As far as Nigeria’s economy is concerned, the jury is still out on how it has performed under President Muhammadu Buhari’s watch.

While the government believes it has made considerable progress, a significant number of Nigerians believe the economy remains sick and President Buhari’s cure for it has been more painful than the sickness itself.

In this piece,Bounce News looks back at the top four trending economic issues that dominated the soundbites within 2018 and what they tell us about the coming year.

1. Inflation:

november inflation

It was a former British Prime Minister, Margaret Thatcher who said, “inflation is the parent of unemployment and the unseen robber of those who have saved”.

So, you can understand why the monetary policy authorities are obsessed with suppressing it.

It is difficult to think of any other economic issue that made the news headline in 2018 as inflation did.

Nigeria started the year with a relatively low inflationary environment of 15.1% compared to 18.7% which it started with in January 2017.

The Central Bank of Nigeria, CBN’s target was a single digit inflation rate of 9.1%. But despite several efforts such as holding benchmark interest rate at 14% and intervening consistently in the foreign exchange market throughout the year, it was unable to meet that target.

Also Read: CBN Survey Shows Nigerians Prefer Low Interest Rates To High Inflation

Nonetheless, inflationary pressures improved considerably before year end, moderating at 11.23% by July and rising slightly to 11.28% in November.

The CBN believes it could drop to 11.4% by December, even as the 2019 budget is predicated on a single digit inflation of 9.98%.


Going into the new year, chances are the CBN will end up with more policy tightening while retaining or raising rates to reign in flow of cash that could result in higher inflation.  

2. Foreign Exchange Interventions

In 2016, prices of oil in the international market collapsed. Consequently, Nigeria witnessed an acute dollar shortage that led to massive erosion of naira’s value.

As a matter of fact, the naira weakened to about 500-naira per dollar at the parallel market at the peak of the dollar shortage in February of 2017.

But the CBN has sworn this shall never happen again and has thrown everything it had at defending the naira till date. And thanks to recovering oil prices in the international oil market, the apex bank received more greenbacks at its arsenal which it has used to aggressively defend the naira.

As at September 2018, the CBN had pumped at least $9 billion into the foreign exchange market. Chances are this figure could have reached at least $12 billion by the end of the year, as the apex bank has sworn to use every dollar at the reserves to defend the naira.

To sustain liquidity in the FX market and keep the naira from an overbearing influence of the dollar, the CBN also entered a currency swap deal with Peoples’ Bank of China in May.

Read More: 41 Items Still Banned Under Nigeria-China Currency Swap Deal

The deal is worth $2.5 billion, and the aim is to provide naira liquidity to Chinese businesses and provide Renminbi liquidity to Nigerian businesses.

Towards Q3, the naira faced more pressure as foreign portfolio investors exited the stock market due to uncertainty around 2019 elections and especially in favour of high yield environment in the developed markets.

The CBN responded by increasing its frequency of intervention in the foreign exchange market.


Going into 2019, it is highly unlikely that the pressure on the naira will go away. Although the volatile environment of 2017 may never return, analysts believe with dwindling reserves, declining oil prices and OPEC restrictions on oil productions, the CBN may be forced to reconsider its decision to keep intervening in the foreign exchange market.

3. Sluggish GDP Growth

nbs q3 gdp growth

At the beginning of 2018, the Nigerian economy successfully exited a period of negative growth and the World Bank projected a 2.5% Gross Domestic Product, GDP growth for the year.

In its January outlook for the sub-Saharan Africa economy, the World Bank forecast that economic growth in Nigeria would edge up to at least 2.5% in 2018, as the nation benefits from improved commodity prices, investments and trade.

According to the report, Nigeria’s GDP is expected to grow by 2.8% in 2019 and 2020.

However, by the end of Q3 all the indices for which Nigeria’s economic growth were hinged went on a downward trajectory.

Capital importation was down, Nigeria lost over 2 trillion naira as foreign portfolio investors sold off their shares in the stock market, and commodity prices – oil - had begun to recede, averaging $56 per barrel in December after peaking at over $80 per barrel in October 2018.

By October, the World Bank had reversed its growth projections for Nigeria, pegging it at 1.9%. As it turns out, the CBN wasn’t that optimistic, pegging its own forecast at 1.7%.

You May Like: What World Bank’s Reversed Economic Forecast Means For Nigeria

The reversed projections are a result of late passage of the 2018 budget and sluggish growth that started in Q2 when the economy grew by only 1.50% compared to the relatively strong 1.9% posted in Q1.


Going into 2019, analysts expect the economy to keep up its growth, albeit marginally. As the economy saw a reasonable but still marginal growth in Q3 at 1.81%, perhaps a 2% growth to end the year isn’t entirely impossible.

But in 2019, a more aggressive infrastructural investment, capital injection into the economy, broadening access to credit to boost SME growth, luring in foreign direct investment to bolster manufacturing are some measures that could spur a reasonable growth to make a dent in the economy in terms of job creation and lifting millions of Nigerians out of poverty.

4. Banking Crisis

diamond bank

Crisis may be a tough word to use here but thanks to strong regulations, Nigeria inadvertently averted a banking crisis in 2018. The situation saw the number of Nigeria’s lenders drop to 17 from 19 due majorly to capitalization issues.

It all started as a rumour early in the year but by September, the collapse of Skye Bank had become a reality.

The Nigeria Deposit Insurance Corporation, NDIC revoked its license, dissolved the board and handed over the assets and liabilities of the lender to a bridge bank – Polaris Bank – under the supervision of the Asset Management Corporation of Nigeria, AMCON.

In October, analysts at Afrinvest West Africa Limited predicted in their banking sector report for 2018 that banks’ capital buffers may further weaken.

They said while the impact would be more pronounced on banks with weaker regulatory risk reserves and tier-1 capital levels, the impact should still result in either a new bout of debt raising or increased retention of profits to boost tier-1 capital by the financial year (2018).

Also Read: Diamond Bank: Is It A Merger Or An Acquisition?

By December, one of the tier 1 lenders, Diamond Bank fell victim to the weakening capital buffers.

Faced with increasing non-performing loans of 12% and unable to raise additional capital, the bank withdrew its international license and settled for a local one. Yet reprieve didn’t come its way.

In the end, it entered a merger and acquisition talks with rival lender Access bank.

The deal, believed to have been midwifed by the CBN, would see Access Bank acquire Diamond Bank by the first quarter of 2019.


Going into 2019, as this deal is consummated, the financial sector regulators are likely to begin to pay closer attention to the banks and other financial services providers to ensure strict compliance with regulations, while monitoring their adherence to corporate governance.

More so, the banks are likely to pluck a leaf from what happened to the two lenders and go bullish on debt recovery while tightening loan approval requirements.

Did you enjoy this? Share with your friends.

Also Watch: