CBN’s EARLIER WARNING ON IMPENDING RECESSION IN 2016
The Central Bank of Nigeria (CBN) on September 22, 2015 at a Monetary Policy Committee (MPC) meeting in Abuja present a warning on the economy: with “two consecutive quarters of slow growth, the economy could slip into recession in 2016 if proactive steps are not taken to revive growth in key sectors of the economy.”
In the face of the prevailing circumstances, the MPC advocated that a “synergy between monetary and fiscal policies remains the most potent option to sustainable growth.”
FEDERAL GOVERNMENT RECENT REACTION TO THE CBN’S WARNING
The federal government is planning to create a $25 billion fund through public and private sector financing with the aim of tackling infrastructure decay and to avoiding a recession. The special fund will be an intervention fund to fall back on during economic recession
“We think that the way out of this, what some have described as an impending recession, is actually to spend rather than to cut back in any way,” – VP Yemi Osibajo In an interview with Bloomberg on Tuesday 20 October, 2015.
The investment fund will be targeted toward improving power supply, roads, rail and agriculture.
Osinbajo said that the federal government plans to create jobs and conserve foreign exchange by making Nigeria self-sufficient in rice production in 24 months.
“A lot of those projects will be bankable projects, because we’re looking at projects that will interest private sector investors as well, but they are strategic for us,” Osinbajo said
Osinbajo said he understands that portfolio investors aren’t pleased about the trading restrictions on the currency, which have led to a slowdown in capital market inflows and on the other side, the government is “mindful that we maintain foreign-exchange reserves so at least that we are able to keep investor confidence high, especially direct investment,” he said.
OPPORTUNITIES FROM THE PLAN $25b SPECIAL FUND
Clearly from the federal government reaction to the CBN warning per above, the federal government rejected the SYNERGY call between the fiscal and monetary policy as the Federal Government is set to spend heavily rather than cutting back. The projection therefore is that in the coming year 2016, Adesanya & Partners (Chartered Accountants) expect business boom in the following areas:
- Agriculture (second GDP generator to the foreign reserve)
- Construction business vis-à-vis Railway construction and improvement
- Power supply
- Suppliers of raw materials and inputs to the 3 above businesses.
Therefore entrepreneur are expected to commence preparation of their budget towards such opportunities[plulz_social_like width="350" send="false" font="arial" action="like" layout="standard" faces="false" ]