CBN Headquarters
Festus Akanbi
Following the marginal improvement across some economic indices in the last quarter of last year, economic watchers have predicted a recovery in consumer spending/capital in 2013 and 2014.
This follows a year when consumption was undermined by high interest rates, elevated inflation and a growth slowdown in sector that employs the majority of the workforce- agriculture.
Economists who raised the optimism said the underperformance of the Value Added Tax (VAT) revenue collections – 12% below target in 9M12 – reflects a slowdown in sales that is related to a weak consumer.
Analysts from Renaissance Capital therefore said the anticipated low interest rate regime, and stronger equity market are clear factors that will boost consumer spending.
In its latest economic preview, Rencap said, “The recovery in consumer spending is partially premised on our projection of moderately lower interest rates. Households are recipients of, at most, 15% of credit extended to the private sector. Our expectation of a stronger equity market in 2013 and 2014, which is indicative of wealth, is positive for consumer spending. Although, retail investors in Nigeria’s equity market have dropped to c. 3-5%, from15% pre-local banking crisis, the stock index is still significantly linked to consumer spending, according to our model.”
Analysts, however, warned the risks to a recovering consumer spending include maintenance of firm monetary policy and some weakness in the equity market.
“Upside pressure on inflation or naira weakness would compel the Central Bank of Nigeria (CBN) to maintain a high-interest-rate environment. Our base case is that interest rates will moderate to 11%. On the equity market’s performance, attractive high-yielding naira debt and a negative turn in global sentiment may limit the upside we expect in the market in 2013,” analysts said in the report.
Meanwhile, a flat current account surplus/GDP of 7.4% of GDP is expected in 2013. Rencap analysts said, “We project a flat oil price in 2013, of c. $110/bl, so our projection of a moderate increase in export earnings is expected to be largely due to higher oil export volumes.
“On the supply side, we expect these higher volumes to come on the back of increased government surveillance of oil-producing areas, which has already resulted in oil production climbing to 2.48mbd in August, from 2.23mbd in January 2012. On the demand side, we expect a moderately stronger EU to translate in some strengthening in demand for Nigeria’s oil.
“On the imports side, we believe the decline in the import bill in 2012, was a one-off event, related to a policy decision. As we expect some import growth in 2013, we project limited improvement in the CA surplus. For this reason, we expect a broadly flat CA surplus/GDP in 2013.”The source said this was what compelled the management of Customs to, in February last year, introduced a duty benchmark that was later suspended on the orders of the Presidency.
However, our source said the customs management had introduced what was described as ‘confidential’ measures to evaluate all import duty payments to ensure that appropriate duties are collected on every consignment being cleared at the nation’s ports and border stations.
Apart from this, all Federal Operations units (FOUs) of the Customs nationwide are to conduct post clearance checks on importers to ensure that they did not defraud the government.
Following this, FOUs are to visit notable importers periodically to demand for details of transactions to ensure that the company met all trade regulations.
The border stations have also been directed to put close markings on unapproved routes to check the menace of smugglers.
The Federal Government had given the Customs a revenue target of N800 billion, but the management had on its own raised the target to N1.2 trillion for 2012.
Apapa and Tin Can Island Customs Commands realised N283 billion and N206 billion respectively as against targets of N324 billion and N264 billion for last year.
This year, the two commands believed to be the biggest ports in the country, have also been given the same revenue targets.
However, some industry operators, including the President of the Association of Nigerian Licensed Customs Agents (ANLCA), Alhaji Olayiwola Shittu, have advised the Federal Government against setting revenue targets for the customs.
Shittu said such target was the cause of all corrupt and sharp practices in the ports.