By Babajide Komolafe, Economy Editor

Nigeria recovered from economic recession in 2021 but the economy of most Nigerians did not.

Most Nigerians experienced decline in welfare and standard of living caused by a combination of sharp naira depreciation and surge in prices of goods and services. These and other major developments which dominated the  economy in 2021 are presented below.

Surge in Prices of Goods and Services (Inflation)

A major issue of concern and challenge for most individuals and companies is the widespread surge in prices of goods and services.

According to data by the Nigeria Bureau of Statistics, NBS, the average price of eggs  (medium size) rose by 28.15 per cent from N44.75 in November 2020 to N57.35 in November 2021.

Similarly, the average price of Ikg Yam rose by 38.64 per cent from N236.25 in November 2020 to N327.53 in November 2021

Also the average price of one bottle of palm oil rose  by 42.79 per cent from N542.85 in November 2020 to N775.11 in November 2021. 

The average price of beans also rose by 54.61 percent from N308.36 in the corresponding month of November last year to N476.76 in November 2021.

In the same vein, the average price of refilling a 12.5kg cylinder of Liquefied Petroleum Gas (Cooking Gas) rose by 78.99 per cent  from N4,082.97 in November 2020 to N7,308.06 in November 2021.

This  general increase in prices of goods and services is reflected in the annual inflation rate which rose to a four year high of 18.17 per cent in March before declining to 15.4 per cent in November.  

The severe impact of this development on businesses is reflected in the CBN Monthly economic report for August which showed that the banking industry recorded a 13.6 per cent, month-on-month, MoM,  increase in bad loans  to N2.76 trillion in August, triggered by  rising  loan defaults in the construction sector as a result increase in  prices of building materials. 

The CBN  stated: “The increase in bad loans (Non Performing Loans, NPLs,) was due, mainly, to the increase in construction sector non-performing loans, owing to the rise in the prices of building materials, making it difficult for the contractors to meet their debt obligations.” 

Naira Depreciation

One of the  major causes of the double digit inflation experienced by Nigerians in 2021, is the sharp depreciation of the Naira in  the parallel market, where most businesses and individuals depend for the foreign exchange needs in 2021. 

While the naira depreciated marginally by 1.1 per cent in the official Investors and Exporters (I&E) window, where the exchange rate rose to N415.10  per dollar from N410.25 per dollar at the beginning of the year, the naira depreciated by 22.8 per cent in the parallel market.

The sharp depreciation  of the naira in the parallel market was driven by increased demand amidst low dollar supply, a situation worsened by the  July 27 decision of the Central Bank of Nigeria (CBN) to stop dollar sales to Bureaux De Change (BDCs). 

Rise in National Debt

Another major issue of concern  in the economy in 2021 was the sharp increase in the national debt.

Data from the NBS showed that the national debt stock rose to N38 trillion at the end of September 2021 from N32.9 trillion at the end of 2020,  representing an increase of  15.5 per cent.

The sharp increase is driven by increased borrowing by the Federal Government to finance the budget 2021 deficit of N5.6 trillion.

For example, the FG in September conducted a Eurobond auction to borrow $4 billion from the international debt market.

On the domestic front the FG  borrowed about N6 trillion comprising N2.84 trillion through FGN bonds, N3.03 trillion through treasury bills and N250 billion through the Sukuk bond.

The widespread concerns generated by the increased borrowing activities of the FG and the sharp increase in the national debt is reflected in the comments by Professor Doyin Salami, Chairman of the Presidential Economic Advisory Council, PEAC, who said the nation’s debt profile is not sustainable. 

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Also expressing similar concern, another member of the PEAC and Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said, “The growth in the level of debt is something of concern because the debts are liabilities. You also have to focus on the assets. What are the assets that are being acquired? How much of it is for consumption and how much of it is for Gross Capital Formation.” 

Twitter Ban

The indefinite ban imposed on Twitter by the FG  on June 5th sent shockwaves through the economy in 2021. 

The ban was a rude shock to many businesses as  Twitter had become a veritable channel to advertise their products and services as well as  to engage their customers. Furthermore, the social media marketing site had become a steady source of income for the advertising industry.

Hence the Twitter ban represented a major loss of income for most businesses and a minus to the nation’s Gross Domestic Product (GDP)

According to Netblocks Cost of Shutdown Tools,  Nigeria’s economy loses $250,600 per hour  due to the Twitter bank. This translates to $1.26 billion from June 5th to December 31st i.e. 209 days. 

Clampdown on Cryptocurrencies 

The CBN on February 5th reiterated its ban on crypto currency related transactions and ordered all banks and other financial institutions to identify individuals or entities that transact in cryptocurrency or operate cryptocurrency exchanges and close their accounts.

The directive of the CBN was greeted with criticism in some quarters who opined that prohibiting cryptocurrencies  would stifle innovation and the fledgling fintech ecosystem in the country. 

Notable among those that opposed the directive of the CBN is Vice President Yemi Osinbajo. Stressing that what is needed is regulation of cryptocurrencies and not prohibition as done by the CBN and SEC, Osinbajo said: “There is a role for regulation here. And it is in the place of both our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs.”

e-Naira launch

On October 25th, President Mohammadu Buhari launched the country’s central bank digital currency (CBDC) known as e-Naira. This provided another means for Ngerians to pay for goods and services. 

The e-Naira, also the first CBDC  in Africa and the third in the world, also provided another means of money transfer  for locals and for Dispora citizens. 

While stressing that the eNaira like other digital currencies carries risks for monetary policy implementation, cyber security, operational resilience, and financial integrity and stability, the International Monetary Fund, IMF  however expressed its readiness to help the CBN with technical assistance and policy advice to mitigate the risks.

Petroleum Industry Act 

The nation’s petroleum industry received a major boost on August 16th when President Mohammadu Buhari signed into law the much awaited Petroleum Industry Bill (PIB). 

The Senate had passed the Bill on July 15, 2021, while the House of Representatives did the same on July 16, thus paving the way for major reforms expected to facilitate investment flow into the oil and gas sector. 

 The  passage of the  bill had been delayed for nearly two decades due to stakeholder conflict, host communities’ objections, lack of political will and changes in government.

Following the enactment of the PIA, the FG announced a nine member Steering Committee, headed by the Minister of State, Petroleum Resources,  Timipre Sylva, as Chairman,  with a mandate to complete implementation of the PIA in 12 months.

Furthermore, the Nigeria National Petroleum Corporation, NNPC, became NNPC Limited, with a Board of Directors headed by Sen. Ifeanyi Ararume as  Chairman while Mallam Mele Kyari was  retained as the Chief Executive. 

The FG also constituted the board of the two regulatory bodies created by the PIA, namely the Upstream Petroleum Regulatory Commission (Commission) and the Midstream and Downstream Regulatory Authority (Authority). 

Drama at FirstBank and FBN Holdco

The banking industry was treated to two major boardroom politics in the nation’s oldest bank, FirstBank and its parent company, FBN Holding Company. The first drama happened in the last week of April . It started with the sack of the bank’s Chief Executive Officer, Mr. Adesola Adedutan by the Oba Otudeko led board of  FBN Holding Company. Irked by the board’s decision despite its plea against the move, the  CBN on   April 29th sacked the Boards of Directors of First Bank of Nigeria Limited and FBN Holdings Plc. The apex bank however  reappointed 14 out of the 21 directors affected by the sack into the new board of the two institutions.

The CBN also reinstated Mr Adesola Adeduntan as the Managing Director/Chief Executive of First Bank of Nigeria. 

The second drama happened in November when Billionaire Femi Otedola, in November announced his acquisition of  5.07 per cent shareholding in the company . This sparked controversy over who is the majority shareholder between Otedola, Tunde Hassan-Odukale,  and Oba Otudeko. The dust was settled however when  Otedola acquired more shares of the company and thus increased his shareholding to 7.5 per cent.

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