Infrastructural deficit, border closure constraints to growth in 1Q-Rewane

Managing Director Financial Derivatives Company Limited, Bismarck Rewane said the infrastructural deficit and border closure stands as major constraints on the nation’s economic growth in the first quarter of this year.

Rewane who stated this in Lagos at LBS breakfast session said first quarter growth typically slows down owing to lull in economic activities and lower consumer spending in January.

He said growth outlook would be affected by reduced consumer disposable income through hike in value added tax (VAT) and rising inflation.

He explained that with implementation of new VAT rate of 7.5 per cent in February and increase in electricity tariff in April, inflation will continue in an upward trend but at a slower pace.

Rewane stated that there was decline in revenue shared in February due to lower statutory and VAT revenues and it would likely go down further in the coming months owing to fall in average oil price.

For instance, he said , oil price which stood at $63 per barrel in January decreased to $55.48 per barrel in February, while  oil production grew by 1.71 per cent to 1.78 milliion  barrel per day in January despite decline in operational rigs by 17.6 per cent to 14 at the first month of this year.

Stating the  impact of outcome of OPEC’s meeting on Nigeria, he said nation’s oil production could fall to 1.5 mbpd as OPEC mulls additional  output cuts.

He said that this could put government revenue under severe pressure while gross external reserves could fall towards $34 billion.

He stated that for the country to maintain growth profile there is need to have more aggressive tax policies to boost internally generated revenues.

In his explanation , he said amid soft demand , power shortages and scarcity of primary materials for production, Federal government would need to incentivised the manufacturing sector to increase productive capacity.

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