FG Adhoc Policies to Raise Uncertainty, Toughen Business Climate
Analysts at FSDH group, a financial services supermarket in Nigeria, said the introduction of adhoc and uncoordinated policies would heighten uncertainty in the economy.
The financial services group said with government’s adhoc policies, economic outlook is bleak as it stated that pressure would be on reserves, prices and output.
FSDH in its review listed policies uncertainty, higher prices, rising debt level and insecurity as short to medium term risk.
The analysts said: “in the past few months, we have seen the closure of land borders, Central Bank of Nigeria’s policy on open market operations (OMO) etc.
“We could continue to witness the introduction of adhoc policies that will heighten uncertainty and toughen the business climate”.
They added that Government’s aggressive revenue drive is expected to lead to price increase in the short to medium term.
This, following significant increase in inflation pressure points- VAT increase, Toll increase, planned introduction of communications tax, land border closure, etc.
As a result, it expects foreign portfolio investment (FPIs) to continue to outperform foreign direct investment (FDI) inflows in the short to medium term.
It however noted that FDI inflows depend largely on big pocket issues such as security, infrastructure, certainty, power supply, among other factors.
“FPI inflows will continue to target short term instruments”, the firm said.
The analysts think this would lead to rise in uncertainty and slow growth in both domestic and foreign investments as well as pressure on Reserves.
Read Also: 5 Investment Firms Downgrade FCMB, Express Concern over Earnings Outlook
The firm also noted that there are numerous inflation pressure points arising from implementation of minimum wage, border closure, VAT and other tax increase.
In the short term, this is expected to lead to higher government revenue but lower consumer purchasing power which could slow down investments.
Further to that, from the fiscal front, FSDH is of the view that total public debt has steadily risen to N26 trillion (US$84 billion) as at June 2019.
Analysts said this is more likely to increase going forward.
“This has implication on debt servicing costs. Nigeria could be trapped in unsustainable debt circles; higher interest rate and pressure on Reserves”, the firm stated.
FG Adhoc Policies to Raise Uncertainty, Toughen Business Climate
