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Focus on boosting production, not funding households, experts urge Nigerian govt

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Nigeria's external reserve hits six months high at $44.14bn

As Nigeria continues to struggle with high unemployment and poverty rates, aggravated by the public health challenges from COVID-19, experts in the country’s business sector have urged the Federal Government to focus on boosting the production value chain rather than funding households.

Recall that the Central Bank of Nigeria (CBN) rolled out unconventional tools to stimulate growth. In January, the CBN disbursed N20 trillion to cushion the effects of the pandemic. The apex bank said it disbursed N192.64 billion to households and small businesses from the COVID-19 Targeted Credit Facility.

Speaking with Ripples Nigeria, the Senior Research Analyst at FXTM, Lukman Otunuga, said the deployment of funds directly to households was a significant support for the economy. However, he said the second wave of infections in the country threatens to sabotage any meaningful recovery, at least in the short term.

According to him, tightening monetary policy this year may be too soon and could make Nigeria an outlier among major economies expected to ease or hold rates at record lows to breathe new life into their economies.

He maintained that other than direct funding, the CBN may end up using additional unconventional tools to revive growth, including tweaking the loan to deposit ratio, liquidity ratio, and cash reserve ratio.

“The questions are whether these will be enough to save the country from more financial pain and what will be the long-term effects on Nigeria’s economic health,” he added.

Similarly, Professor of Economics and Chair, Centre for Economic Policy and Development Research (CEPDeR), Covenant University, Evans Osabuohien, told Ripples Nigeria that to ensure a meaningful recovery, the government should focus on boosting the production chain, rather than funding households.

According to him, this was like going to the farm to water an uncultivated land, as it would only yield weeds, saying the impact of the irrigation would only be felt when one had already cultivated the land.

He said: “Money is liquid and the value of a liquid can only be measured in a container. Money is a medium of exchange. So if you have not created the product to be exchanged, deploying money may be wasteful.

Read also: Nigerian govt, Crown Flour Mills in partnership to boost wheat production

“Nigerians are not asking for too much. Don’t give us money; give us power supply and good roads. Nigerians are enterprising, they would create the system. That is what you see in China. So just pumping money into the system can only cause economic erosion.”

He maintained that if the government focuses on production, other things would fall in place. “Jobs will be created, when the job is created, money is created and when money is created, the government can actually earn more taxes,” he added.

On his part, Economic Analyst and Agropreneur, Godwin Okeke, said the apex bank’s decision to fund households was the perfect thing to do, as the economy rests on the households, noting that the funds were the palliatives that kept the households going.

He said a lot of the funds disbursed to households went into micro trading, which had a direct impact on the people that were really affected. He maintained that the second wave of the pandemic would not have much impact on the economy compared with the first wave, as there is no economic lockdown.

However, Okeke reiterated the need for the government to deploy more funds into the production value chain, especially the agricultural value chain, noting that there was a need for intervention in the area of storage facilities for farm produce.

“The agricultural value chain is very long, therefore, the government have to invest heavily in those chains. It is not just about producing. In Benue State, the oranges harvested per day can feed the whole of Nigeria but there is no storage facility where these oranges can be processed, so most of them are wasted.

There is also a serious need for more investments in the transportation sector, especially the rail transport so that all these farm produce can be taken to the commercial cities where there is huge population to consume them,” he said.

By Victor Ifeanyi Uzoho…

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