Report: Fiscal Measures, Monetary Policies ‘ll Stimulate Growth
The FSDH Research says that there are limitations to the use of monetary policy alone to stimulate economic growth. It mentioned some complementary fiscal measures that the Federal Government of Nigeria needed to implement to ensure that Nigeria achieved the desired goal of inclusive growth.
The FSDH Merchant Bank stated this in its monthly economic and financial markets outlook entitled, ‘Monetary policy easing: Fiscal policy choices.’
These measures, it added, related to the provision of a more conducive business environment in order to attract investments, both domestic and Foreign Direct Investment.
The report noted that it would also require government to spend money in some critical sectors of the economy to stimulate household consumption to drive economic growth.
Part of the report read, “We understand that the government would require funds to implement these measures and pump money into the economy. We are also aware that government’s revenue is low at the moment while its expenses both on recurrent and capital projects are growing.
“Therefore, government needs to devise way to increase its ability to generate more revenue without necessarily increasing tax rate as this may reduce household consumption and reduce compliance.”
The FSDH Research’s analysis showed that government could earn more revenue from the Value Added Tax in Nigeria by developing strategies to increase household consumption and increase VAT compliance.
Against the expectations of most analysts in the market, the FSDH observed that the Monetary Policy Committee of the Central Bank of Nigeria suspended its monetary policy tightening during its last meeting in March.
The MPC reduced the Monetary Policy Rate by 50 basis points from 14.00 per cent to 13.5 per cent.
Major reasons for the rate cut, it added, were declining inflation rate; stability in the foreign exchange rate (and marginal appreciation in some cases); moderate improvement in crude oil price; increase in the external reserves; successful conclusion of the general elections; and the need to boost credit creation to stimulate economic growth.