Financial Derivatives CEO Rewane on Nigeria’s 2020 budget & its impact on the economy

Nigeria's President, Muhammadu Buhari, recently signed the country's record N10.59 trillion 2020 budget. Bismarck Rewane, CEO of Financial Derivatives, joined CNBC Africa to discuss funding options for the budget and recap the highlights of Nigeria's economy in 2019. Despite some policy changes throughout the year, economic recovery momentum was still lacking in the country. Rewane highlighted that while the average growth rate improved from 1.8% in 2018 to 2.2% in 2019, there is still a long way to go to achieve desired growth levels. The year saw fluctuations in treasury bill rates, inflation numbers, and significant policy shifts, such as the opening and subsequent closing of borders and the passing of the production sharing contract bill. Many of these initiatives were reactive rather than strategic, signifying the need for a more cohesive long-term economic plan. One key highlight of 2019 was the passage of the budget within the newly aligned calendar year. This change allows for greater synergy between government arms and the flexibility to adjust to fluctuating oil prices through supplementary budgets. While the 2020 budget represents only a small percentage of GDP, it marks a positive shift towards fiscal discipline and realistic growth assumptions. A notable challenge lies in bridging the revenue gap, but anticipated revenue-boosting measures offer hope for improved fiscal management. While deficit financing remains a tool for economic stimulus, investments must be directed towards projects with tangible productivity impacts. With declining rates in the fixed-income market, the Debt Management Office faces a balancing act between domestic and foreign borrowing. The current low interest rates pose challenges in sustaining investments and could lead to inflation and external vulnerabilities. Exchange rate stability remains a crucial concern for investors, with factors such as trade balances, reserves, and oil prices influencing the Naira's performance. Despite existing vulnerabilities, confidence in the central bank's ability to manage liquidity for stability remains high. The 2020 budget is geared towards job creation and stimulating real sector growth through increased domestic and international investments. Initiatives like the Petroleum Industry Bill (PIB) and fiscal incentives aim to attract investments in crucial sectors like oil and gas, infrastructure, and manufacturing. While early signs show promise, the impact of these investments may take time to materialize fully. Rewane maintains a cautiously optimistic outlook for 2020, emphasizing the need for sustained investments and strategic economic reforms to drive sustained growth and job creation in Nigeria.