Heavy rainfall and cocoa harvest
Nigeria’s cocoa output in 2020/21 harvest season is likely to drop sharply due to heavy rainfall in the South West. This is happening simultaneously with unfavourable weather conditions in Kebbi state which has affected rice harvest. The strategy of inducing self sufficiency and a boost in agricultural output by intervention funding and import prohibition have their limitations. It is therefore imperative for infrastructure investment to complement existing policies to improve domestic output.
Nollywood: a potential gold mine
The urge to increase Nigeria’s revenue to GDP ratio which currently stands at 2.2% has questioned the effectiveness of Nigeria’s diversification strategy. The Nigerian film industry provides a potential gold mine for the FGN. Nollywood, the world’s second largest movie industry, has successfully transitioned from the era of home videos to cinema releases and now to featuring on both domestic and global streaming platforms. Nonetheless, the industry is yet to scratch the surface in terms of infrastructure funding and gross revenue. To boost its contribution to GDP and employment, challenges such as piracy and distribution must be tackled effectively.
MPC slashes interest rate, expands asymmetric corridor
In a widely unexpected move, the MPC voted to cut the benchmark interest rate by 100bps and adjust the asymmetric corridor to +100/-700bps. The decision to cut rates at a time of rising inflation was premised on the assumption that structural deficiencies and not monetary aggregates was the primary driver of inflation. The assumption that a reduction in the MPR will automatically result in an increase in aggregate output and moderate inflation is generous. In reality, the time lag between policy making and transmission impact to the market is likely to be much longer than anticipated.
In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
Enjoy your read!