Harmonise policy to save economy, Afrinvest tells govt

The harmonisation of fiscal-monetary policies and the end to series of policy reversals may have been identified as the leeway to the economy’s survival in the face of financial crisis.

Besides, the use of forward guidance, as well as clear communications of well thought-out policy actions to reduce uncertainty in the domestic investment environment has also been listed for stability.

The Group Chief Executive Officer of Afrinvest West Africa Limited, Ike Chioke, made the observations at the company’s launch of Economic Outlook 2016, in Lagos, at the weekend.

Afrinvest Research estimated a Gross Domestic Product (GDP) growth of 3.5% in 2016, against three per cent in 2015, while headline inflation is expected to average 9.6% in 2016 as pressure on foreign exchange rate lingers.

He said that the series of policy pronouncements and reversals in the monetary policy space have significantly eroded confidence in the system, hence the need to start the year with focus on harmonisation of rules.

He said that the persistent fall of oil prices, the impact on Balance of Payments (BoP) and external reserves, have heightened the call for the devaluation of the naira.

“With policy normalisation in the United States and increasing pressure on domestic macroeconomic variables, we also anticipate that the CBN will reverse its dovish position on interest rate, which should see rates rise by 100bps to 12 per cent in the course of the year.

“The financial market is currently going through a turbulent time, reflecting the intensity of instability in the global and domestic environment.

“From slowing growth concerns in China and plunging commodity prices in the global market to fiscal and currency crises in the domestic economy, a dark cloud seems to overshadow the investment landscape,” he said.

Earlier, the Head of Research, Ayodeji Eboh, while presenting the report, noted that a mix of monetary policy responses and delayed fiscal policy pronouncements and relentless decline in oil prices, had offset gains from a peaceful and successful conduct of the general elections.

“As experienced in 2015, we expect adjustment to lower crude oil prices to remain a crucial theme in 2016. With lower oil prices further impeding government revenue, we believe a looming fiscal crisis may constitute a major threat to social stability in 2016 notwithstanding efforts to shore up revenue through diversification into non-oil sources.

“We are of the view that non-oil revenue projections in the proposed 2016 budget may be optimistic given the subdued outlook for consumption spending and corporate earnings amidst policy constraints in the system,” he said.