By Babajide Komolafe
FSDH Merchant Bank has called on the federal government to introduce appropriate fiscal measures to complement the five-year policy trust of the Central Bank of Nigeria (CBN).
The bank made this call in its Monthly Economic and Financial Outlook report stressing, however, that the policy trust recently announced by the CBN will stimulate increased lending to the economy which may trigger increased non-performing loans in the banking industry in the absence of complementary fiscal policy measures by the federal government.
Following his appointment for a second term as CBN Governor, Mr. Godwin Emefiele, rolled out the five-year policy trust of the apex bank aimed at enhancing growth and development of the Nigerian economy.
The policy trust is anchored on five key priorities, namely: Preserve domestic macroeconomic and financial stability; Create robust payment system infrastructure; Work with the Deposit Money Banks to improve access to credit for smallholder farmers, Micro, Small & Medium Enterprises, (MSMEs); Consumer credit and mortgage facilities for bank customers; Grow external reserves; And support efforts at diversifying the economy through intervention programmes in the agricultural and manufacturing sectors.
Listing the possible impact of these measures while speaking at the media presentation of the report, Head of Research, FSDH Merchant Bank, Mr. Ayo Akinwunmi, said: “With the implementation of these priorities, more funds will be available to finance non-oil export-led sectors. This 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.”
He, however, stressed that CBN policy trust requires complementary fiscal policies to produce the expected impact.
These, he said, include: improving the transportation network in the country so that goods can be moved easily from farmland to the market. This will reduce wastages. Port and land border reforms to achieve a more efficient exportation process and to reduce smuggling activities, and implementations of measures to improve electricity generation, transmission and distribution in Nigeria. This is to reduce the costs of doing business so that locally manufactured goods are competitive both in local and international markets.
“If the following issues are not addressed, increasing lending to the economy may lead to a rise in non-performing loans in the Nigerian financial system”, he concluded.