Nigeria needs reforms to boost growth – IMF

Nigeria needs structural reforms to lift growth and boost her poor revenue status, the International Monetary Fund (IMF) has said.

Chief of the World Economic Studies Division of the IMF’s Research Department, Gita Gopinath, said this yesterday during the public presentation of the World Economic Outlook at the on-going World Bank/IMF annual meetings in Washington DC.

This is just as the Fund forecasts that Nigeria’s Gross Domestic Product (GDP) growth is projected to remain flat this year. “Robust growth is expected for non-commodity exporters such as Vietnam and Bangladesh, while the perfor mance of commodity exporters, such as Nigeria, is projected to remain lacklustre, according to the World Economic Outlook.

Besides, the Washington-based institution predicted the biggest slowdown in global economic growth by lowering its forecast from the 3.2 per cent it predicted in July to three per cent, blaming barriers in trade and a rise in global political tensions.

Specifically, IMF’s Divisional Chief, Research, Oya Celasun, said Nigeria’s slight positive growth experienced through strong agricultural production earlier in the year was not sufficient to turn per capital growth into positive.

IMF also said Nigeria currently has one of the lowest revenues in the world, adding that this is particularly so because of the drop in oil revenues and poor revenue base in non-oil sectors.

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Fielding questions from journalists on measures of reforms that Nigeria should introduce to improve growth, she said the country should introduce tight monetary policy, simpler unified exchange rate system and improved spending on priorities such as social safety and infrastructure.

“There was a slight upward revision for growth this year and that came mostly from strong agricultural production earlier in the year, but the growth is not high enough to lift the per capita growth into positive tertiary,” she said. 

“For some time, we have been emphasising on a comprehensive package to lift growth. On the element of that, it would have to be stronger non-oil revenue mobilisation as Nigeria has one of the lowest rates of revenue in the world, which was hit hard by the drop in oil prices that is essential for the country to be able to spend more on priorities such as social safety and infrastructure.”

IMF also said there was the need “for tight monetary policy and simpler unified exchange rate system. Foreign exchange restrictions have also been distorting public and private sector decisions and holding back investments.

“Generally, banking system has continued with stronger structural reforms. Infrastructure in power sector on the part of government would remain critical.”

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Speaking earlier during the press briefing, Gopinath said: “In the case of Nigeria, a lot depends on oil prices and crashes and one thing to keep in mind about Nigeria is that the per capita growth remains weak and this is why we are talking about restructuring reforms.”

Responding to questions on the side-lines of the meeting on trade and tensions hampering intra Africa trade, Celasun said: “African countries don’t do much trade with each other, so, it creates greater facilitation of free trade and lower tariff barriers; it helps create new opportunities for growth, it is a longer term, medium to longer term. We would expect that if its implementation progresses fast, we would expect positive impact of medium term much needed given the demographics of Africa, many jobs will have to be created given the young population.

“It is not good for the economy. It affects activities directly sometimes, but it also affects confidence, but it is never helpful for growth. We have, over the last several years and always, seen occasional bursts of violence and unrest and this certainly does not help growth. Conflict doesn’t help economic activities.

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“It was particularly weak this year with weaker growth, but is set to improve next year and that is good news, but in general, apart from very easy financial condition, many of the factors in the global economy are not positive.”

On the global economic outlook, IMF said 2020 recovery in the global economy will be slightly weaker than expected and U.S. growth will continue to slow.

IMF trimmed its global growth forecast for 2020 by 0.1 percentage points to 3.4 per cent, saying that rising trade and geopolitical tensions had put economies in a “precarious” position.

“As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list,” IMF said in its October World Economic Outlook.

“Such actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and manufacturing and raise world growth,” it said.

The forecasts are the first since Kristalina Georgieva took over as Managing Director of IMF earlier this month, succeeding Christine Lagarde, who departed to lead the Eurpoean Central Bank.

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