In many countries and regions of the world, various but interdependent drivers of policy risks are expected to hold sway this year. Some of them had begun to create uncertainties to the global economic outlook since the last quarter of 2011. The downside to the national outlook had made President Jonathan to revise down the benchmark price for crude oil to $70 a barrel in the 2012 Appropriation Bill. Expectations that the BRIC markets are entering a phase of slower growth after a decade of strong GDP growth will dent commodity prices including crude oil. There is a policy dilemma regarding the scope for another round of stimulus in China, considering its weaker export prospect as a result of austerity measure in Europe; concerns on (further) deterioration of the asset quality of its banks; and the bet that the Chinese housing market nears a burst following the past years of heating.
Domestic politics may undermine appropriate policy measures to solve the euro zone debt crisis, with awful implications of another recession. In the United States, the upcoming presidential election in November may exacerbate the fault lines in the partisanship which continues to foster short-term consideration of serious fiscal problem facing the biggest world economy.
Regarding Nigeria, there are upsides to the domestic policy issues. I think the current Finance Minister and Coordinating Minister for the Economy, Ngozi Okonjo-Iweala offers hope that savings from withdrawal of the subsidy will be accounted for and managed in a way that will deliver positive social impacts. In the same vein, the new tariff regime for wheat and rice in coordination with the commercialisation policy might drive up investments in agriculture from this year and drive down food prices in the medium term. However, I see upward swing in food prices in the short term from when the policy will take effect in July.
Kingsley Moghalu says the outlook of the banking industry is broadly stable, following the actions of the Central Bank of Nigeria (CBN) in de-risking the banking industry since 2009, the contingent plans to ward off potential contagion from the eurozone crisis and macroprudential supervisory framework coming into place. We spoke with the erudite Deputy Governor in charge of Financial System Stability in CBN, in continuation of our Notable Policy Personality series.
With COP 17 Durban climate talks now history, the future of market-based emission reduction framework is not much more assured. At best, in South Africa, we had "the building blocks" of a future agreement. But quite honestly, the Kyoto Protocol has grossly under-performed in terms of reducing actual emission; while in some cases its financial incentive has been misappropriated through projects that claimed fraudulent carbon credits. The question is: are we likely to have a safer world without any binding agreement capping carbon emissions? With regard to restoring the forest, what will compel more than token, voluntary responses from Nigeria, Indonesia and Brazil - the worst countries for deforestation according to the latest study by Maplecroft?
It is important to point out that the right responses and commitments have led to 15% reduction of new HIV infections over the past decade and a 22% decline in AIDS-related deaths in the last five years, according to a new report. This follows the mileage that has been gained against the malaria scourge. So, we can rise up to the 2012 policy challenges. Happy New Year!
This editorial note summaries some of the articles that appear in the January 2012 edition of Financial Nigeria magazine - a monthly Development & Finance journal. To subscribe to it, click here