Nigeria requires urgent economic policies to reduce vulnerabilities, says IMF

Obasanjo Warns Against Arab Spring Experience In Nigeria
The International Monetary Fund (IMF), yesterday, advised that urgent and workable economic measures are urgently required in Nigeria to reduce the huge vulnerability to which the Nigerian economy has slipped into.

The advice came on a day Nigeria’s former President, Chief Olusegun also warned Nigeria and other African leaders to buckle up and rescue their countries from the impending Arab Spring experience, which he said might be driven by deprivation and hunger from the youth devoid of religion, ethnicity or territory.

While the IMF advice is contained in the outcome of its Article 1V Consultation on the Nigerian Government, Chief Obasanjo’s was at the panel discussion on the third day of the on-site going 25th anniversary and Annual General Meeting of the Afrexim Bank in Abuja, where he spoke about the evil of bad governance and corruption.

According to the IMF, “A coherent set of policies to reduce vulnerabilities and increase growth remains urgent. This includes specific and sustainable measures to increase the currently low tax revenue—including through avoiding new tax exemptions — and ensuring budget targets are adhered to even in an election year.

“This process should be supported by keeping monetary policy tight through appropriate monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market-determined exchange rate.”

The reported further stated moving ahead with structural reforms is needed to invigorate inclusive growth, particularly in the power sector where faster progress would be needed to ensure financing shortfalls in the sector are met in a sustainable manner.

It would be recalled that a staff team led by Mr. Amine Mati, the Senior Resident Representative and Mission Chief for Nigeria, visited Nigeria from June 27 to July 9, 2018, to discuss recent economic and financial developments, update macroeconomic projections, and review reform implementation, following which the observation and advisory was issued yesterday.

Though the team observed that higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures, it pointed out that the recovery remains challenging.

“International reserves remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.”

On non oil revenue generation, the team observed that tax collection efforts improved, but revenue shortfalls and the late adoption of the 2018 budget impede its implementation, while revenue from higher oil prices is limited by net losses from retail fuel sales. Meanwhile, non-oil revenue remains below expectations, with yields from tax administration measures—including the Voluntary Asset Income Declaration Scheme (VAID) and increased tax audits—yet to fully materialize.

Commenting on Government’s spending profile, it declared that current spending remains in line with expectations, observing, however, that carryover from 2017 to 2018 helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget. It also reported that lower yields have kept interest payments within the budgeted envelope, but the Federal Government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year.

The Statement reads further: “Reforms to improve the business environment are progressing, including through identification of priority investment projects and the adoption of the Company and Allied Matters Act (CAMA)—a legislative landmark for private sector development. The implementation of the Power Sector Recovery Plan is advancing through a mini-grid policy, and regulations on eligible customers and meter asset providers.

“Under current policies, the outlook remains challenging. Growth would pick up to about 2 percent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth. The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget. Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices. Increased oil exports would keep the current account in surplus, helping stabilize gross international reserves even if the current pace of foreign portfolio outflows continues,” it concluded.

The IMF team held productive discussions with senior government and central bank officials. It also met with representatives of the banking system, the private sector, civil society, and international development partners.

Meanwhile, former President Obasanjo who featured in an interview panel moderated by The Financial Times Lead Writer, Williams Malis bothering on the Afrexim Bank identified incompetence and corruption as reason for the huge unemployment in Africa and advocated for whether termed a Public, Private, People (PPPP) in the development strategies.

“If you have people at the core of what ever development you are embarking on, there won’t be anything like corruption or stealing what belongs to the people. The present realities of our leaders, some of them, who have been in uniform are still there as leaders today. The way they are reacting to issues now is different from when they were in uniform.