Purchasing power, GDP, foreign trade… Tinubu’s first year by economic indicators

On May 29, 2023, President Bola Tinubu made several promises during his inauguration speech to rekindle hope in Nigerians searching for light at the end of the tunnel.

Tinubu promised a decline in unemployment and a reduction of interest rates “to increase investment and consumer purchasing power” in ways that sustain the economy at a higher level.

The president also said his administration would target higher gross domestic product (GDP) growth.

With 12 months gone in his four-year tenure, TheCable takes a look at some economic indicators that illustrate Tinubu’s first-year performance.

PURCHASING POWER

Tinubu has not been able to increase purchasing power as promised, as the cost of living continues to ascend on the back of soaring inflation.

The inflation rate has been on an upward trend rising from 22.41 percent in May 2023 to 33.69 percent in April 2024, while food inflation has climbed to 40.53 percent from 24.82 percent within the same period.

To rein inflation, the Central Bank of Nigeria (CBN) has increased the interest rate from 18.5 percent in May last year to 26.25 percent in May 2024.

CBN has hiked interest rates four consecutive times under Tinubu — an act against the president’s vow to reduce the cost of lending to spur investments and improve the purchasing power of Nigerians.

Within the same period, the average retail price paid by consumers for premium motor spirit, also known as petrol, rose by 194.5 percent or N463.13 from N238.11 in May last year to N701. 24 in April 2024, according to data from the National Bureau of Statistics (NBS).

The increase, driven by the removal of petrol subsidy, and the hikes in the cost of borrowing and soaring inflation contributed to the increase in the cost of living and decline in purchasing power.

This is reflected in the average price of 1 kilogram (kg) of local rice (sold loose) which was sold for N555.18 in May 2023 but rose to N1,399.34 in April — indicating a year-on-year increase of 152.05 percent or N844.16.

Similarly, the average price of 1kg of white garri (sold loose) increased by 129.33 percent on a year-on-year basis from N371.42 in May last year to N851.81 in April.

CAPITAL IMPORTATION

Within the last nine months of last year, capital importation declined by 26.15 percent ($982.41 million) to $2.77 billion, compared to $3.75 billion reported in the same period in 2022 by NBS.

Capital importation consists of foreign direct investment (FDI), foreign portfolio investment (FPI), and other investments.

It entails the foreign capital inflow to fuel investment, trade, and manufacturing within a country.

According to NBS data, total capital importation into Nigeria stood at $1.03 billion in the second quarter (Q2) last year, lower than the $1.53 billion recorded in Q2 2022 — indicating a decrease of 32.90 percent.

In Q3 2023, capital importation declined by 43.55 percent to $654.65 million, compared to $1.15 billion reported in the corresponding quarter the previous year.

Similarly, in Q4 2023, capital importation stood at $1.08 billion — 2.62 percent higher than the $1.06 billion recorded in Q4 2022.

EXCHANGE RATE

At the end of President Muhammadu Buhari’s tenure a year ago, the exchange rate was hovering around N464.51 per dollar in the official window and N762/$1 in the parallel market.

A year later, however, the exchange rate stood at N1,339.33/$ and N1,520/$ in the official and parallel markets, respectively, as of May 27.

This indicates that the naira depreciated by N874.82 or 188.33 percent in the official market and N758 or 99.47 percent in the parallel market.

The depreciation of the naira was driven by many factors, one of which is the devaluation of the local currency by the Central Bank of Nigeria (CBN) on June 14, 2023, as the apex bank unified all trading windows into the investors and exporters (I&E) window.

The presidency also blamed Binance and other crypto platforms for the woes of the currency on February 21, but the CBN’s monetary policy committee (MPC), on May 21, said the volatility in the FX market is caused by seasonal demand for forex.

On its part, the Association of Bureau De Change Operators of Nigeria (ABCON), on May 23, said the weakening of the naira is caused by unearned income pursuing the local currency and not due to demand for the dollar.

Aminu Gwadabe, president of ABCON, also said corruption was responsible for the depreciation of the naira.

GDP

The GDP under Tinubu has underperformed and outperformed when compared to Buahri’s last year in office.

A quarterly breakdown showed the GDP growth rate in Q2 2023 was 2.51 percent (year-on-year) in real terms, falling below the 3.54 percent reported in the same quarter the previous year.

In Q3 last year, the GDP grew by 2.54 percent (year-on-year) in real terms, higher than the 2.25 percent recorded in the third quarter of 2022.

However, in Q4 2023, the GDP growth rate stood at 3.46 percent (year-on-year) in real terms, compared to the 3.52 percent recorded in the corresponding period in 2022.

The fluctuation in growth movement continued in Q1 2024, as the GDP growth rate was 2.98 percent (year-on-year) in real terms, relative to the 2.31 percent recorded in the first quarter of 2023.

In nominal terms, the aggregate GDP under Tinubu has increased by 15.69 percent (N32.21 trillion).

The aggregate GDP in nominal terms stood at N237.40 trillion between Q2 2023 and Q1 2024, compared to N205.19 trillion recorded between Q2 2022 and Q1 2023.

FOREIGN TRADE

Nigeria’s foreign trade under Tinubu increased by 61.27 percent or N22.15 trillion between Q2 and Q4 2023 compared to the same period in the previous year.

Total foreign trade, according to NBS data, increased to N58.3 trillion, compared to N36.15 trillion during the review period.

This report has excluded the Q1 2023 data because the NBS has not released the country’s trade performance numbers for Q1 2024 for better comparison.

Nonetheless, TheCable Index observed that in Q2 2023, the country’s entire trade stood at N12.7 trillion, with total exports at N7.02 trillion and imports amounting to N5.73 trillion.

The total trade fell below the N12.84 trillion reported in Q2 of 2022, with total exports at N7.40 trillion, while total imports stood at N5.43 trillion.

In Q3 last year, Nigeria’s total trade stood at N18.80 trillion, with exports accounting for N10.34 trillion, while total imports stood at N8.45 trillion. This was higher than the total trade of N11.59 trillion recorded in the third quarter of 2022, when total exports stood at N5.93 trillion and total imports were valued at N5.66 trillion.

However, despite raising total trade to N26.80 trillion in Q4 last year, Nigeria recorded a trade deficit of N1.41 trillion, as the country’s exports totalled N12.69 trillion, and total imports stood at N14.11 trillion.

Compared to the fourth quarter of 2022, Nigeria’s total trade stood at N11.72 trillion, of which total exports stood at N6.35 trillion and total imports amounted to N5.36 trillion — indicating a trade surplus of over N990 billion.

FOREIGN RESERVES

The foreign reserves have declined by 6.83 percent or $2.40 billion since Tinubu took over from Buhari.

It decreased from $35.09 billion reported on May 30, 2023, to $32.69 billion as of May 27, 2024, according to data obtained from CBN.

During the period of the decline, the CBN had intervened in the parallel market in a bid to crash the FX rate.

The apex bank sold $20,000 to each bureau de change (BDC) operator at the rate of N1,301/$ on February 27, while the second tranche of $10,000 was sold to the BDCs at the rate of N1,251/$.

Similarly, on April 8, CBN began the third tranche of sale to BDCs at N1,101/$.

The naira gained against the dollar in the parallel market amid the intervention, appreciating from N1,900/$ on February 21 to N1,100/$ on April 13.

As of June 5, the exchange rate stood at N1,500 to the greenback.

During the same period, the local currency at the official window recovered to N1,136.04/$, from N1,551.24/$ — but last traded at N1,488.60/$ on June 5.

However, Cardoso said the reduction in the country’s reserves is due to the payment of debts, and not defending the naira.