The Federal Government must revive and concentrate on production, review its trade- industrial policy and borrow innovatively if it needs to tame rising inflation.
These where the words of Managing Director/Chief Economist at Analysts Data Service and Resources Limited, Dr Afolabi Olowookere, at a one-day forum organised by the Capital Market Correspondents Association of Nigeria (CAMCAN), in Lagos.
He spoke on the theme: “2022 Performance Review and Factors to Shape Post- Elections Market.”
Olowookere, while reviewing economic activities in 2022, said that the Russia-Ukraine war, widening disparity in the foreign exchange market coupled with unsustainable debts and financing led to the soaring inflation.
Although the National Bureau of Statistics (NBS), had, on Monday, reported that inflation had eased to 21.34 per cent in December from an all-time high of 21.47 per cent in November, 2022, Olowookere believes that the Federal Government especially the incoming administration should seek ways to revive production, the country’s trade-industrial policy and must borrow innovatively.
“Inflation has been on the rise and in response, the Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) four times in 2022.
“Rising debt stock has been a major concern for the government and citizens alike.
“For example, the FG’s revenue increased from N2.57 trillion in 2011 to N4.64 trillion in 2021,” he said.
Olowookere noted that expenditure had risen from N4.30 trillion to N11.08 trillion within the same period while outflow for the half year of 2022 stood at N7.91 trillion.
According to him, the country’s deficit has continued to rise with the Federal Government’s expenditure overwhelming yearly inflow.
“Also, our debt-to-Gross Domestic Product appears sustainable but our debt-to-revenue ratio is not and this is why Nigeria needs to start becoming a producing nation.
“We need to look at our trade and industrial policy again and again to see how we can grow.
“The Central Bank of Nigeria (CBN) has been giving incentives and there has been moves to reduce import duties but this is not for the fiscal and monetary policy thing, Nigeria needs to compete and by competing, then you have to be a producing country,” he explained.
Olowookere said that Nigeria needs to be more innovative in borrowing money, tap into sustainable finance and build trust among its citizens.
When asked whether successive rate hikes would reduce inflation, he said sustainable decline in general prices is beyond monetary policy approach.
“For a country to have a sustainable decline in general prices, it is beyond the monetary approach and it is beyond raising interest rates.
“But if you keep raising interest rates, it could affect the stock market and then it will be difficult for people to do their businesses and so I will not recommend that the CBN should continue to raise interest rates as that will be counter-productive,” he said.
Speaking on the outlook of the stock market in 2023, Olowookere disclosed that while recent evidence suggests the market performance during pre and post elections comes out negative, it is expected that the market might close in the negative territory at the end of the year.
“The past may not necessarily be the one we might see in future. In the last three years of election, the market had closed in the negative and so looking at it, stock market returns might likely close at -16 per cent at the end of the year and this will be centered on factors like uncertainties around the outcome of the elections, low capital inflows and rising inflation”, Olowookere said.
