Political activities, crude oil price to determine 2019 economy – OPS

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… More tax burden on registered companies

By Ayo Fadimu

The Organized Pri-vate Sector (OPS) has identified stability in the polity during and after the 2019 general elections as well as country’s earning through the crude oil sales as the main determinants of the economic outlook in 2019.

The OPS in their separate preview of the 2019 economy said the year being an election year, performance of the economy would to a large extent depend on the transparency and credibility of the election and that the distractions from political activities may slow down infrastructure spending and the performance of the manufacturing sector being a sector whose operations relies heavily on this infrastructure.

The Manufacturers Association of Nigeria (MAN) noted that technically, from the observed trends in the Nigerian budget cycle, the 2019 budget proposal might undergo late passage and the resultant negative effect on the overall economic ambience of the country might be colossal for an economy whose current growth rate is still fragile.

“According to estimates by Capital Economics analysts, every $10-per-barrel fall in oil prices will cause a 3-5% decline of GDP in most of the Gulf economies, and a slowdown of 1.5-2% of GDP in Russia and Nigeria on an annualized basis.  The outlook will therefore depend to a large extent on developments in the oil and gas sector and the political will to undertake far reaching reforms, beginning with the oil and gas sector” LCCI said

On what would shape the economic outlook in 2019, MAN highlighted the following issues;

“Development in the global scene such as increasing interest rates across large developed markets and tightening commodity markets would likely contract investment inflow to the country, evidenced by the capital reversals from emerging & frontier markets observed in the current year and the inflation rate might slightly increase due to electioneering spending resulting from heightened political activities and lack of proper policy coordination;

MAN in a release said, “even though the Central Bank of Nigeria (CBN) is in a stronger reserve position than in recent years, there maybe a slight depreciation of the value of Naira due to the recent pressure on the country’s external reserve, naira amid the continuous dip in oil prices and the usual withdrawal of foreign capital as a result of anticipated political uncertainty;

On taxation, MAN  advised the registered companies to prepare for the worse as more pressure may be mounted on registered companies by Government Agencies in a bid to vigorously drive for revenue to salvage the precarious status of the country’s debt service to revenue ratio;

MAN noticed that the proposed 2019 budget appears to be an extension of 2018 as no new grounds were explored.

“There is the need to properly align the assumptions of the budget with economic realities. No doubt, some of the provisions of the budget would be very important in supporting economic activities in the coming year. The huge emphasis on infrastructure development, especially power, road and rail is encouraging. However, as more development on the budget unfolds, it will be easier to understand why the budget fell short of 2018 figures,  notwithstanding the improvements in the global and Nigerian economy.  As the budget stands, MAN opines that a lot of works still needto be done while hoping that it will be passed with dispatch.In broad terms, the manufacturing sector could be in for a tough operating environment in 2019, seeing that the needed supporting policies and infrastructure have not been given sufficient priority. MAN is however hopeful that the capital expenditure component of the budget will be conscientiously implemented”.

In its 2019 outlook, the Lagos Chambers of Commerce and Industry (LCCI) also noted that the Nigerian economy remained fragile with the high dependence on oil sector for revenue and foreign exchange earnings.

“With the limited progress in the ongoing effort to diversify government revenue sources, the performance of the oil and gas sector would remain a critical factor that would shape the outlook for the economy in 2019.According to estimates by Capital Economics analysts, every $10-per-barrel fall in oil prices will cause a 3-5% decline of GDP in most of the Gulf economies, and a slowdown of 1.5-2% of GDP in Russia and Nigeria on an annualized basis.  The outlook will therefore depend to a large extent on developments in the oil and gas sector and the political will to undertake far reaching reforms, beginning with the oil and gas sector”.

“Given the challenging economic conditions, key policy reforms would be imperative to support and sustain macroeconomic stability. These include, among others, a foreign exchange management framework that reflects the market fundamentals, the acceleration of the economic diversification agenda, normalization of Lagos ports environment, the oil and gas sector reform, especially the petroleum industry bill; reduction in the cost of governance at all levels;  improvements in the domestic revenue (particularly independent revenue) to reduce volatilities of government revenues, among others” LCCI said .

On how the 2019 economy will improve, NACCIMA urges the Federal government to focus on agriculture and improve the infrastructure in the country, “The Association counsels that the Federal Government must redouble its efforts in promoting agriculture to ensure food security and import substitution. The Federal Government must also redouble its efforts in improving infrastructure, such as power, roads and rails, as well as its efforts at improving the ease of doing business. These will bring about positive change in the manufacturing sector (as Nigeria is still a net importer in Manufactured Goods). NACCIMA looks forward to  the prompt passage and implementation of the programmes and capital projects outlined in the 2019 budget” said the National President Of The Nigerian Association Of Chambers Of Commerce, Industry, Mines And Agriculture (NACCIMA), Iyalode Alaba Lawson

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