The Federal Government’s current total indebtedness to contractors is in excess of N800bn, a new report by Financial Derivatives Company Limited, a Lagos-based research firm, has stated.
The report also says that over 18 state governments are owing staff salaries, pointing out that the economy is facing a very turbulent time in recent history.
The report stated, “The Federal Accounts Allocation Committee’s allocation to the states has declined sharply to N388bn; the allocation shared in April was N435bn.
“The Gross Domestic Product growth shrank sharply to 3.96 per cent, from 5.94 per cent in the fourth quarter of 2014 at a time of creeping inflation; this means that the country is in secular stagnation or temporary stagflation.”
According to the FDC report, Nigeria is currently faced with “limited options and hard choices” because oil output is dropping as power supply continues to fall.
Amid a bleeding manufacturing sector and low agricultural output owing to Boko Haram attacks, the research firm said inflation was likely to jump from 8.7 per cent to 9.5 per cent in coming months.
It, however, says naira, has appreciated in all segments of the foreign exchange market.
The report reads, “The naira has appreciated in all segments of the forex market: N198 at the interbank, N217 at the parallel, and N199 at the International Air Transport Association segment.
“The forex demand at the interbank market is slowly normalising due to the delayed impact of the devaluation and consumer resistance to higher prices at the retail level. Huge payments to oil marketers have increased money supply saturation in the economy.”
The FDC report also forecasts that the recent harmonisation of the Cash Reserve Ratio on public and private sector deposits to 31 per cent by the Central Bank of Nigeria’s Monetary Policy Committee will trigger some reaction in the banking system.
It argues that the monetary policy action “will lead to the refund of 44 per cent on public sector funds against an 11 per cent mopping up of private sector deposits.
“Major beneficiaries of this move are the tier 1 banks. Private sector-dependent banks will face challenges.
“However, the immediate impact on the market was neutral. The medium-term impact will increase system liquidity due to the volume of the refund.”
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