IMF Raises Nigeria’s GDP Projection, Forecasts 4.3% Contraction

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•FG not considering World Bank’s relief package, says Ahmed

By Francis Ndubuisi in Abuja and Nume Ekeghe in Lagos

The International Monetary Fund (IMF) has predicted that Nigeria’s Gross Domestic Product (GDP) will contract by 4.3 per cent, which indicates an improvement compared with a negative GDP projection of 5.4 per cent it had predicted in its previous report in June.

This is coming as the federal government has stated that it is not considering the relief package offered by the World Bank for low-income countries in the wake of the COVID-19 pandemic in order not to worsen the nation’s crippling debt situation.

IMF’s Chief Economist and Director of Research Department, Ms. Gita Gopinath, disclosed the country’s new GDP projection during a virtual media briefing to unveil the fund’s World Economic Outlook (WEO) at the ongoing Annual Meetings of the IMF/World Bank in Washington DC.

The report titled: ‘A long and difficult ascent, 2020 October,’ however, predicted that the economy would grow by 1.7 per cent in 2021.

Also, during a separate media briefing to unveil the Global Financial Stability Report (GFSR), the Director of Monetary and Capital Market Departments, IMF, Mr. Tobias Adrian, said banks are in a safer position than the last global economic crisis, adding that the IMF is closely monitoring the concessionary loans given to Sub-Saharan Africa.

Speaking on the projection for Africa, Gopinath said: “Overall for the region, the numbers are close to what we had in June, -3 per cent in 2020 and 3.1 per cent in 2021. There is significant heterogeneity in the within the region. You have countries that are commodity exporters who have been negatively impacted not just by the pandemic but by the drop in oil prices.

“Nigeria is one of such case and then you have countries like South Africa where there has been a very big hit in terms of the pandemic and a collapse in activities because of the requirements of lockdowns. There is always a difference in countries that are more diversified, that seem to have better growth prospects than other.”

She further added that the economic fallout of the COVID-19 pandemic would cause 20 million people in the continent to fall into extreme poverty.

She added: “It is also important to note that in Sub-Saharan Africa, the World Bank projects that over 20 million people will enter extreme poverty this year. These are very large numbers and several of these countries are also living with very high levels of debt distress.”

Responding to a question about emerging countries going through foreign currency volatility, depleting foreign reserves and how fiscal and monetary tools could be adopted to overcome the crisis, she said there was a need for emerging economies to closely restructure their debt to reduce and seek debt relief if allowed.

She said: “This pandemic is triggering divergence across advanced economies, emerging and developing economies. They have been hit by the health crisis and they have been hit because they are oil exporters which had collapsed and more importantly, they just don’t have the resources that advanced economies have to deal with this crisis.

“Because we don’t have a financial crisis at this point, many emerging markets are able to borrow at record levels in foreign currency this year relative to previous years.

“But that is not going to be enough and there would be a need for continued international support for many countries in terms of concessionary financing, aide and there are going to be developing and low-income economies that would need debt relief and, in some cases, restructuring of debt to make sure they have the space to do the spending that they need.”

On his part, the Division Chief, Research Department, IMF Mr. Malhar Nabar, said: “The oil exporters have also been hit very hard and the other commodity exporters such as South Africa has also been struggling through this crisis with deep contractions projected this year.

“But in terms of what the global outlook means for Africa, the partial recovery that we are projecting next year clearly has a beneficial impact on the outlook in terms of stronger external demand but one key element is that the external financial conditions which have been extremely tight for Sub-Saharan Africa over the past several months, a turnaround in those conditions and better access for Sub-Saharan African issuers to access external hard currency bond markets would actually, help with improving the outlook.”

Continuing, in the GFSR, Adrian said the various interventions and loans given to SSA which amounted to $21 billion are closely monitored to ensure they are not mismanaged.

He said: “Since the start of the pandemic, the IMF has provided financing to 81 countries and the total new financing is about $100 billion. Poverty Reduction and Growth Trust (PRGT) countries, which are mostly in Sub-Saharan Africa received about $21 billion and this is concessional.

“It is extremely important for the money to get to the right people. And we are watching very carefully and we are watching very closely to make sure that all these loans go into the right hands.”

FG Not Considering World Bank Relief Package, Says Ahmed

Meanwhile, the federal government is not considering the relief package offered by the World Bank for low-income countries in the wake of the COVID-19 pandemic in order not to worsen the nation’s crippling debt situation.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, gave the indication yesterday in Abuja.

In response to a question on whether Nigeria would consider the relief package in the face of dwindling revenue generation, the minister, who spoke during the public presentation of the 2021 budget proposals, said the package would not be considered, for now.

She noted that the conditions attached to the package were not favourable for the country, adding that Nigeria might opt for it if the conditions are relaxed later.

She said several loan agreements had been entered with various lenders, stating that seeking for debt relief would portray Nigeria as a country that cannot meet its debt obligations in the eyes of creditors.

She said: “For now, the answer is no; the reason being that we have assessed the offer and reviewed all the loans that we are committed with other countries that we borrowed from. We have to also first review all agreements we have with commercial lenders.

“It is not only Nigeria that was not able to access the loan because of the similar limitations that we have. The offer might trigger some inability of the borrowing countries to pay back.”

Giving an insight into the performance of the 2020 Revised Budget, she disclosed that a total of N1.2 trillion had been released for capital projects and N2.14 trillion to meet debt service obligations provided for in the Revised 2020 Budget, as at the end of September.

During the period under review, the sum of N2.18 trillion was also expended as personnel cost, including pensions.

She disclosed that as at the end of August 2020, the federal government’s revenue available for budget funding, which excludes government-owned enterprises (GOES) was N2.52 trillion, representing 71per cent target.

Of the N9.97 trillion appropriated on the expenditure side (excluding GOEs and project-tied loans), N6.25 trillion (representing 93.9 per cent of the pro-rata N6.65 trillion) was spent.

According to her, the Federal Government of Nigeria’s (FGN) share of oil revenues during the review period was N1.105 trillion (representing 164 per cent performance over and above the prorated sum in the revised 2020 budget) while non-oil tax revenues totalled N831.41 billion (77 per cent of revised target).

Companies Income Tax(CIT) and ValueAddedTax (VAT) collections stood at N447.52 billion and N117.75 billion, representing 82 per cent and 62 per cent respectively of the pro-rata revised targets for the period.

Customs collections also stood at N266.14 billion (77 per cent of revised target) while other revenues amounted to N583.82 billion, of which independent revenues accounted for N281.81billion.

Giving a breakdown of the 2021 budget proposals, she stated that the aggregate revenue available to fund the N13, 08 trillion proposed 2021 budget is projected at N7.89 trillion (35 per cent more than the 2020 Revised Budget of N5.84 trillion).

The minister also defended the N5. 196 trillion 2021 budget deficit, which is 3.64 per cent of gross domestic product (GDP) and above the three per cent threshold prescribed by the Fiscal Responsibility Act (FRA).

She said several loan agreements have been entered with various lenders, adding that asking for debt relief would portray Nigeria as a country that cannot repay its indebtedness in the eyes of creditors.

Ahmed said that although the 2021 budget deficit exceeded the three per cent threshold, the government has not breached the law, adding that there is a provision in that Act that allows the government to surpass the threshold during “unusual times.”

To promote fiscal transparency, accountability and comprehensiveness, the minister stated budgets of 60 GOEs are integrated in the FGN’s 2021 budget proposal.

In aggregate, 31 per cent of projected revenues is to come from oil-related sources while 69 per cent is to be earned from non-oil sources.

The minister noted that, overall, the size of the budget has been constrained by relatively low revenues.

To enhance independent revenue generation and collection, the government, she said, will aim to optimise the potential, operational and collection efficiency of GOEs with a view to generating significantly higher revenues required to fund the FGN budget from this source.

She added that the current sub-optimal revenue performance of most GOEs will be addressed through the effective implementation of the enhanced performance management framework On whether government is considering issuing Eurobond in 2021, she said it is an option that is on the table.