Managing Director Financial Derivatives Company Limited, Bismarck Rewane has said that the planned increase in Value added Tax (VAT) to 7.5 per cent would lead to higher commodity price.
Rewane who made this statement while reviewing the nation’s economy and outlook for 2020 said in coming year disposable income will be squeezed and trapped.
He said that apart from having dwindling income per capita currently at $2.236, but on the increase, there would be high income inequality and rising poverty rate.
He, however, said that although aggregate consumption stood at $386 billion, 85.97 per cent of Gross Domestic Products (GDP), consumption projected to increase by 12.7 per cent in 2020.
This according to him would be driven by slow but steady growth estimated at two per cent in 2020 and higher disposable income, new minimum wage effect.
He stated that the new N50 charge on POS could reduce the volume and value of transactions while cheques will in future become obsolescent as a medium of exchange.
He further said that rising inflation and depleting external reserves would compel the Central Bank of Nigeria (CBN) to maintain status quo on the Monetary Policy Rate (MPR), stressing that the apex bank would only consider interest rate cut when inflation enters a sustained downward trend and fails below the targeted upper limit of nine percent.
Admitting that the apex regulator would continue to employ unorthodox measures to stimulate lending as economic growth becomes stronger, he said “it is likely to impose foreign exchange restrictions than devalue the naira in the face of growing external imbalances.”
Rewane stated that would next year faced with the challenge of markek policy and political risks.
He said there is tendency that oil price will fall below $50 per barrel as there would be forex shortages leading to external sector weakness.
He said the ideological policy will backslide while “we there would be reactive rather than see strategic policies.”
