- Inaugurates economic advisory council
- Analysts back IMF
Omololu Ogunmade, James Emejo in Abuja, Obinna Chima and Nume Ekeghe in Lagos
The World Bank and the International Monetary Fund (IMF) wednesday called for urgent structural reforms to fast-track Nigeria’s economic recovery.
The Brentwood institutions’ advocacy coincided with President Muhammadu Buhari’s faulting of statistics produced on Nigeria by the two foreign bodies, describing them as wild estimates.
He has, therefore, tasked members of the Presidential Economic Advisory Council (PEAC), which he inaugurated yesterday to develop local content data base and make accurate economic data gathering its prime focus.
Some economists have, however, expressed support for the call by the IMF for structural reforms in the country.
The World Bank, in the 20th edition of Africa’s Pulse, its bi-annual economic update for the region, which was launched wednesday, said the recovery in Nigeria, South Africa, and Angola—the region’s three largest economies—had remained weak and is weighing on the region’s prospects.
This edition of Africa’s Pulse includes special sections on accelerating poverty reduction and promoting women’s empowerment.
“In Nigeria, growth in the non-oil sector has been sluggish, while in Angola the oil sector remained weak. In South Africa, low investment sentiment is weighing on economic activity,” the bank stated.
It said initiatives to empower poor people, girls and women were essential to progress.
World Bank’s Vice President for Africa, Mr. Hafez Ghanem, said: “Empowering women will help boost growth. African policy makers face an important choice: business as usual or deliberate steps toward a more inclusive economy. After several years of slower-than-expected growth, closing the opportunity gap for women by removing barriers to their economic participation is the best way forward.”
According to the report, “Excluding Nigeria, South Africa and Angola, growth in the rest of the subcontinent is expected to remain robust although slower in some countries”.
The report noted that overall growth in the region is projected to rise to 2.6 per cent in 2019 from 2.5 per cent in 2018, which is 0.2 percentage points lower than the April forecast.
On its part, the IMF in a statement at the end of a visit by its staff to Nigeria, led by the Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, stressed the urgent need for a “comprehensive package of measures,” to reduce vulnerabilities and raise economic growth in the country.
It called for structural reforms on governance and corruption, noting that implementing the much-delayed power sector recovery plan is essential to boosting prospects for higher and more inclusive growth.
According to the IMF, the pace of Nigeria’s economic recovery remains slow, adding that the depressed private consumption and investors’ wait-and-see attitude kept growth in the first half of the year at two per cent, a rate significantly below population growth.
It added that headline inflation has fallen, reaching its lowest level since January 2016. This was helped by lower food price inflation.
It said: “Spurred by one-off increases in imports, the current account turned into a deficit in the first half of 2019 after three years of surpluses. Gross international reserves have fallen to below $42 billion at end-August 2019, mainly reflecting a decline in foreign holdings of short-term securities and equity. The exchange rate in various windows remained stable, helped by steady sales of foreign exchange by the Central Bank of Nigeria (CBN).
“Carryover from 2018 to 2019 helped increase public investment spending in the first half of 2019, but revenue underperformed significantly relative to the budget target in the first half of 2019.
“Over-optimistic revenue projections have led to higher financing needs than initially envisaged, resulting in overreliance on expensive borrowing from the CBN to finance the fiscal deficit. Federal government interest payments continue to absorb more than half of revenues in 2019.”
The multilateral institution said the outlook for Nigeria under current policies was challenging, predicting that growth was expected to pick up to 2.3 per cent this year on the strength of a continuing recovery in the oil sector and the regaining of momentum in agriculture following a good harvest.
“Revenue initiatives planned under the 2020 budget— including a VAT reform that increases the rate, introduces a minimum registration threshold and exempts basic food products— will help partially offset declining oil revenues and the impact of higher minimum wages, thus keeping the overall consolidated fiscal deficit elevated.
“The current account’s shift to a deficit is expected to persist while the pace of capital outflows continues to weigh on international reserves. Inflation will likely pick up in 2020 following rising minimum wages and a higher VAT rate, despite a tight monetary policy.
“A comprehensive package of measures—whose design and implementation will require close coordination within the economic team and the newly-appointed Economic Advisory Council—is urgently needed to reduce vulnerabilities and raise growth,” it added.
According to IMF, the increasing Central Bank of Nigeria’s (CBN) financing of the government reinforces the need for an ambitious revenue-based fiscal consolidation that should build on the initiatives laid out by the government in the Strategic Revenue Growth Initiative.
The IMF expressed support for the current CBN’s tight monetary policy regime, saying it should be maintained through more conventional tools.
It stated: “Managing vulnerabilities arising from large amounts of maturing CBN bills—including those held by non-residents—requires stopping direct central bank interventions, the introduction of longer-term government instruments to mop up excess liquidity and moving towards a uniform market-determined exchange rate.
“Banking sector prudential ratios are improving. However, new regulations to spur lending—which has recently increased—should be carefully assessed and may need to be revisited in view of the potential unintended consequences on banks’ asset quality, maturity structure, prudential buffers and the inflation target. Continued strengthening of banks’ capital buffers would enhance banking sector resilience.
“Structural reforms, particularly on governance and corruption and in implementing the much-delayed power sector recovery plan, remain essential to boosting prospects for higher and more inclusive growth,” it added.
Analysts Back Call for Structural Reform
Reacting to the IMF’s position on the economy, a former member of the CBN’s Monetary Policy Committee, Prof. Akpan Ekpo, advised the federal government to come up with a long-term development plan.
Ekpo, who is the immediate past Director General of the West African Institute for Financial and Economic Management (WAIFEM), said: “What we need is to put in motion a process to develop a development plan. What we need is like a 20-year development plan with target for every four years.
“We need a plan document that we would speak to from now onward. The first two development plans in Nigeria that were implemented, we made some progress until based on the advice of the IMF and World Bank, we abandoned planning and that is why we are in this mess.
“So, we need a comprehensive economic plan that would incorporate structural changes.”
The Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, advised the federal government to build a strong economic base.
He said the country’s narrow economic base placed more burden on a few taxpayers in the country.
He said: “So, if you try to tax the people who are paying, you will end up overtaxing them. So, what the government should do is to stimulate growth in the economy.
“The second factor is that in terms of employment, 23 per cent of Nigeria’s workforce is unemployed and therefore not subject to tax as you can’t tax those who are unemployed.
“Another factor is the formalisation of the economy. A lot of business operators are in the informal sector and not formalised, so you really can’t track them.”
According to him, a lot of businesses in the country do not have the structure that allows the government to assess them for taxation.
Also, the Head, Research, United Capital, Mr. Wale Olusi, aligned with the IMF on the need to urgently design and implement bold reforms across various sectors of the economy to accelerate growth, boost employment and non-oil revenue.
World Bank, IMF’s Data on Nigeria Based on Wild Estimates, Says Buhari
Meanwhile, Buhari has faulted foreign statistics produced on Nigeria by the IMF and the World Bank, describing them as wild estimates and tasked the members of the newly- constituted PEAC to develop local content data base and make accurate economic data gathering its prime focus.
The president, while inaugurating the eight-man council led by Prof. Doyin Salami, charged them to come up with data that will be a true reflection of the state of events in the country.
The president had announced membership of the council on September 16, naming Dr. Mohammed Sagagi, Prof. Ode Ojowu, Dr. Shehu Yahaya, Dr. Iyabo Masha, Prof. Chukwuma Soludo, Mr. Bismark Rewane and Dr. Mohammed Adaya Salisu as members.
According to the president, developing local content statistics had become imperative because statistics relied upon for measuring the country’s performance indicators were developed abroad by the World Bank and IMF.
While tasking the team to set an agenda on what it wants to achieve in the shortest possible time, Buhari, who described the council’s duties as the ‘‘most important national assignment,” also described foreign statistics on Nigeria as wild with little reflection of the true state of events in the country.
A statement by Special Adviser to the President on Media and Publicity, Mr. Femi Adesina, said the president described as disturbing, the attitude of relying on foreign statistics to measure the country’s economic indices, noting that the country is hampered from effective planning if it does not possess its own data.”
He said: “As you develop your baseline study, I would like you to focus on primary data collection. Today, most of the statistics quoted about Nigeria are developed abroad by the World Bank, IMF and other foreign bodies.
“Some of the statistics we get relating to Nigeria are wild estimates and bear little relation to the facts on the ground. This is disturbing as it implies we are not fully aware of what is happening in our own country.
“We can only plan realistically when we have reliable data. As you are aware, as a government, we prioritised agriculture as a critical sector to create jobs and bring prosperity to our rural communities. Our programmes covered the entire agricultural value chain from seed to fertiliser to grains and ultimately, our dishes.
“As you travel in some rural communities, you can clearly see the impact. However, the absence of reliable data is hindering our ability to upgrade these programmes and assure their sustainability.”
On the Social Investment Programmes (SIPs), Buhari told the council that his administration was working towards measuring the impact of the programmes, which he said was targeted at improving the well-being of millions of poor and vulnerable citizens.
He said he had instructed the Minister of Humanitarian Affairs and Disaster Management to commence a comprehensive data-gathering in all Internally Displaced Persons (IDP) camps in the North-east.
He also faulted claims by international organisations that they spent billions of naira on humanitarian crisis in the North-east with little or no impact, adding that since the National Emergency Management Agency (NEMA) took over the welfare of IDPs, the money being spent is lower than the loud claims of foreign organisations.
The president emphasised the necessity to secure “actionable data” that will be deployed to addressing “pressing problems” such as the humanitarian crisis.
Buhari urged the council to come up with solutions that develop the country and its economy.
He also told the council to coordinate and synthesise ideas and efforts on how to lift 100 million Nigerians out of poverty in 10 years by working in collaboration with various employment generating agencies of the federal government.
The statement said Buhari recalled the economic challenges confronting the country despite its exit from recession, noting that plans made to combat economic challenges in the last four years have been conservative.
He therefore challenged the economic experts to help the country re-energise its economic growth plans.
”I am told you worked throughout last weekend in preparation for this meeting. I have listened attentively to findings and ideas on how to move the country and the economy forward.
“Yes, Nigeria has exited the recession. But our reported growth rate is still not fast enough to create the jobs we need to meet our national ambition of collective prosperity. Reason being we had to tread carefully in view of the mess we inherited.
“Many of the ideas we developed in the last four years were targeted at returning Nigeria back to the path of growth. I am sure you will also appreciate that during that time, our country was also facing serious challenges especially in the areas of insecurity and massive corruption.
“Therefore, I will be the first to admit that our plans were conservative. We had to avoid reckless and not well thought-out policies. However, it was very clear to me after we exited the recession that we needed to re-energise our economic growth plans. This is what I expect from you, ” Buhari stated.
He assured the council that the federal government would ensure that its needs and requests were met before the next technical sessions in November.
He stated that all key ministries, departments and agencies would be available to meet and discuss with the team on how to collectively build a new Nigeria that caters for all.
The president advised members of the council to consult anyone who may be resourceful to its assignment.
Salami, in his remarks, said the council’s mandate was about “Nigeria first, Nigeria second and Nigeria always,” adding that it was about Nigerians, not as numbers, but as people.
“Our goal is that the economy grows in a manner that is rapid, inclusive, sustained and sustainable, so that Nigerians will feel the impact,” he said.