West Africa in Focus /

Nigeria's multi-faceted problems

  • Nigeria lost out on US$1.8bn due to oil production shortfalls in Q1 22 and might not benefit from increased OPEC quota

  • Mobile money growth in Africa has been impressive, but taxes and levies put it at risk

  • Our outlook for inflation stands. The next few months will be tough for African countries

Nigeria's multi-faceted problems
Janet Ogabi
Janet Ogabi

Senior Research Analyst

Tellimer Research
7 April 2022
Published byTellimer Research

Nigeria seems to be getting many things wrong. The country cannot take advantage of higher oil prices and a higher production quota. Foreign exchange policies continue to negatively affect investors and regular citizens, and insecurity concerns are escalating. Nigeria's inflation is also not looking pretty, but it is not the only African country faced with that challenge. Elsewhere, mobile money is booming in Africa, but taxes could jeopardise this progress.

Nigeria is missing out on US$100 oil as OPEC increases quota

After the OPEC meeting on 31 March, the cartel voted to maintain the increase in allocated production quota to member countries at the already set pace of 400kbpd. As a result, Nigeria's allocated quota increased from 1.735mbpd in April to 1.753mbpd in May (excluding condensates). Although the allotted 18kbpd increase can be considered meagre, OPEC has, since the start of the year, increased Nigeria's allocated quota to the tune of 87kbpd, from 1.666mbpd in Dec 2021.

However, Nigeria's oil production continues to decline as the country grapples with oil theft and dissipating investment. On average in Q1 22, Nigeria under-produced by 200kbpd, which translates into US$1.8bn in total lost oil revenue (based on a US$97/bbl average oil price). Sadly, production is likely to stay low in the interim while other producing peers reap the benefits of a new US$100/barrel oil era.

Nigeria's crude oil production below OPEC quota

Nigeria’s power crunch bolsters the case for solar

There has been significant pressure on Nigeria’s energy sector across all fronts this year. Because of the inefficiencies of the national grid, consumers have had to rely on off-grid, fossil-fuelled generators. However, even sourcing gasoline (petrol) and diesel for these has been extremely difficult this year.

The challenges around the grid and fossil-fuelled energy sources seem endless – we have discussed some of them recently. Given these growing power challenges, there is increasing interest in a long-overlooked power source – solar. In our report earlier this week, we highlighted three solar companies that are bright spots in Nigeria’s still fragmented solar industry.

Nigeria national grid collapse caused plunge in power generation

Impressive mobile money growth in Africa – but new taxes could put the brakes on it

According to GSMA, global mobile money transaction value grew by over 30% to US$1tn in 2021. Transaction value grew even faster in West Africa, by 60%. Nearly two-thirds of global mobile money transaction value now comes from East and West Africa.

Source: GSMA

But this game-changing growth could be jeopardised by Ghana's new tax on mobile money.

Insecurity in Nigeria – reason to be worried

Last week there was a terrorist attack on a train carrying passengers from Abuja (Federal Capital Territory) to Kaduna (North-West Nigeria). Two days before that, Kaduna Airport was raided by bandits, who allegedly kidnapped the National Air Management Agency personnel.

This is very concerning for three reasons:

  1. Terrorist attacks are coming closer to the centre of the country.

  2. The attacks are worsening Nigeria's already-weak infrastructure.

  3. Nigeria is in its pre-election year and security is a primary concern, particularly because of the upcoming tricky handover of the presidency from north to south (according to Nigeria's unwritten zonal agreement for power sharing).

Nigeria's government blocks outgoing calls on unregistered SIMs

72mn SIM cards will be barred from making outgoing calls because they have not been linked to National Identification Numbers (NIN). The registration drive has been ongoing for over a year, with the deadline shifting on multiple occasions. However, the commission has finally drawn a line and mandated telcos to disconnect SIMs that don't have a NIN.

However, we expect minimal impact on telcos profits as NIN registration continues and multiple SIM owners are likely to consolidate mobile activity. 

SIM-NIN registration responsible for c9mn decline in total mobile subscribers

The challenge of paying for international services from Nigeria

Cross border transactions in Nigeria are getting harder not easier. There is always one new CBN regulation that makes international transactions an excruciating process. The most recent pain point has been commercial banks reducing the international spending limit on Naira cards to US$20 per month. After paying for Netflix, Apple Music and storage, there is barely enough to make other international transactions, such as purchasing a course on Udemy or paying for professional exams.

The alternative is to get a dollar card, but individuals will need to source the dollars at the parallel market rate, and the account opening process can be arduous.

This challenge has birthed some fintech solutions. For instance, Flutterwave has a dollar virtual card product that is now the go-to for international transactions. Crypto startups are also building solutions around this, as they did with remittances. Fintech innovation continues to come to the aid of Nigerians, despite the CBN's continued crackdowns.

 Our latest West Africa research

  • We anticipate multiple US rate hikes over the next few months and we think the market may be underpricing the extent to which Fed will have to tighten to prevent de-anchoring inflation expectations. We analyse what rising US rates will mean for EM assets. We highlight examples in Senegal, Ghana, Nigeria and Cote d'Ivoire.

  • Nigeria's government has barred 72mn telephone lines from making outgoing calls, after over a year of warnings. We look at the likely impact on telcos such as MTN Nigeria and Airtel.

  • We unravel Nigeria's recent electricity troubles and highlight the increasing interest in solar as an alternative source of electricity for households and businesses.

  • In the wake of currency devaluations this month in Egypt and Sri Lanka, we attempt to identify currencies that may be at risk of devaluation. By examining quotes against Tether (USTD) – a cryptocurrency that is pegged to the US$ – we find four currencies (three of which are in Africa) are at risk of devaluation.

  • The fastest-growing emerging markets in fintech. We survey 215 fintechs across 14 emerging markets to gauge their growth and identify KPI trends (such as ARPU, margins and customer acquisition). Overall, fintechs in Brazil, Nigeria and Egypt are growing the fastest.

Upcoming events

Nigeria inflation – 15 April

Nigeria's March inflation numbers will not be pretty (again!). We expect inflation to accelerate as energy costs remain high. Nigeria's inflation rate is likely to remain in double digits for the rest of 2022, driven by rising energy prices, insecurity in the food-producing states and election spending.

Ghana inflation – 14 April 14

Nigeria is not the only country worried about inflation. For most African countries, Ghana included, we expect inflation to worsen as the impact of higher energy and commodity cost feeds through.


Nigeria’s all-share index declined by 2bps wow, bringing the ytd gain to 9.5%. The general sentiment in the market remains underwhelming as foreign portfolio investors continue to avoid Nigeria. Nigerian institutional investors are also taking a cautionary stance as they anticipate a higher yield environment in the coming months.

The outlook for Nigerian equities is unchanged: FX restrictions will keep Nigeria off-limits for fresh capital from foreign investors, while locals will dominate. Also, several factors point to increased domestic yields towards H2, which might put a dampener on local participation in equities.

Tellimer's West Africa Equities Coverage
Market indicators

Nigeria's yield curve (%)

Ghana's yield curve (%)