IMF Senior Resident Representative (Nigeria), Mr. Scott Rogers OR Minister for Finance, Ngozi Okonjo Iweala
The International Monetary Fund (IMF) said the time is ripe for Nigeria to aggressively pursue the diversification of the economy so as to make the country less vulnerable to movements in oil prices.
Speaking Thursday in Abuja at the presentation the of recently published IMF World Economic Outlook and the Sub-Saharan Africa Regional Economic Outlook with perspective on the Nigerian Economy, IMF Senior Resident Representative (Nigeria), Mr. Scott Rogers, told THISDAY in an exclusive interview that diversification was one of the greatest challenges currently confronting the country because oil revenue would be falling quickly.
He also cautioned against indiscriminate depletion of the Excess Crude Account (ECA) given that revenue shortfalls do not occur on a regular basis to warrant regular withdrawals from it.
According to him, one of the reasons for the shortfall in the past was because of the high cost of the fuel subsidy which has now moderated.
He also identified the huge size of the public sector in terms of recurrent spendings which go into the civil service as another great challenge which the country faces.
He said: "Salaries went up a lot between 2007 and 2010. So once you raise those wages and salaries, it makes it difficult to contain the growth of public spending. If Nigeria wants to increase the ECA, increase government savings, increase reserves, reduce inflation, reduce nominal interest rate, and provide adequate room for rapid growing private sector, the growth in government spending need to be controlled. It’s very straight forward."
He said although public spending increased 20 per cent per annum between 2006 and 2010, the economy is currently on the right track in terms of macro and fiscal policies being implemented leading to better fiscal restraint in the recent times.
He said:"The challenge is to contain the rate of growth and cause the rest of the economy to expand rapidly. Yes, interest rates are high but those interest rates would come down as inflation comes down and come down even more rapidly with additional fiscal restraint. So both fiscal and monetary policies are moving in the right direction. If all the tiers of government want to be ready for another crisis, then they need to rebuild their financial assets and for them to do that, they need to run surpluses. But that is not what we see going on in the future.
That will require more fiscal tightening and that can be achieved by monitoring budget reference price-not letting it go up, and also saving what goes into the ECA. They want to see the excess crude account go up...you have to run fiscal surpluses to see the ECA go up."
Rogers said if the country must realise its potentials as a middle-income country, it must focus on the diversification of the economy to make it less dependent on oil.
He added that there was need for private sector credit expansion given that the country's economic future lies there in.