and other banks in the
U.S. started paying back to the Treasury the money lent
to them under the Troubled Assets Relief Programme
(TARP). However, overall financial conditions remained tight. Growth in bank credit to the private sector
continued to slow in mature economies and securitization markets outside those supported by the public sector remained impaired, while lower-quality borrowers
have little access to capital market funding. Furthermore, public sector interventions that underpinned the
reduction in private sector risks, resulted in a concomitant increase in public sector risks and a mounting burden on fiscal sustainability.
Corporate bond markets functioned more normally, a
critical development for countries, notably the United
States, that rely more heavily on non-bank market financing. Corporate credit and asset-backed spreads
tightened significantly and issuance rose, as firms
sought alternatives to scarce bank credit. High-yield
issuance also increased recently, but was still restricted
to higher quality credit, and spreads remained historically wide.
Emerging market assets benefited from the recovery of
commodity prices and improved growth prospects, especially in Asia. The return of risk appetite also, led to a
resumption of portfolio inflows from investors. Emerging market equities rebounded 30.0 to 60.0 per cent,
matching or outpacing mature market equities. Despite
these positive developments, the overall outlook for
emerging markets remained vulnerable to lower than
expected global growth and constrained international
bank lending.
Banks contracted their cross-border positions at a faster
rate than their domestic balance sheets, although there
was evidence that parent banks maintained funding levels to their emerging market subsidiaries. Consequently,
cross-border deleveraging was leading to an unwinding
of the rapid financial globalization that occurred over
the past 10 years.

This trend would likely continue, placing additional
pressure on those banking systems that are heavily reliant on cross-border funding. Emerging Europe and the
Commonwealth of Independent States (CIS) are particularly vulnerable to contractions in cross-border funding
had not benefited as much from the market rebound
seen elsewhere.
Globally, sovereign yield curves steepened considerably, as conventional monetary policy easing had anchored short-term rates, while the longer end of the
curve rose sharply, reflecting in part improved recovery
prospects and reduced risks of deflation.

6.4
Other International Economic Developments and Meetings

Other major international developments and meetings of
relevance to the domestic economy during the review
quarter included: the meeting of the Leaders of the
Group of Twenty (G-20) in London on April 2, 2009 to
discuss the global economy issues and challenges (see
April Report). The Ordinary Meeting of the Bureau of
the Association of African Central Banks (AACB) was
held in Addis Ababa, Ethiopia on April 9, 2009 (see
April Report). The second meeting of the Joint Committee of the African Union Commission and the Association of African Central Banks (AACB) was held in Addis Ababa, Ethiopia on April 9, 2009.

The meeting considered the new approach suggested by
the African Union Commission (AUC) which entailed
setting up a steering committee to oversee preparations
for the establishment of the African Central Bank
(ACB) (see April Report). Also, the 2009 Spring Meetings of the Board of Governors of the World Bank
Group and the International Monetary Fund (IMF) took
place in Washington, D. C, USA from April 25-26,
2009. These meetings were preceded by bilateral meetings. The Global Monitoring Report (GMR) 2009, a
development emergency report released by the International Monetary Fund (IMF) and the World Bank on
April 24, 2009 warned that the global financial crisis
has constrained the attainment of the 2015 Millennium
Development Goals (MDGs) and created an emergency
for development (see April Report).

The meeting of the Economic Community of West African States (ECOWAS) Ministerial Monitoring Committee (MMC), comprising ECOWAS Ministers of
Trade and Finance, was held in Abuja on May 15, 2009.
The Ministers are responsible for coordinating the ongoing negotiations of the Economic Partnership Agreement (EPA) with the European Union (EU) (see May
report). The 24th meeting of the Convergence Council
of Ministers and Governors of the West African Monetary Zone (WAMZ) was held in Abuja, Nigeria on May
23, 2009. The meeting was preceded by the 21st meeting of the Committee of Governors of Central Banks of
the WAMZ (see May Report).
The ECOWAS Convergence Council, comprising Ministers of Finance and the Governors of Central Banks of
member states held an Extraordinary Meeting on May
25, 2009. The Meeting was chaired by Nigeria’s Minister of Finance, Dr. Mansur Muhtar. The Council considered and approved a revised road map for the realisation
of a single currency for West Africa by 2020.
The roadmap outlined activities to be undertaken ahead
of the new date, including the review and harmonisation
of the convergence criteria, the harmonisation of statistics, domestic policies and the legal, accounting and
statistical frameworks of public finance (see May Report). The 44th Annual Meeting of the Board of Governors of the African Development Bank (ADB) and the
35th Annual Meeting of the African Development Fund
(ADF) were held jointly from May 13 – 14, 2009 in
Dakar, Senegal(see May Report). The Association of
African Central Banks Continental Seminar on Liquidity Management was held in Abuja from May 7 – 9,
2009. It was attended by about 100 participants from
member central banks and regional institutions. The
seminar had three sub-themes namely: What Concept of
Liquidity for African Economies; Suitable Liquidity
Management and Forecasting Tools for Africa;
and Collaboration among African Central Banks in Liquidity Management in the Context of the International
Financial Crisis (see May report).

In a related development, the 153rd Extraordinary Meeting
of the Conference of the Organization of the Petroleum
Exporting Countries (OPEC) was convened in Vienna,
Austria in the review quarter. The Conference considered
the report of the Ministerial Monitoring Sub-Committee
and the oil market situation, as well as the demand and
supply projections for 2009, in particular the third and
fourth quarter. It observed that the severe and broad impact of the ongoing global economic downturn, precipitated by the financial crisis, had led to a weakness in
global oil demand, which was likely to remain for some
time (see May Report).

In another development, the Second Joint Annual Meeting of the African Union Conference of Ministers of
Economy and Finance and the United Nations Economic
Commission for Africa (ECA) Conference of African
Ministers of Finance, Planning and Economic Development was held in Cairo, Egypt from June 6-7, 2009. The
following are the highlights of the meeting:
Ministers recognized that although the financial crisis
was triggered by events in advanced countries, its effects
were being felt in Africa as recent projections indicated
that in 2009 the crisis would reduce growth in the region
by two to four percentage points, with dire consequences
for Africa’s ability to reduce poverty and meet the Millennium Development Goals (MDGs) by the 2015 target
date. Consequently, bold and swift actions were needed
to cushion the impact of the crisis.
They acknowledged that several countries in the region
lacked the ability and flexibility to conduct countercyclical policies needed to mitigate the impact of the crisis on
their economies. They urged regional and multilateral
development finance institutions to increase their financial support to African countries and ensure that the financial crisis does not become a humanitarian disaster.
They acknowledged the existence of a wide gap between
domestic savings and investment requirements in Africa,
as well as the need to close the financing gap in order to
increase the prospects of meeting the MDGs. They recognized the crucial role of domestic resource mobilization in laying a solid foundation for sustained growth and
development noting that growth would increase domestic
revenue if it was accompanied by structural change, improved fiscal policies and better tax administration.
Ministers noted that although Africa is not a major contributor to global warming, it is the region most likely to
be significantly affected by climate change. They called
on industrialized countries to provide financial and technical assistance to Africa to enable them to respond to
the challenges presented by climate change.

•
They called for efforts to be made to increase
Africa's voice and participation in international financial institutions as well as other forums on reform of
the global financial architecture.

Also, the 5th Session of China-Nigeria Economic and
Technical Cooperation Joint Commission was held in
Beijing, China from June 22 – 26, 2009. Collaborative issues were discussed, including issues on economic cooperation, banking and finance, energy,
solid minerals, and infrastructure development.

In a related development, the 79th Regular Council
Session, 139th Executive Committee Meeting and the
19th Meeting of the Consultative Board on the World
Cocoa Economy of the International Cocoa Organisation (ICCO) were held in Moscow from June 1 – 5,
2009. The meeting considered the following amongst
others: membership of the International Cocoa Organization; distribution of votes; review of observer
status of non-member countries; Special Reserve
Fund; relocation of the ICCO Headquarters to Ivory
Coast; cocoa production and consumption; and proposals for a future cocoa agreement.


Lastly, a special ECOWAS – Spain Summit was held
in June 2009. It was attended by Heads of State and
Government of ECOWAS and the Prime Minister of
Spain. The summit agreed to take steps towards
strengthening cooperation in areas of infrastructural
development, renewable energy, war against malaria
and illicit trafficking in persons, drugs and arms. The
cooperation would also cover the implementation of
the ECOWAS Agricultural Policy (ECOWAP), the
promotion of gender and professional training.

The Spanish government pledged to provide a total of
Euro 262 million to strengthen regional integration in
West Africa. Euro 240 million out of the donation
would be dedicated to boosting agricultural productivity to be spread over three years. The amount will
help facilitate the implementation of ECOWAP, its
national and regional priority programmes as well as
regional efforts towards increased food production
and anti-famine activities through support for regional agricultural programmes.

Appendix 1: Selected Macroeconomic Indicators (GDP, Money & Credit, Money Market & Capital Market Indicators)
2nd Qtr 07
3rd Qtr 07

4th Qtr 07


1st Qtr 08


2nd Qtr 08


3rd Qtr 08


4th Qtr 08

1st Qtr 09
2nd Qtr 09
GROSS DOMESTIC PRODUCT (at 1990 Constant Basic Prices)
Growth Rate (%)

Oil share of GDP (%)

Non-Oil share of GDP (%)

GROSS DOMESTIC PRODUCT (at Current Basic Prices)
Growth Rate (%)

Oil share of GDP (%)

Non-Oil share of GDP (%)

MONEY & CREDIT
Narrow Money (M1) (%)1

Broad Money (M2) (%)1

Narrow Money ((M1) (%)2

Broad Money (M2) (%)2

Aggregate Credit (Net) (%)1

Aggregate Credit (Net) (=N= ‘b)1


Credit to Government (Net) (%)1


Credit to Government (Net) (=N= ‘b)1


By CBN


By DMB


Federal Government Deposits (=N= ‘b)


Credit to Private Sector (%)1


Credit to Private Sector (=N= ‘b)1


Private Sector Deposit (=N= ‘b)

Aggregate Credit (%) 2


Credit to Government (%) 2


Credit to Private Sector (%)2

Base Money (=N= ‘b)

(Growth Rate, %)1

Currency in Circulation (=N=’b)


Bank Reserves (=N=’b)

Money Supply (=N=‘b)

NTB SALES (=N=‘b)
NTB Sales at Primary Market


2nd Qtr 07
3rd Qtr 07
4th Qtr 07
1st Qtr 08
2nd Qtr 08
3rd Qtr 08
4th Qtr 08
1st Qtr 09
2nd Qtr 09
NTB Sales at OMO (N’ B)

INTEREST RATES (%)
Inter-bank Call Rate (Weighted Average)

Minimum Rediscount Rate/Monetary Policy Rate

Treasury Bill Rate
Savings Deposit Rate

Deposit Rates (Consolidated)

Average Term Deposit Rate

7 Days

1 Month

3 Months

6 Months

12 Months

Over 12 Months

Prime Lending Rate

Maximum Lending Rate

Average Lending Rate
Real Interest Rate (Max. Lending Rate)

Real Interest rate (Ave. Deposit Rate)

CAPITAL MARKET
All Share Value Index
51,330.46
50,229.01

57,990.22

63,016.56

55,949.00

46,216.13

31,450.78

19,851.89

26,861.55
Market Capitalization (=N=’t)

Value of Shares Traded (=N=’b)

Volume of Shares Traded (‘b)

1 Percentage change over preceding Quarter
2 Percentage change over preceding December
* Commencement of MPR
GDP Figures are revised for 2007