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IMF highlights threats to Nigeria’s economic growth

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By Emeka Anaeto and Babajide Komolafe, Reporting from Washington DC

The International Monetary Fund, IMF, Tuesday, listed policy implementation, forex market segmentation, and banking system fragilities as major threats to sustained economic growth in Nigeria.

The Fund, however, re-affirmed its 0.8 percent growth forecast for the nation’s economy in 2017contrary to the Federal Government’s projection of 2.19 percent.

The Fund’s position was contained in its current World Economic Outlook, WEO, released yesterday in Washington DC, United States, at the on-going World Bank Annual Meetings.

While alluding to the nation’s exit from recession, the WEO report stated: “Growth in 2017 is projected at 0.8 percent, owing to recovering oil production and ongoing strength in the agricultural sector.

“However, concerns about policy implementation, market segmentation in a foreign exchange market that remains dependent on Central Bank interventions (despite initial steps to liberalize the foreign exchange market), and banking system fragilities are expected to weigh on activity in the medium term.”

In its WEO earlier this year, the IMF had raised projections for Nigeria’s economic growth to 0.8 percent, from the 0.2 per cent that it had projected in the WEO report of October 2016, saying the revision reflects high oil production due to security improvements in the country’s oil producing region.

The October WEO 2017 projection, however, falls heavily behind the 2.19 percent quoted by the Federal Government in its Economic Growth and Recovery Plan, ERGP, released earlier this year, but much closer to the actual Gross Domestic Product, GDP, figure of 0.55 percent for second quarter 2017 as given by the National Bureau of Statistics (NBS).

Responding to media questions at the WEO press briefing, Maurice Obstfeld, IMF’s Economic Counsellor stated: “Nigeria is going to have stronger growth this year because agriculture and oil production are doing better but there are still downsides and there is still a lengthy adjustment to lower oil prices ahead.”

The improvement in agriculture output is been driven by the various Central Bank of Nigeria (CBN) interventions in the sector namely the Anchor Borrowers Programme (ABP) and the Commercial Agricultural Credit Scheme (CACS).

Global economy to grow by 3.6%

Meanwhile, the IMF has raised its global economic growth projection to 3.6 per cent for 2017, up from 3.5 per cent projected in July, citing accelerating economic activities in Europe, China, Japan, and the United States, as well as emerging Asia.

The Fund similarly raised its global growth projection for 2018 to 3.7 per cent from 3.6 per cent projected in July.

According to IMF’s Economic Counsellor, Maurice Obstfeld, “The global recovery is continuing, and at a faster pace. The picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence.

“For 2017, most of our upgrade owes to brighter prospects for the advanced economies, whereas for 2018’s positive revision, emerging market and developing economies play a relatively bigger role. Notably, we expect sub-Saharan Africa, where growth in per capita incomes has on average stalled for the past two years, to improve overall in 2018.”

The current global acceleration is also notable because it is broad-based—more so than at any time since the start of this decade. This breadth offers a global environment of opportunity for ambitious policies that will support growth and raise economic resilience in the future. Policymakers should seize the moment: the recovery is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever.”

Sub-Saharan Africa growth downgraded

The IMF however downgraded its growth projection for the sub-Saharan Africa economy to 2.6 per cent for 2017 and 3.4 per cent for 2018, from 2.7 per cent and 3.5 per cent respectively projected in July.

On the rationale for the downgrade, IMF said: “Downside risks have risen because of idiosyncratic factors in the region’s largest economies and delays in implementing policy adjustments. Beyond the near term, growth is expected to rise gradually, but barely above population growth, as large consolidation needs weigh on public spending.”

According to Obstfeld: “What we see in the headline numbers is growth this year and better outcome which is largely driven by the larger economies such as Nigeria South Africa and Angola where one of the factors that had being laying on growth and allowing for a somewhat better outcome but not necessarily a strong one in particular with the case of Nigeria is stronger oil production after the problems and anticipating better agricultural production are playing a role likewise in South Africa, a rebound in agricultural has ease drought in that region and stronger mining output are helping.

“So these are the dissipating of negative factors and it is not a very strong growth impetus that is coming. That is not to say that a number of economies are not growing stronger; many countries are growing at five percent so that is a favorable story although it comes with risks, with some countries with public debt has been quiet strong.

“Those four economies are oil export countries and they are adjusting their public finances to lower oil prices and that is creating a drag for their economies.”

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