CBN, Adesina See Big Agric Impact on Economy

Central Bank of Nigeria (CBN) has reaffirmed 6.72 per cent GDP Q2, 2013 growth forecast by the National Bureau of Statistics, and noted that the country’s now relies more on the non-oil sector as driver of growth.

On the country’s fiscal outlook, the CBN confirmed earlier projections, however, noted that “the relatively robust output growth projection for 2013 was hinged on expected three favourable conditions for increased agricultural production and other policy initiatives aimed at stimulating the economy.”

The CBN’s monetary policy committee (MPC) which met fortnight ago, also “noted with caution, the high GDP growth projection in view of the extant risk factors such as widespread insecurity, weak infrastructure and probable flooding from the projected heavy rains in some parts of the country.”

It also notes with trepidation the “state of emergency in the North East and the accompanying military operations in that axis have the potential to adversely affect economic activities generally, including agricultural production and food prices, as well as consumer demand.”

Dr. Akinnwumi Adesina, minister of Agriculture in separate interview with BBC radio stated that Nigeria was on path to self-sufficiency in food production.

Adesina who caused quite a ripple recently with his $600 million mobile phones for farmers’ project in the country, said Nigeria was on-course to regain lost grounds in groundnuts, palm produce and cocoa production.

Already, Nigeria is the largest producer of Cassava and Yam tubers globally. But its import bills in products like wheat and rice eat deeply into its annual GDP.

Yahaya Shehu, a member Monetary Policy Committee said the country’s “GDP growth rate of 6.56 per cent in Q1 of 2013, though a bit lower than the annualized level of growth in Q4 2012, maybe due to seasonal factors, is still robust and is forecast to increase in the next two quarters of 2013.”

He alluded that “one of the major challenges facing the Nigerian economy is the prospect of significant declines in oil earnings in the medium term, both due to weakening oil prices and declines in official domestic production occasioned by production disruptions and leakages. Already, this year, actual retained revenue of the federal government has been about 24 per cent lower that budgeted. Yet, there are some concerns that development imperatives and the security situation in the North Eastern part of the country might lead to substantial fiscal deficits necessitate increased government borrowing and generate inflationary pressures.”

Tunde Lemo, deputy Governor of CBN said: “arriving at policy decision seems a little bit complex. Current macroeconomic conditions suggest a benign environment, including moderation in inflation with all the measures now in single digit. The foreign reserve level has increased to a fairly comfortable level with demand pressure in the foreign exchange market fairly subdued. In addition, the money market rates have shown good degree of stability while investors‟ confidence in the economy has increased, evidenced by the declining yields on long term bonds.”

But Mallam Sanusi Lamido Sanusi, governor of the apex bank had some other reservations about risk factors in the economy other than declining oil revenue. He noted that the war against terror in Nigeria’s North East and subsequent investment in the “reconstruction and rehabilitation as the country deals with the humanitarian situation, are likely to be costly.”

Sanusi who recently got a hattrick of Africa Central Bank Governor of the Year award from the UK based Banker also noted that political spending in the country consequent to the next general elections in 2015 posed great risk to the economy.

“Secondly, as we approach 2014 and the nationwide election, political spending is bound to rise. While, to some, it may seem too early to worry about election spending, it is clear to me that 36 developments such as the Nigerian Governors’ Forum Chairmanship fiasco and the forging of alliances among opposition parties are indicative of the earnest commencement of horse-trading and grand-standing among politicians. The process has therefore commenced.”