As the sluggish global output growth continues, the Central of Bank Nigeria (CBN) has projected a mixed domestic economy in 2016 running till 2017, while expecting a slow demand for Nigeria’s exports in the year under review.
The CBN revealed this in a circular on its website yesterday tagged,” Monetary, Credit, Foreign Trade and Exchange Guidelines for Fiscal Years 2016/2017, where it noted that the government efforts to spur growth in the manufacturing and agricultural sectors are expected to contribute to improved economic performance in the 2016/2017.
The apex bank explained that all these would be tapered by resource constraint, specifically, the power sector, tax and import duty reforms which are expected to support agricultural and manufacturing value chains, and subdue demand-linked inflationary pressures
The circular also pointed out that the downside risks to the growth outlook are security challenges, low demand for Nigeria’s exports due to the crawling global economic growth, and the sovereign debt crisis in the euro area.
More so, it said that the agricultural sector is expected to drive growth in the medium term through increased activities and attainment of self-sufficiency in agricultural production.
‘This is hinged on sustained implementation of appropriate policies, incentives and programmes, favorable climatic conditions, local demand for agricultural produce and increased private sector investment. These would boost agricultural production and moderate inflationary pressures’, it’s added.
However, the circular disclosed that Inflation is expected to remain largely stable, as appropriate policy measures continue in 2016/2017. However, demand pressure at the foreign exchange market, high liquidity surfeit, low agricultural output growth and lingering fuel scarcity constitute downside risks to domestic price developments in 2016.
While recovery in the advanced economies is expected to improve the demand for Nigeria’s exports, the demand for Nigeria’s crude oil is projected to remain weak in 2016/2017, owing largely to gas and shale oil exploitation in the US, which has reduced Nigeria’s crude oil exports to that country.
Other factors include Saudi Arabian policy to over supply oil into the market to depress oil prices and make future production of shale oil uncompetitive, the after effect of the Iranian peace deal as well as investment in green energy. On the supply side, it said, oil production capacity growth is expected to rise on the assumption that the Petroleum Industry Bill (PIB) is signed into law. This legislation is expected to stimulate investment in the upstream and mid-stream of the oil industry.
With the renewed anti-corruption campaign, CBN says reduction of leakages in government revenues, fiscal consolidation including the operationalisation of the Treasury Single Account (TSA), among others, is looking fairly promising in 2016.
‘Thus, there are prospects for improvement in non-oil tax revenue predicated on expanded tax/revenue base and the efficient collection machinery which will have significant effect on the economy’, the circular stated.
The power sector reform, culminating in the privatization of the Power Holding Company of Nigeria (PHCN), is expected to improve efficiency in power generation and distribution, thereby reducing the cost of doing business.
The apex bank said this should lead to expansion in production, increased lending, investment growth, employment generation and poverty reduction.