Analysts on Wednesday urged the Federal Government to strengthen the non-oil sector by ensuring lower interest rate to reduce cost of borrowing, in order to boost Gross Domestic Product (GDP).
They stated this in an interview with the News Agency of Nigeria (NAN) in Lagos, while reacting to the fourth quarter GDP which expanded to 2.55 per cent.
NAN reports that NBS, on Feb. 24, said that Nigeria’s economy received a positive performance report, with the GDP growth at about 2.55 percent in the fourth quarter of 2019.
The full-year 2019 real GDP stood at 2.27 per cent, higher than the 1.91 per cent growth rate recorded in 2018.
The full-year 2019 figures are almost the same range predicted by the World Bank and the International Monetary Fund of 2.0 and 2.3 per cent respectively.
Also, the 2019 figure is the highest figure recorded in three years, higher than 1.91, 0.83, and -1.58 in 2018, 2017 and 2016 respectively.
Mr Sola Oni, the Chief Executive Officer, Sofunix Investment and Communications, said the current GDP growth would be sustained with lower interest rate regime.
“Nigeria can grow the non-oil sector by operating a regime of lower interest rate in order to reduce the cost of borrowing.
“This singular approach shall increase consumer spending and investment.
“The real wages should be increased by ensuring that nominal wages is above inflation. By this model, consumers’ disposable income will increase.
“An enabling operating environment where infrastructure is optimised will spur rapid production, enhance export of goods, generate foreign currency and boost external reserve,” he said.
Oni noted that economic growth was driven by consumer spending and business investment.
“Business drives the economy through hiring of workers, increase in wages and investing in business expansion.
“These are some of the key ways to boost revenue from the non-oil sectors,” he said.
Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd., said that government should pursue friendly fiscal and economic policies that would boost activities in the non-oil sector.
Kurfi stated that policies that would boost activities in financial services, agriculture, industrial sector and telecommunications should be pursued.
Analysts at United Capital said that the Central Bank of Nigeria’s unorthodox monetary policies would keep cost of capital low through 2020.
They added that the apex bank policy would encourage domestic borrowings and investment by local corporates for expansion purposes.
“However, we believe faster GDP growth is unlikely in the near term, given the ongoing necessary but conflicting fiscal policy actions such as increase in VAT and possible hike in electricity tariffs may hurt consumption.
“Also, the continued closure of the land borders may hurt aggregate demand as a result of increased prices, but has a positive effect on local production.
“In addition, subsisting concerns around policy unpredictability which has been one of the biggest impediments to FDI flows and investment generally, as well as the reluctance to implement reforms that will spur private sector growth is worrisome.
“A tepid outlook for crude oil prices amid demand shortages and the likelihood of a deeper supply cut in crude oil suggest a negative impact on the broader growth number.
“Finally, the time span required to fix power and other critical infrastructure that will ease the cost of doing business and other structural impediments is a factor that may subdue growth in the interim,” they said.