Dear Subscriber,

Nigeria’s external reserves are coming under pressure as foreign portfolio investments and export revenues decline. In Q2, total capital inflows into Nigeria declined by 12.53% to $5.5bn, while exports fell by 4.9% to $12.4bn.

Although these data points are historical, they point to a disturbing trend i.e. depleting external buffers and a possible weakening of the exchange rate. So far in Q3, Nigeria’s gross external reserves have declined by 5.19% ($2.48bn) while the naira is trading at N363-N364/$ at the IEFX window.

Gas is one of the four sources of power and is responsible for 85% of electricity generated in Nigeria. On the average, at least 2,000MW is lost through gas constraints daily. In recent times, there have been at least two total system-wide collapses. To achieve optimal power supply, the availability of gas and an efficient (cost reflective) pricing mechanism needs to be implemented.

Nigeria is the 2nd largest rubber producer in Africa and the 12th globally, however the country is not competitive. This is because production is suboptimal and primitive whilst output is declining.

In this edition of the FDC Bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses, investments and the Q3 macroeconomic outlook.

Enjoy your read!