It was only yesterday that I was talking about how commercial banks are cutting credit lines for some industries due to fear of reduced government spending. The day before yesterday, when I was examining if the Nigerian Stock Exchange was due for a bullish or bearish 2015, I opined that we might see foreign investors pulling out their funds from the NSE.
It seems that both predictions are already becoming realities as the Federal government revealed that more austerity measures are on the way for the Nigerian economy.
When the Expected Happens
Firstly, the Minister of Finance, Dr. Ngozi Okonjo-Iweala stated (according to a Punch Newspaper report) that the Federal government was working on additional austerity measures in order to arrest the effects of the global drop in crude oil prices on the Nigerian economy. Dr. Okonjo Iweala did not give details of the new austerity measures being prepared but we can take a clue from the recently announced austerity measures.
The most recent austerity measures include the stoppage of the purchase of new furniture, and reduction in international travels and trainings by government officials by 50%. Other elements of the austerity measures are the commencement of 10% tan on private jets, 1% property tax on mansions whose value exceeds 300 million Naira and the introduction of a 3% surcharge on Champagnes.
The Minister of Finance while speaking at Abuja yesterday said that 2015 will be a tough year for the economy and that the government is committed to responding with more austerity measures in order to keep the economy afloat.
The second point that attests to the fact that the Nigerian economy is treading in dangerous waters is a report on the capital markets that foreign investors have pulled out almost N793.17 billion from the Nigerian Stock Exchange between January and November 2014. The figure represents 67.5% increase on the foreign portfolio investment outflow of N473.61 billion from 2013.
It might be too early to start trying to fathom out where the next round of austerity measures are likely to come hit. Nonetheless, you should be brace yourself for additional tough measures especially in the first half of the year.