The ministry of budget and planning on Monday held a consultative forum in which it shared the Plan Structure and reviewed the context of Nigeria’s Economic Recovery and Growth Plan (NRGP). In a presentation made to attendees, the government said it aims to achieve a growth rate of 2.19% in 2017.
This will be primarily driven by a 5% growth in agriculture, a 7% growth in industry and a 24% growth in oil GDP. The government does not expect non-oil GDP to grow significantly this year, as it still tries to figure out how to tackle reforms. Non-oil GDP is expected to grow at 0.24%.
Can Nigeria’s industrial sector attain a 7% growth coming straight out of a -10% contraction in 2016? Although this is still in planning, it means that the government should be planning for an ultra-accommodating/expansive fiscal policy environment.
This will also mean decisively addressing the reasons why industries are being crushed in Nigeria – lack of access to forex to access input, high interest rate environment, and the infrastructure deficit among other reasons.
For this scale of fiscal stimulus, we are talking all sorts of incentives to woo investors including tax cuts. In addition to this, the government’s borrowing plan critically needs to be successful.
Fiscal injection should however be done in concert with a boost in monetary policy by the CBN. But achieving sync with the CBN will be one of the tough spots in the government’s economic plan. The CBN is faced with a battle against inflation and foreign exchange management. This makes an expansionary monetary policy tricky, as its policies have been mostly constrictive in the past 12 months to rein in inflation, putting it in complete dissonance with the fiscal policy posture.
