MARKET DEVELOPMENT
FG May Impose Restrictions on Importation of Palm Oil, Others
FG May Impose Restrictions on Importation of Palm Oil, Others
29/01/2015 (THISDAY Live) - The significant drop in Nigeria’s revenue as a result of the slide in crude oil prices may compel the federal government to impose further restrictions on importation of certain agricultural products, a report has stated.
Specifically, some of the agricultural items, according to the report may include palm oil, nuts and rubber goods.
Guaranty Trust Bank Plc (GTBank), made the prediction in its 2015 macroeconomic outlook obtained by THISDAY.
Oil revenue currently accounts for more than 75 per cent of government’s revenue and close to 90 per cent of foreign exchange income.
Given that weak oil prices are expected to prevail till mid-2015, the financial institution said it expects forex supply to suffer a significant decline.
In the first two quarters of 2014, Nigeria recorded year-on-year gross domestic product (GDP) rates above six per cent in the midst of declining worldwide growth trends.
This trend continued in the third quarter as Nigeria recorded year-on-year GDP growth of 6.23 per cent driven by non-oil sector which grew by 7.5 per cent.
“In spite of government’s efforts to diversify the economy and to reduce demand for forex, we do not see this taking effect in the short-term. We are however, confident in the central bank’s ability to hold the current official exchange rate steady, for oil prices above $55 per barrel.
“In addition to previous import substitution initiatives restricting the importation of fertilisers, sugar, cement and other items, the federal government in 2014 placed restriction on the importation of certain classes of vehicles and automobiles spare parts through increased tariffs and levies.
“The federal government expects that the policy would create jobs, reduce the dependence on imported vehicles, thereby reducing the demand for forex for the purpose of vehicle ownership. Faced with dwindling oil revenue, we expect the federal government to ramp up efforts in this regard,” it argued.
The report noted that in 2014, offsetting what would have been otherwise been a stable pre-election year, declining oil prices had set the tone for tighter monetary policies, market turbulence and inevitable devaluation of the naira in the fourth quarter.
Furthermore, it stated that the combined effect of declining oil prices, gradual capital flight, a reduction in forex supply and the import dependent nature of the Nigerian economy resulted in sustained pressure on the naira.
“Given the international variables contributing to the weakened state of oil prices and OPEC’s intent to maintain current supply, even if prices go to as low as $20 per barrel, we do not expect a reversal in the direction of oil prices in the first half of 2015.
“However, we expect that this may change later in the year as declines in supply are expected in the second half of 2015,” it added.
Specifically, some of the agricultural items, according to the report may include palm oil, nuts and rubber goods.
Guaranty Trust Bank Plc (GTBank), made the prediction in its 2015 macroeconomic outlook obtained by THISDAY.
Oil revenue currently accounts for more than 75 per cent of government’s revenue and close to 90 per cent of foreign exchange income.
Given that weak oil prices are expected to prevail till mid-2015, the financial institution said it expects forex supply to suffer a significant decline.
In the first two quarters of 2014, Nigeria recorded year-on-year gross domestic product (GDP) rates above six per cent in the midst of declining worldwide growth trends.
This trend continued in the third quarter as Nigeria recorded year-on-year GDP growth of 6.23 per cent driven by non-oil sector which grew by 7.5 per cent.
“In spite of government’s efforts to diversify the economy and to reduce demand for forex, we do not see this taking effect in the short-term. We are however, confident in the central bank’s ability to hold the current official exchange rate steady, for oil prices above $55 per barrel.
“In addition to previous import substitution initiatives restricting the importation of fertilisers, sugar, cement and other items, the federal government in 2014 placed restriction on the importation of certain classes of vehicles and automobiles spare parts through increased tariffs and levies.
“The federal government expects that the policy would create jobs, reduce the dependence on imported vehicles, thereby reducing the demand for forex for the purpose of vehicle ownership. Faced with dwindling oil revenue, we expect the federal government to ramp up efforts in this regard,” it argued.
The report noted that in 2014, offsetting what would have been otherwise been a stable pre-election year, declining oil prices had set the tone for tighter monetary policies, market turbulence and inevitable devaluation of the naira in the fourth quarter.
Furthermore, it stated that the combined effect of declining oil prices, gradual capital flight, a reduction in forex supply and the import dependent nature of the Nigerian economy resulted in sustained pressure on the naira.
“Given the international variables contributing to the weakened state of oil prices and OPEC’s intent to maintain current supply, even if prices go to as low as $20 per barrel, we do not expect a reversal in the direction of oil prices in the first half of 2015.
“However, we expect that this may change later in the year as declines in supply are expected in the second half of 2015,” it added.