Martins Ifijeh in Washington DC
The International Monetary Fund (IMF) has advised the federal government to initiate policies that would enhance the contribution of the private sector to Nigeria’s economic growth.
The fund also stated that the trade tension between the United States and China as well as the tension in the European Union over the Brexit would negatively affect the performance of Nigeria’s economy, even as it called for proactive policies to mitigate external shocks.
In the same vein, the fund reiterated that Nigeria’s GDP projection had been cut from the 2.3 per cent projected in October 2018 to 2.1 per cent as of January 2019.
Responding to a question during a media briefing on the IMF’s World Economic Outlook at the ongoing IMF/World Bank Spring Meetings in Washington DC yesterday, the Chief Economist and Director of Research Department, IMF, Gita Gopinath, said global trade tension was increasingly taking a toll on business confidence and called for tightening of financial conditions for vulnerable emerging markets, Nigeria inclusive.
Gopinath, specifically said trade tension between the United States and China could erode business confidence in Nigeria and other countries which depend on exported goods and services.
Nigeria is China’s biggest trading partner in Africa, and Africa is China’s biggest trading continent globally, and it is believed the trade war could cause hike in prices and reduce business engagement in Nigeria.
Gopinath said: “Brexit and softening oil prices are the main risks. For Nigeria, what is very important is the oil price, so to the extent that other global risks transmit into a weaker oil price or there are other developments that are oil market specific that would be a factor weighing on Nigeria.
“We expect a growth recovery for the country. Growth was reasonably strong last year and we think that things will improve a bit going forward. We cut our forecasts for 2019 precisely because oil prices are going to be a bit weaker than we expected last time we did the forecast.”
Therefore, the IMF official stressed the need for policymakers to be cautious.
“Fiscal policy needs to tighten further for which mobilising more non-oil revenue is very important,” she said, adding: “For monetary policy, it has to stay tight for some more time. It has to be well communicated and transparent. There has been some convergence on the exchange rate front, there is also much more that needs to be done there and the structural reforms, all of these has to be put in a context of reforms that help boost private sector performance.”
Also, the Deputy Director, Research Department, IMF, Gian Maria Milesi-Ferretti, said low and middle income countries that rely mostly on oil could experience additional public financial stress following dwindling oil prices.
He said in whichever case, there should be social security for vulnerable population in any country, such that they are protected from further hardships.
In general, the released World Economic Outlook showed that the world economic situation was deteriorating with many poor countries already struck by debt crisis.
Continuing, Gopinath said global growth softened to 3.6 per cent in 2018 and was projected to decline further to 3.3 per cent in 2019.
She said the downward revision in growth for 2019 reflected the weakness in major economies in Europe, Latin America, the United States, United Kingdom, Canada and Australia.
She stated: “After the weak start, growth is projected to pick up in the second half of 2019.
“This pickup is supported by significant monetary policy accommodation by major economies made possible by the absence of inflationary pressures in spite of growing at near potential.
“The US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have all shifted to a more accommodative stance.
“China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs.’’
Gopinath called for greater multilateral cooperation to resolve trade conflicts, address climate change and risks from cyber security, and to improve the effectiveness of international taxation.
She said that monetary policy should remain data dependent, well communicated, and ensured that inflation expectations remained anchored.
Meanwhile, the European Network on Debt and Development (EURODAD), a major network of European civil society organisations working on development finance has warned that progress on sustainable development goals could be derailed or even reversed, adding that poverty and inequality could rise if counter measures are not taken.
The Head of Policy, EURODAD, Bodo Ellmers said: “High debt levels became a key constraint for spending on infrastructure projects and public goods in poor countries.
“Every euro that goes to creditors is a euro that does not go to poverty eradication and sustainable development.”
He warned that IMF needs to do more such that their programmes do not harm poor people, adding that when crisis strikes, IMF loans are often the last resort for affected countries.
“But they come with harsh austerity and adjustment conditions attached. The IMF conditionality review that takes place while the spring meetings are ongoing should be used to ensure that IMF programmes respect democracy and human rights. We also call on the IMF to conduct human rights impact assessment of all its programmes,” Ellmers said.