By Adaeze Okechukwu
FSDH Merchant Bank has called on the federal government to intensify efforts to implement policies that will stimulate investment in the economy.
Analysts at FSDH made this call in a report, expressing the importance of investment stimulation in fostering inclusive growth.
They stated: “Although we believe the IMF growth forecast for the Nigerian economy at 0.8 per cent and 1.9 per cent for 2017 and 2018, respectively, is conservative, FGN must intensify efforts to implement policies that will stimulate investment in the Nigerian economy. This is necessary to accelerate inclusive growth. Friendly policies in agro-allied industries, agriculture, telecommunications, power, solid minerals, real estate and manufacturing are important to jumpstart the economy.”
The research analysts, however, noted that the burden of interest payments on government borrowing may retard Nigeria’s growth potential except there are concentrated efforts to grow revenue.
“IMF in its World Economic Outlook (WEO) October 2017 edition predicted a 42 per cent increase in public debt from N18.06 trillion in 2016 to N25.59 trillion in 2017 and a further increase to N54.96 trillion in 2021. Analysis show that the faster growth in public debt than the growth in GDP (at current prices) will result in a consistent increase in the public debt-to-GDP ratio between 2017 and 2021. According to the IMF, the public debt-to-GDP ratio will increase to 25 percent in 2021 from 18 percent in 2016,” the report stated.
Meanwhile, FSDH also reported that the outlook for the Nigerian macroeconomic economic environment remained positive as oil production and oil price remain favourable in the short-term.
“The stability in the value of the Naira should attract additional foreign capital, which will increase the external reserve.” the report stated.
In another development, the FSDH analysts noted: “A total inflow of about N991.65 billion should hit the money market from the various maturing government securities and FAAC in the month of October 2017. Our expected outflows from the various sources such as government securities and statutory withdrawals are estimated at N699.16 billion, leading to a net inflow of about N292.50 billion. The positive GDP growth rate has reduced the risks inherent in the Nigerian economy. This coupled with lower inflation is expected to attract more investments and to have a downward impact on yields on fixed income securities.”
They further explained that the plan of the Debt Management Office (DMO) to refinance domestic debt, particularly Nigerian treasury bills (NTBs) with cheaper foreign debt is also another reason for the proposed decline in fixed income securities yield.