The Managing Director, Financial Derivatives Company, Mr. Bismarck Rewane, on Thursday said the monetary policy strategy needed to reinforce and complement fiscal policy at a time when oil price has dropped to $30 per barrel.
The renowned economist, who spoke at a roundtable discussion organised by Business Eye in Lagos, stated that the currency misalignment would remain for some time to come, stressing that there was need for the right exchange rate policy.
While speaking on fiscal strategy, he said, “When you are in this kind of situation, you must spend your way out of it. The fiscal strategy is intact; what is missing is the monetary policy strategy to reinforce the fiscal strategy.
“Your exchange rate policy when your price of oil was $114 cannot be the same exchange rate policy when the price falls to $30. We had money, we squandered it; we had opportunity, we gave it up.
On how to use monetary policy to complement and reinforce fiscal policy, Rewane said, “We think that you come up with parameters that you will use to measure economic performance and that will decide the exchange rate policy.
“If these things are moving upwards, the exchange rate will appreciate. If they are going downwards, it will adjust downwards.”
He said those things include the price of oil, the level of production, the level of external reserves, inflation rate, and the purchasing managers’ index.
“You cannot deal with an exchange rate that is inefficient,” the FDC MD said.
On what $30 per barrel oil price meant to Nigeria, Rewane said, “In 2014, the price of oil was $116 per barrel and the cost of production was $25 per barrel. The yield on every barrel was $91. Cost of production per barrel is still $25, the price is $30. So the yield has gone from $91 to $5 per barrel. That is the magnitude of the problem.
“In times like this, you have to ask yourself, have we been here before? Yes we have been here before. In 2008, we had the same issue. But then we were fatter, wiser and the problem in 2008 was shorter.
“In 2008, we suffered for nine months only and oil price bounced back. But average price of oil in 2009 was $61.9 per barrel; 2016, the average price is projected at $45. External reserves in 2009 were $53bn; gross external reserves today are $28bn. The exchange rate in 2009 was 150 BDC, official 154. Today, BDC is 300, official is 199. Excess crude account was $22bn in 2009; it is $2bn today. Total external debt in 2009 was $10.4bn; total external debt today is $17.1bn.”
Nigeria’s Real Estate Sector Shrinks by 8.06% in the Third Quarter -NBS
Economic uncertainty plunged Nigeria’s real estate sector by 8.06 percent in the third quarter of the year, according to the National Bureau of Statistics (NBS).
Nigeria’s statistics office said “In nominal terms, real estate services recorded a growth rate of –8.06 per cent in the third quarter of 2020, indicating a decline of –11.78 per cent points compared to the growth rate at the same period in 2019, and by 9.12 per cent points when compared to the preceding quarter.
“Quarter-on-quarter, the sector growth rate was 18.92 per cent.
“Real GDP growth recorded in the sector in Q3 2020 stood at -13.40 per cent, lower than the growth recorded in third quarter of 2019 by –11.09 per cent points, but higher relative to Q2 2020 by 8.59 per cent points.
“Quarter-on-quarter, the sector grew by 17.15 per cent in the third quarter of 2020.
“It contributed 5.58 per cent to real GDP in Q3, 2020, lower than the 6.21 per cent it recorded in the corresponding quarter of 2019.”
Nigeria’s economy contracted by 2.48 percent in the first nine months following a 6.10 percent and 3.62 percent contraction in the second and third quarters respectively.
Nigeria Requires N400 Billion Annually to Maintain Federal Roads -Senator Bassey
The Chairman of the Senate Committee on road maintenance, Senator Gersome Bassey, on Friday said Nigeria requires about N400 billion annually to maintain federal roads across the country.
The Senator, therefore, described the N38 billion budgeted for road repairs in the 2021 proposed Budget as grossly inadequate. According to him, nothing meaningful could be achieved by the Federal Roads Maintenance Agency (FERMA) with such an amount.
He said, “For the 35 kilometres federal roads in the country to be motorable at all times, the sum of N400bn is required on yearly basis for maintenance.”
Bassey “What the committee submitted to the Appropriation Committee in the 2021 fiscal year is the N38bn proposed for it by the executive which cannot cover up to one quarter of the entire length of deplorable roads in the country.
“Unfortunately, despite having the power of appropriation, we cannot as a committee jerk up the sum since we are not in a position to carry out the estimation of work to be done on each of the specific portion of the road.
“Doing that without proposals to that effect from the executive, may lead to project insertion or padding as often alleged in the media.”
Scarcity of Day-Old-Chicks Cripple Poultry Farmers in Akwa Ibom
Despite billions of Naira spent on Akwa Prime Hatchery and Poultry Limited by the Executive Governor of Akwa Ibom State, Udom Emmanuel, poultry farmers in the state said they had to order day-old-chicks from outside the state as the 200,000 capacity poultry farm developed specifically to make day-old-chicks and other poultry products available at affordable prices is almost empty at the moment.
The farmers expressed frustration over many challenges they face in the course of bringing day-old-chicks from outside the state. Usually, Ibadan, Enugu and sometimes as far as Kaduna, while the hatchery built and inaugurated in 2016 remains idle.
Mr Ekot Akpan, one of the poultry farmers who spoke with the pressmen said the state had not had it this bad.
Akpan said: “For the 12 years that I have been in poultry farming, this is the first time that poultry farmers have been so harshly affected by both economic and non-economic factors. And, quite unfortunately, nobody is available to offer any explanation.
“Farmers have been left at the whims and caprice of owners of the means of production.
“There seems to be no government regulation of the poultry industry. How, do you explain a situation where you wake up suddenly and the price of a day old chick is selling for N600, a bag of feed goes as high as N6,000.
“And, in a state that government claims to be pursuing agriculture as one of his cardinal programmes.
“For instance, in 2016, the state government said it has constructed an hatchery, and the intention according the government was to ensure availability of day old chicks at affordable price to farmers, but, quite, unfortunately, that effort has not yielded any tangible result.
“Farmers are still getting their day old chicks from Ibadan, Kaduna, and Enugu. So, the question now is where is the hatchery?
“One would have expected that farmers would be buying old chicks at humane prices, but, from all indications they acclaimed hatchery is a ruse. So, which one is the Akwa Prime Hatchery producing,” he said.
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