In Nigeria, the Monetary Policy Committee (MPC), will hold its second day of meetings today; also against a backdrop dotted with positives. Growth in the economy turned positive in Q2 2017, having shrunk by almost 2% last year and headline inflation has fallen from a high of 18.7% y/y in January to 16.01% last month.
Thus far, the policy rate has been maintained at 14% since early 2016 – and the general expectation is that this stance will be maintained. Although there is pressure for further easing amid a tepid recovery, the policy rate is below inflation and expectations still feel to be pointing in the wrong direction. At points, political influence is felt keenly at the central bank even though President Muhammadu Buhari did not appoint any of the current MPC members; however, this does not feel to be such a moment.
More controversial perhaps, are revenue raising measures. Last week Nigerian aviation unions protested in Lagos against the government’s plan to concession the Murtala Muhammed airport in Lagos and three others in Abuja, Kano and Port Harcourt. The protest followed media reports quoting Vice President Osinbajo saying cabinet had decided to go on with the concession plans to revamp aviation infrastructure (although bidding hasn’t begun yet).
An executive of the Nigerian Union of Air Transport Workers (NUATE), which took part in the demonstration, told us, “we understand that all the airports in Nigeria require some rehabilitation, but what we’re against is the government’s approach. The Federal Airports Authority of Nigeria (FAAN) is the body that should be leading the way with this policy, not the government itself. The government also hasn’t fully involved us stakeholders in [its] planning to address concerns about potential job losses and so on. We’re not satisfied with the political handling.”
Faced with revenue shortages, the government will likely continue orienteering infrastructure projects toward more private sector ownership/management e.g. refineries, airports and roads. For example, last week, Works Minister Babatunde Fashola urged firms to invest in road construction in exchange for some tax relief. This posture will likely be maintained, but we expect some restraint going forward given some stakeholder disapproval election season kick around the corner.
The above paragraphs are excerpted from a larger piece shared the same day
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