Joy Okeke, Lagos
A member of the Presidential Economic Advisory Council and Managing Director, Financial Derivatives Company Limited, Mr Bismarck Rewane has said that the infrastructural deficit and border closure were major constraints to the nation’s economic growth in the first quarter of this year.
Rewane said this in Lagos at LBS breakfast session adding that first quarter growth typically slowed down owing to lull in economic activities and lower consumer spending in January.
He said that growth outlook would be affected by reduced consumer disposable income through hike in value added tax (VAT) and rising inflation.
The economist 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.
Highlighting some of IMF article IV recommendations, he said structural reforms remains essential to boosting inclusive growth, execute the much delayed power sector recovery plan,implement the anti-curruption and financial inclusion strategy, address infrastructure and gender gaps.
The article also called for introduction of risk-based minimum capital requirements to strengthen banking resilience.