Obinna Chima
The federal government has been advised to in the medium term, pursue policies directed towards spurring the inflows of foreign capital with renewed vigour.
The government was also urged to consider selling assets which could include the privatisation of the Transmission Company of Nigeria, taking the Nigerian National Petroleum Corporation (NNPC) public by selling part of government’s 100 per cent stakes in the state-owned oil company and the sale of railway operation licences to domestic and foreign private operators.
Analysts at the Time Economics, an economic consulting firm stated this in their monthly economic report for August obtained wednesday. Furthermore, they stated that efforts should also be made to fast track the passage of the Petroleum Industry Bill.
“In the long term, efforts should be directed towards structural reforms aimed at diversifying the productive base of the economy while the ever growing informal sector, now estimated at N39 trillion or 42 per cent of Nigeria’s GDP by the NBS should be brought into the formal system,” the report added.
The report noted that a weak medium term outlook for the economy arises from the collapse of public and private investment, and declining consumer expenditure.
“In all, the three drivers of aggregate demand in the economy – public expenditure, private sector investments and consumer spending – remain significantly dampened. We believe the economy contracted again in the second quarter, but expect growth in the third and fourth quarters of the year.
“Thus given current conditions of subdued or negative growth coupled with macroeconomic uncertainty and short-term weak outlook, the continuous over reliance on the Central Bank of Nigeria to activate growth is unlikely to yield the desired results,” it added.
According to the analysts, to avoid renewed downward spiral in the second half of the year, government will need to step up the use of fiscal policy tools.
“In the short term, it is right for the government to expand debt, especially foreign debt. It is an attractive proposition given very low international interest rates, long term and concessionary possibilities, and provides dollar revenues. However, the purpose for which the debt is used for have implications for Nigeria’s economic outlook.
” So far, the deficit expenditure has been largely used to cover recurrent expenditure and payment of salaries. This nature of expenditure will not support Nigeria’s growth in the medium term because of its limited effect on private sector investments and job creation,” it added.
