IMF: With Economic Policies, Nigeria Will ‘Muddle Through’ in Medium Term

  • Nigeria’s manufacturing index sustains expansion for 11 months

Obinna Chima with agency report

The International Monetary Fund (IMF) has projected that Nigeria will “muddle through” with its economic policies in the medium term, warning, however that “comprehensive and coherent” economic policies remain urgent and must not be delayed by the approaching elections and recovering oil prices.

According to Reuters, the multilateral donor institution made the observation in a report, noting that while the broader economy was slowly exiting the recession, real gross domestic product (GDP) per capita was falling.

Buoyed by the non-oil sector, the Nigerian economy grew in real terms by 1.92 per cent in the fourth quarter (Q4) of 2017 (year-on-year), maintaining its positive growth trajectory since the emergence of the economy from recession in the second quarter (Q2) of 2017.

The economic growth last year corresponded with the forecast of the Chief Economist of the International Monetary Fund (IMF), Maurice Obstfeld, who had predicted last October that Nigeria’s economy would grow by 0.8 per cent in 2017.

“Nigeria is expected to emerge from the 2016 recession caused by low oil prices and the disruption of oil production. Growth in 2017 is projected at 0.8 per cent owing to recovering oil production and ongoing strength in the agriculture sector,” Obstfeld had said.

The latest data released by the National Bureau of Statistics (NBS) had also indicated that the economy recorded a real annual Gross Domestic Production (GDP) growth rate of 0.83 per cent in 2017, an improvement over the -1.58 per cent recorded in 2016.

Meanwhile, the Manufacturing Purchasing Managers’ Index (PMI) for February stood at 56.3 index points, indicating an expansion in the manufacturing sector for the 11th consecutive month.

According to the report posted on the Central Bank of Nigeria (CBN)website wednesday, showed that the index however grew at a slower rate, when compared to that in the previous month.

The report revealed that of the 15 sub-sectors surveyed, 10 reported growth in the review month in the following order: Plastics and rubber products; textile, apparel, leather and footwear; appliances and components; paper products; primary metal; petroleum and coal products; chemical and pharmaceutical products; food, beverage and tobacco products; electrical equipment and furniture and related products.

On the other hand, the remaining five sub-sectors contracted in the following order: printing and related support activities; cement; nonmetallic mineral products; fabricated metal products; and transportation equipment.
Also, at 57.8 points, the production level index for the manufacturing sector grew for the 12th consecutive month in February 2018. The index indicated a slower growth in the current month, when compared to its level in the preceding month. Six of the 15 manufacturing sub-sectors recorded increase in production level, six remained unchanged, while the remaining three recorded declines in production level during the review month.

In the same vein, at 55.6 points, the new orders index grew for the 11th consecutive month, indicating increase in new orders in February 2018. However, eight sub-sectors reported growth, four remained unchanged while three contracted in the review month.

“The manufacturing supplier delivery time index stood at 57 points in February 2018, indicating faster supplier delivery time for the ninth consecutive month.

“Six sub-sectors recorded improved suppliers’ delivery time, seven remained unchanged while two sub-sectors recorded delayed delivery time.

“The employment level index in February 2018 stood at 53.9 points, indicating growth in employment level for the tenth consecutive month. Of the 15 sub-sectors, six sub-sectors increased their employment level, two remained unchanged while seven reduced their employment level in the review month,” the report stated.

In addition, the manufacturing sector inventories index grew for the eleventh consecutive month in February 2018. At 58.1 points, the index grew at a faster rate when compared to its level in the previous month. Nine of the 15 subsectors recorded growth, five remained unchanged while one recorded decline in raw material inventories.

The IMF said in its annual Article IV review of Nigeria’s economy that the outlook for growth has improved but remains challenging. It said, “Comprehensive and coherent” economic policies “remain urgent and must not be delayed by approaching elections and recovering oil prices”.

While the broader economy is slowly exiting recession, people are getting poorer as real gross domestic product per capita is falling, the Fund added.

“Higher oil prices would support a recovery in 2018 but a ‘muddle-through’ outlook is projected for the medium term under current policies, with fiscal dominance and structural constraints leading to continuing falls in real GDP per capita,” the IMF said.

Last year, the lender’s less-than-rosy take on Nigeria’s economy influenced a decision by the World Bank and African Development Bank to halt discussions for budget support loans of at least $1.4 billion.

In the report, it identified risks to growth including additional delays to implementing policies and reforms ahead of 2019 elections, security tensions, and oil prices, a fall in which could see capital flows reversed.

The lender repeated its call, which it has made for more than a year, for Nigeria to simplify its complex foreign exchange system, which has left large gaps between official rates and various windows that certain groups can use to get other rates.

“Moving towards a unified exchange rate should be pursued as soon as possible,” the IMF said.
An IMF spokeswoman declined to comment on the report, but said a statement would be issued after the lender’s board met to discuss the assessment next Friday.

A Nigerian finance ministry spokeswoman did not immediately respond to a phone call and email requesting comment.

Related Articles