The Federal Government used the “Ways and Means Advances” method to borrow from the CBN. The figures rose from N17.46 trillion as of December 2021 to N19.01tn as of April 2022, according to data from the apex bank.

The figure represents an increase of N1.55 trillion within the first four months of 2022.

Ways and Means Advances are loan facilities used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.

The N19.01 trillion owed to the apex bank by the Federal Government is not part of the country’s total public debt stock, which stood at N41.60 trillion as of March 2022. 

The public debt stock only includes the debts of the Federal Government of Nigeria, the 36 state governments, and the Federal Capital Territory.

Section 38 of the CBN Act, 2007, said the apex bank may grant temporary advances to the Federal Government with regard to temporary deficiency of budget revenue at such rate of interest as the bank may determine.

” The act said, “The total amount of such outstanding advances shall not at any time exceed five percent of the previous year’s actual revenue of the Federal Government,” the CBN Act noted.

“All advances shall be repaid as soon as possible and shall, in any event, be repayable by the end of the Federal Government financial year in which they are granted and if such advances remain unpaid at the end of the year, the power of the bank to grant such further advances in any subsequent year shall not be exercisable, unless the outstanding advances have been repaid.”

The CBN has said on its website, however, warns that the Federal Government’s borrowing from it through the Ways and Means Advances could have adverse effects on the bank’s monetary policy to the detriment of domestic prices and exchange rates.

“The direct consequence of central banks’ financing of deficits are distortions or surges in monetary base leading to adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy,” it said.

The World Bank, in a report in November last year, noted that the Federal Government’s recourse to CBN’s overdraft facility had repeatedly exceeded the limit of five percent of the previous year’s fiscal revenues.

It said the government continued to draw on the facility in 2020, with borrowing from the central bank amounting to around 80 percent of the previous year’s fiscal revenues.

But as humans, we naturally like to have a sense of what the year will look like. It is supposed to help planning, enable anticipation and strengthen hope.

Here are my thoughts on the five big things that will impact the Nigerian economy in 2022.

Do feel free to debate the points and if possible do add yours.

1. COVID-19 Pandemic

The coronavirus will remain a menace, affecting Nigerian Economy in 2022. The world cannot wish the COVID-19 pandemic away. It will remain a reference point for policy and business decisions for at least another year – its third year.

The ability of the virus to mutate is the biggest factor in the fight to curtail its spread and impact.

Through the first quarter, airlines are expected to continue to cancel thousands of flights as the Omicron variant cases cause global travel disruptions. This is not surprising as crews test positive, or are forced to self-isolate to stem the spread.

Reports indicate that while Omicron is milder than other variants (read Delta) but the huge number of infections is cause for concern.

Advanced countries are talking of the second round of vaccine booster jabs while developing countries are struggling to get the first jab to go round. It is not a pretty picture.

Throughout 2022, countries will continue to impose measures to keep the virus in check in direct response to emerging realities. For most countries, the policy will shift from a containment strategy to one of mitigation including self-monitoring, mask-wearing, social distancing and strict rules concerning private gatherings but life will go on despite COVID-19.

Production and more equitable distribution of vaccines and the availability of treatment drugs will further help stem the spread.

Expectation: The politics around the virus will be reined in with the focus on containment. 

2. Push for Equities 

Equities are pieces of a company, also known as “stocks.” When you buy stocks or shares of a company, you’re purchasing an ownership interest in that company. In 2021, MTN called on Nigerians to own a share of the company. There was a stampede.

MTN showed that despite reports to the contrary Nigerians still have an appetite for investing in shares.

Granted, the company ran a tight and relatable campaign but the result was truly impressive.

Of course, MTN is fundamentally a solid and well-run company. It is a leader in the Nigerian telecommunications space, owner of a payment service bank (PSB) license and one of the only two companies with 5G license.

Forty (40) per cent of telecommunications subscribers are on the MTN network. With the increasing quest for connectivity data usage and voice calls expected to remain high over the next decade, expectations are high.

One expects that with Nigeria’s me-too type business environment, many other firms are likely to try and reach out to Nigerians in 2022.

Some will succeed, many will struggle. There are no guarantees, each must justify its quest to raise funds.

Expectation: A number of firms will seek to fuel growth and diverse their investors base by offering equity.

3. Financial Inclusion 

Financial inclusion, according to the World Bank, is access to valuable and affordable financial products and services delivered responsibly and sustainably. These services include payments, savings, credit, insurance, and transactions.

In Nigeria, the Central Bank (CBN) has since 2012 stated its goal to deepen financial inclusion in the country. It has actively pursued this objective over the decade, howbeit in fits and stops. The granting of provisional PSB licenses to MTN and Airtel in 2021 is viewed as a massive step forward in the right direction.

PSBs can accept deposits from individuals and small businesses, carry out payment and remittance services within the country, issue debit and prepaid cards, operate electronic purses, and other activities prescribed by the CBN.

Analysts talk of it as a game-changer.

With the final approval, they will join OPay and Paga as major players in that space.

The license to telco is significant because of their wide coverage of the country, especially in rural areas where most of the unbanked population reside.

This will, no doubt, help fast-track the CBN’s financial inclusion goal.

2021 was a good year for fintechs in Nigeria. Three unicorns emerged, several agreements partnerships were reached and new players joined the market. Fintechs are equally at the forefront of deepening financial inclusion in Nigeria.

Expectation: More wins. More partnership. More Financial Inclusion. A fintech will move to acquire a bank. 

4. Politics 

Politics will be the elephant in the room in 2022. No one and nothing can hide from its impact. 2022 is the eve of the election year, the almighty 2023.

Political parties will seek to hold their primaries to decide candidates for the various offices, INEC will intensify the registration of voters and distribution of permanent voter’s cards (PVCs) and governance will essentially ground to a halt as politics takes over the activities of government.

The gladiators for the national prize will struggle to outspend each other, hasten to distribute the usually branded rice, garri and noodles combo and form/rework alliances.

Naturally, hidden secrets will come to the fore with accusations and counter-accusations flying in the media both traditional and new. Politics in 2022 will be peculiar.

Expectation: The youths will find their voice by aligning with the old guards. 

5. Forex /Inflation

The Nigerian economy is largely import-dependent with import bills in steady increase over the last couple of years. Naturally, this puts undue pressure on the Naira precipitating greater outflow of Forex and creating a trade deficit that weakens local production of imported goods. It is a vicious cycle.

In simple English, we don’t produce or export enough to gain enough forex to do the things we need to do as a country. Businesses scramble and scraper to find dollars to carry on operations. It is a vicious cycle.

In Nigeria, Omicron is just another word but inflation is feared. This is not surprising.

If you look at the Nigerian Economy, the rising prices of consumer goods are worrisome. The price of rice, garri and beans have gone through the roof and cooking gas has more than doubled in the last 14 months. It is a scary situation.

Expectation: The Nigerian economy would continue to stagger under the strain of inflation.

Nigerians are naturally resilient people. We’ll find a way to overcome the odds and do something extraordinary in the year. And of course, the Principle of impotence provides a good excuse for action in spite of insufficient data.

Happy New Year!