Modelling Assign

INTRODUTION
Nigeria Economic situation overview
In 2020, Nigeria experienced its deepest recession in two decades, but growth resumed in 2021
as pandemic restrictions were eased, oil prices recovered, and the authorities implemented
policies to counter the economic shock. Nigeria was highly vulnerable to the global economic
disruption caused by COVID-19, particularly due to the decline in oil prices. Oil accounts for
over 80 percent of exports, a third of banking sector credit, and half of government revenues. In
2018, 40% of Nigerians (83 million people) lived below the poverty line, while another 25% (53
million) were vulnerable. The number of Nigerians living below the international poverty line is
expected to rise by 12 million in 2019–23.
As part of its COVID-19 response, the government carried out long-delayed policy
reforms in 2020. Notably, it: (i) began to harmonize exchange rates; (ii) initiated reforms to
eliminate gasoline subsidies; (iii) adjusted electricity tariffs to more cost-reflective levels; (iv)
cut non-essential spending; and (v) enhanced debt management and increased transparency in the
public sector, especially for oil and gas operations.
The COVID-19 crisis continues to disrupt Nigeria’s labor market. While it now exceeds pre-
pandemic levels, improvements have been primarily due to workers turning to small-scale, non-
farm enterprise activities in retail and trade, the revenues of which remain precarious.
Nigeria’s economic outlook remains highly uncertain. Uncertainty around the pace of
vaccinations and the duration of COVID-19 persists. Moreover, the modest projected recovery
can be threatened by volatility in the oil sector, including an unexpected shock to oil prices, and
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weaknesses in the financial sector. Even in the most favorable global context, the policy response
of Nigeria’s authorities will be crucial to lay the foundation for a robust recovery.
Nigeria GDP
Nigeria Last Unit Reference Previous Highest Lowest
GDP Growth Rate -13.9 percent 21-Mar -0.8 12.12 -14.27
GDP Annual Growth Rate 5 percent 21-Jun 0.51 6.88 -6.1
GDP 432.3 USD 20-Dec 448.1 546.7 4.2
Billion
GDP Constant Prices 16694666 NGN 21-Jun 1682689 19550148 12583478
Million 0
Gross Fixed Capital 2944319 NGN 20-Dec 2396980 3108123 17236.65
Formation Million
GDP From Construction 532693.7 NGN 21-Jun 692520.9 752833.7 369190.9
Million
GDP From Agriculture 3969697 NGN 21-Jun 3760881 5484064 2594760
Million
GDP From Utilities 183591.7 NGN 21-Jun 71340.47 183591.7 51342.43
Million
GDP From Transport 209788.4 NGN 21-Jun 231805.4 296779.2 118655
Millions
GDP From Services 6694697 NGN 21-Jun 6514172 7707177 4564086
Millions
2
GDP From Public 368209.6 NGN 21-Jun 278241.1 614330.9 278241.1
Administration Millions
GDP From Mining 1239461 NGN 21-Jun 1556074 2406676 1147138
Million
GDP From Manufacturing 1451511 NGN 21-Jun 1670394 1718985 875408.2
Million
GDP From Services in Nigeria increased to 6694697.46 NGN Millions in the second quarter of
2021 from 6514172.17 NGN Millions in the first quarter of 2021.
Source: National Bureau of Statistics, Nigeria
Modelling of this block followed this identity but captured only private consumption and
investment. Government fiscal activities were
3
1. Investment in the Oil Sector
The oil sector in Nigeria operated under a public-private partnership arrangement, which
involved contributions from both parties. Government’s contribution was captured by the joint
venture cash calls and the bulk of private sector contribution came via foreign direct investment.
The sector had witnessed considerable disruptions owing to activities of militants. But
specifically modeling such disruptions could be difficult on account of poor data. In this study,
the impact of disruptions on investment in the oil sector was rather proxies using volatility of
production in the oil sector. As in other standard specifications of demand, income and price
both featured as determinants. Price in this case took Macro econometric Model of the Nigerian
Economy two forms – domestic prices (CPI) and the price of the product in the international
market, viewed as the incentive to investment. Therefore, investment in the oil sector (INVo)
was specified as a function of output variability in the oil sector (Yvo), domestic price level
(CPI), oil GDP (Yo), oil FDI (FDIo), returns on investment in the oil sector (Po).
2. Investment in the Non-Oil Sector
In the non-oil sector, government influence on private investment came through two channels –
credit to government which had potential crowding out effects and government capital
expenditure which was assumed to complement private investment. We assumed that agents
could (and regularly did) exercise the option to wait in investment decisions when the
macroeconomy was too volatile to accommodate their investment. In particular, returns from
investment were discounted for sunk costs which were partially or wholly irreversible as well as
the probability that other associated costs might not be fully recovered in a difficult to predict
4
environment as obtained in Nigeria. In line with the accelerator principle, domestic output played
a critical part, but was complemented by investments from outside the economy. Finally, the cost
of funds, proxied by the maximum lending rate was also incorporated. Investment in the non-oil
sector (INVn) was, therefore, specified as a function of output variability in the non-oil sector
capturing the macroeconomic instability (Yvn), non-oil GDP (Yn), non-oil FDI (FDIn), credit to
government (Cg), government capital expenditure (GCE), and domestic maximum lending rate
(Rm).
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Fig 1.1 flowchart of Nigeria supply
REFERENCE
CBN “Annual Report and Statement of Accounts” Various Issues
CBN (Forthcoming) “The Changing Structure Implications for Development”
CBN (2005). “Microfinance Policy, Nigeria”

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INTRODUTION

Nigeria Economic situation overview

expected to rise by 12 million in 2019–23.

public sector, especially for oil and gas operations.

Nigeria Last Unit Reference Previous Highest Lowest

GDP Growth Rate -13.9 percent 21-Mar -0.8 12.12 -14.27

GDP Annual Growth Rate 5 percent 21-Jun 0.51 6.88 -6.1

GDP 432.3 USD 20-Dec 448.1 546.7 4.2

GDP Constant Prices 16694666 NGN 21-Jun 1682689 19550148 12583478

Gross Fixed Capital 2944319 NGN 20-Dec 2396980 3108123 17236.65

GDP From Construction 532693.7 NGN 21-Jun 692520.9 752833.7 369190.9

GDP From Agriculture 3969697 NGN 21-Jun 3760881 5484064 2594760

GDP From Utilities 183591.7 NGN 21-Jun 71340.47 183591.7 51342.43

GDP From Transport 209788.4 NGN 21-Jun 231805.4 296779.2 118655

GDP From Services 6694697 NGN 21-Jun 6514172 7707177 4564086

GDP From Mining 1239461 NGN 21-Jun 1556074 2406676 1147138

GDP From Manufacturing 1451511 NGN 21-Jun 1670394 1718985 875408.2

2021 from 6514172.17 NGN Millions in the first quarter of 2021.

Source: National Bureau of Statistics, Nigeria

investment. Government fiscal activities were

2. Investment in the Non-Oil Sector

CBN “Annual Report and Statement of Accounts” Various Issues

CBN (Forthcoming) “The Changing Structure Implications for Development”

CBN (2005). “Microfinance Policy, Nigeria”

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