Analysts Call for Improved Monetary, Fiscal Policy Interaction

Godwin Emefiele
Godwin Emefiele

Obinna Chima

Analysts at FSDH Merchant Bank Limited have stressed the need for complementary fiscal policies to support the five-year policy target unveiled recently by the Central Bank of Nigeria’s (CBN) Governor, Mr. Godwin Emefiele.

The Lagos-based Bank, in its economic report, stressed that the target of the central bank would require complementary fiscal policies and actions to achieve the desired objectives. 

The CBN’s four key macroeconomic economic targets for 2019-2024 includes double-digit growth rate in the Gross Domestic Product (GDP); single-digit inflation rate; foreign-exchange rate stability and accelerating employment rate.

But the Head of Research and Strategy, FSDH Merchant Bank Limited, Mr. Ayodele Akinwunmi, pointed out that the implementation of these priorities would make more funds available to finance the non-oil export-led sectors. This, according to him, should create new businesses, reduce import dependency, grow foreign exchange earnings, ensure stable exchange rate and possibly cause the value of the currency to remain stable to appreciate.

“We expect growth in non-oil exports from Nigeria and reduction in the cost of exporting goods from Nigeria, therefore making exportation more profitable than before. 

“There may be a reduction in the country’s import bill, a reduction in the cost of inputs for manufacturing companies and the development of agro-allied industries.

“There may also be a boost to the development of commodity exchange and opportunities in logistics business as a result of the growth of agriculture and related businesses.

“The CBN may propose moral suasion programmes and specific industry/product limit arrangements to channel bank loans towards agricultural and manufacturing sectors,” Akinwunmi said during an interactive session with journalists.

According to him, there should be complementary support from the fiscal authorities to address smuggling, which could encourage local production, expansion and the demand for credit.

He also anticipated a growth in consumer credit, which was expected to lead to growth in consumer spending, therefore accelerating investment and growth in the economy. 

“Foreign Direct Investment (FDI) may increase, provided there are complementary friendly fiscal policies. FSDH Research expects an increase in the capital base of banks in Nigeria, which would enable the banking system support larger and better viable projects. However, other complementary fiscal measures must be implemented to ensure the success of this initiative.

“There may be mergers and acquisitions in the Nigerian financial industry. Some foreign players may come into the system. In the first few years of implementation, the Return on Equity (ROE) of banks may drop.

“FSDH Research expects the development of mortgage-backed securities in the market. This will expand investment securities and trading opportunities in the financial market. More loans may also be channelled to the real estate sector of the economy, creating jobs and shared prosperity in that sector. 

“The monetary policy stance of the CBN favours a low interest rate regime in the short-term to the limit that the inflation rate and external reserves can accommodate, except there is any domestic or external shock.

“There may be volatility in the interbank money market rates and yields on Treasury Bills in the secondary market. This may create trading opportunities for speculators,” he added.

Furthermore, he anticipated real positive yields in fixed income securities in Nigeria, which may attract investment in those instruments.

“There may not be any major exchange rate depreciation or a devaluation as long as the external reserves remains strong. 

“The external reserves will remain strong provided Nigeria is able to attract more foreign exchange earnings through Foreign Direct Investments (FDIs), sales of oil and non-oil products. 

“The trigger for a possible depreciation or a devaluation in the currency will be when the stock of external reserves is no longer enough to cover more than 6 months of imports. 

“Nigeria may continue to witness the growth of fintech and telecommunication businesses, which could increase the number of people having access to financial services.

“We may see the rapid development of local software that will be used in the Nigerian financial system,” he added. 


Annual Dairy Import Hits $1.3bn as FG Moves to Boost Local Processing 

James Emejo in Abuja 

The Permanent Secretary, Federal Ministry of Agriculture and Rural Development, Dr. Mohammed Umar, has said the country’s annual dairy imports particularly milk currently stood at $1.3 billion. 

Speaking in Abuja at the opening of the 4th Global Dairy Congress Africa, themed: “Accelerating Investment and Cooperation of Dairy in Africa”, he said the government and relevant stakeholders must seek solutions to critical issues aimed at resolving the multi-facet problems bedevilling the dairy sector.

Umar, noted that the challenges facing the Nigerian dairy sector bordered mainly on infrastructure development, processing, dairy husbandry, quantity control and product development.

Represented by the Director, Department of Animal Husbandry Services, Mr. Bright Wategire, the permanent secretary said the theme of the congress was in line with the aspirations and agenda of the President Muhammadu Buhari- led administration to fill up the dairy sub-sector to a level where it would be a major global player in the supply of wholesome dairy products for increase in employment generation, foreign exchange as well as a reliable means of livelihood for Nigerians.

He said Nigerian cattle contribute a conservation estimate of 50,000 liters of daily milk in both supply and consumption, adding that this less than 20 per cent of local potential.

According to him, the country’s milk production accounted for only 13 per cent of West Africa’s production and 0.01 per cent of global dairy output. 

The permanent secretary, further stated that Nigeria daily requirement is largely met by 60 per cent imports and 40 per cent local production.

He urged all stakeholders to collaborate to uplift the Nigerian dairy sector in order to fight against malnutrition and achieve zero hunger in the country

Umar, further told the gathering that Nigeria is currently in the process of evolving a national dairy policy that will articulate a clear road map for its developmental aspirations and strategies involving broad spectrum stakeholders and multinationals in order to improve the sector.

He said the dairy industry was dynamic, with an ever increasing demand for milk products, stressing that the practice was still dominated by pastoralists who are gradually moving away from subsistence level of production to embracing entrepreneurial ideals with emphasis on economic consideration.

Nevertheless, Vice President of Arla Global Dairy Products Mr. Steen Hadsbjerg, noted that to achieve the United Nation global nutrition target of zero hunger and malnutrition by the year 2030 all stakeholders in the continent must unite and forge sustainable development plan.

As part of initiatives to strengthen the sector and boost job creation, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, last year, hinted at considerations to prohibit the importation of milk into the country in the near future. 

He said: “I keep talking about milk: before I was born 60 years ago, milk is being imported into the country and I have told WAMPCO that look, we need to come back.”

He said: “What does it take to produce milk; is it not to fatten the cow, give it water, give it the necessary nutrients and it will produce milk for you? 

“Yet, they say milk cannot be produced in Nigeria. We will confront it and I think they also should get ready to join in this train.”