Kunle Aderinokun, Obinna Chima, Funke Olaode, Kasie Abone in Lagos and Nosa Alekhuogie in Washington DC
The International Monetary Fund (IMF) advised the federal government to give more priority to investment in infrastructure so as to address the high level of poverty in Nigeria.
The Director, African Department of the IMF, Abebe Aemro Selassie, made this call at a media briefing on Sub-Saharan African economies at the on-going IMF-World Bank spring meetings in Washington DC, United States.
Selassie pointed out that the economic situation in Nigeria remained difficult despite its tremendous resources. He, however, urged the government to look for ways to mitigate the weak economic situation on the poorest.
“You know the fact is that the country has moved from a period when oil prices were $100 per barrel for five or six years or more, to where they are now. But it’s a huge hit on the income of the country and the government’s revenue. The government has a lot of public services it has to provide which need to be financed and so alternative sources of financing have to be found for that. Which particular tax system they want to use, of course is up to the government.
“But without that, the government’s objective of addressing poverty, you need infrastructure investment to be able to do that, you need to build more schools and you need to invest more in health and education. All of these require resources. So, you know it’s imperative for the government to be able to address its long-term developed agenda to have tax handles to be able to generate revenue,” he added.
The IMF official noted that in countries hardest hit by commodity price decline, especially oil exporters like Angola and Nigeria, the budgetary revenue losses and balance of payment pressure were continuing. He, however, warned that the delay in much-needed reforms in those regions was creating uncertainty, holding back investments, generating risks as well as even creating deeper difficulties in the future.
Selassie also said the IMF was concerned about famine in South Sudan and the North-eastern Nigeria, which he said had created significant humanitarian concerns, saying that addressing the problems in those countries would pave the way for the restoration of economic conditions in those countries.
“2016 was a difficult year for many countries. Economic growth in 2016 is estimated to have reached only one and a half per cent, which is the weakest outcome in more than two decades, and below the rate of population growth. While a number of countries continue to grow robustly, the slowdown in growth has been broad, affecting about two-thirds of countries that together account for more than four-fifth of regional GDP. This contrasts with the fairly robust growth rates the regions has experienced in recent years.
“Inflation has also begun to accelerate in some countries reflecting widening macroeconomic imbalance, currency depreciations and drought-related food price increases. Looking ahead, the outlook is foreseen to remain subdued. Growth in the region is expected to rebound modestly to two and a half per cent in 2017. However, this falls short of past trends and barely delivers any per capital gains,” he added.
Selassie explained: “The uptick in growth is largely driven by one-off factors in the three largest economies- a recovery in oil production in Nigeria, higher public spending ahead of elections in Angola, and the fading of drought effects in South Africa. This aggregate number hides considerable differences across the region, with some of the largest Western and Eastern Africa countries expected to continue to grow at five to seven and a half per cent.”
“The outlook remains subject to external risks, including further appreciation of the U.S dollar and a tightening of financing conditions, especially for countries where fundamentals have deteriorated, and a broad shift towards inward-looking policies, including protectionism, that could reduce trade and impede global growth. In addition, the outlook is clouded by the incidence of drought, pests, and security issues that have contributed to an increase in food insecurity and even famine in parts of sub-Saharan Africa. This humanitarian crisis needs to be urgently addressed,” he, however, pointed out.
Meanwhile, the Acting Director, Corporate Communications Department, Central Bank of Nigeria (CBN), Mr. Isaac Okorafor, has said that the call by the IMF and World Bank on the CBN to float the naira and liberalise the market, was “laughable,” citing the case of Egypt where inflation has skyrocketed.
“We are 180 million people, our infrastructure is so poor and the productive capacity cannot be fast enough to rise to benefit from massive depreciation. If you float the naira today, and given the discoveries by security agencies, you’ll discover that our case will be terrible. Egypt today has an inflation rate of almost 31 per cent, remember Angola also has about 36 per cent inflation, ours is at 17.26 per cent.
“If we float the naira and we allow speculators and those with corruption money and all the people who create the bubbles to launch into the market, you can imagine the kind of situation we will find ourselves. Of course, you should also know that no country floats its currency, just leaving it to the dictates of the market. Our economy has its own peculiarities, and we cannot kill our people in the name of floating the naira,” the CBN spokesman said during a media briefing at the IMF-World Bank meetings.