Fidelity Bank has said that Nigeria Economy is in need of more fiscal incentives.
This was made known in a third Quarter report GDP released by the bank saying that it surprised to the upside with a growth rate of 2.28% from
a revised growth of 2.12% in Q2’19. While this seems positive, the rate of growth is still way below the
ERGP target (4.5%).
Fidelity Bank said, “The Q3 GDP report was released this morning and surprised to the upside with a growth rate of 2.28% from a revised growth of 2.12% in Q2’19. While this seems positive, the rate of growth is still way below the
ERGP target (4.5%).
“This is an indication that the economy is in need of more fiscal incentives. The
expansion in Q3 GDP can be partly attributed to the government’s anti-smuggling strategy and its positive
effect on domestic production. Output growth was further supported by the harvest season and increased
activities in the construction sector.
“A breakdown of the report showed that most of the interest rate sensitive and employment elastic sectors
showed slight improvement. This suggests that the various government policies are having medium term
effect. Of the 19 activities reported, 10 expanded, 5 contracted and 4 slowed.
“Economic growth is a function of fiscal policy and can only be complemented by monetary policy. While the
Q3 GDP numbers showed that the recovery path is sustained, corporate earnings are still suffering.
“The inability of companies to pass on higher costs to consumers weighed on profitability and revenue growth.
” Consumer demand was also constrained by low disposable income. The economy needs more fiscal
incentives to ensure that growth reaches its potential and full employment levels. Hence, it is expedient that
the CBN’s current intervention strategy is supported by more investment friendly policies in order to attract
more foreign investment which is a catalyst for growth.
” Fiscal policies can however be complemented by
monetary policy to enhance macroeconomic stability.
Sector Breakdown – 10 sectors expanded, 4 slowed while 5 contracted
An in-depth analysis of the GDP numbers showed that the fastest growing sectors are the interest ratesensitive and job-elastic sectors.
“The agric, manufacturing and construction sectors expanded by 2.28%, 1.10% and 2.37% respectively. These sectors contribute approximately 40% to GDP and employ more than
30% of the labour force.
The slowing sectors include mining (6.19%) and human health (0.86%). The slow performance in the mining
sector was largely due to dwindling oil prices.
“The average price of oil was $62.03pb in Q3’19, 9.35% lower
than the average of $68.43pb in Q2.
The sectors with negative growth include – real estate (-2.31%), trade (-1.45%), and electricity (-11.81%). The Consumer spending usually increases in the fourth quarter of the year due to festivities. This alongside the minimum wage implementation is expected to boost aggregate demand. Hence, we expect Q4 GDP growth to come in higher at 2.3%. At this rate, average growth in 2019 will be 2.2%. This is inadequate to make a dent on the rising unemployment (estimated at 30%) or an impact on the lives of the average citizen.
“Hence, more fiscal
incentives and investment friendly policies are required to boost economic activities and attract foreign investment.”