IMF Revises Upwards Nigeria’s Growth Projections
The International Monetary Fund has said it expects Nigeria’s economy to recover in 2916 even as it revised upward the growth projections for the country to 0.8 per cent based on higher oil production as well as likely improved price of crude at the international market.
The IMF in its World Economic Outlook update released yesterday said economic activity in both advanced economies and EMDEs is forecast to accelerate in 2017 and 2018, with global growth projected to be 3.4 percent and 3.6 percent, respectively, unchanged from its October forecasts.
While growth forecast for some regions were revised downward, the IMF said Nigeria’s forecasts were revised up, primarily reflecting higher oil production due to security improvements.
Nigeria, a oil dependent country is one of the hardest hit economies by the decline in the price of oil and according to the the IMF, the recent market firming provides some relief for commodity dependent nations.
While the price of crude in the international market has in recent times risen above $50 per barrel, average oil output of Nigeria is expected to rise by 13 per cent over its 2016 averages to 1.8 million barrels per day in 2017 as government seeks to put an end to militancy in the oil rich Nigeria Delta region of the country.
Despite the improving conditions in the commodity market, the IMF said adjustment to reestablish macroeconomic stability is urgent. “This implies allowing the exchange rate to adjust in countries not relying on an exchange rate peg, tightening monetary policy where needed to tackle increases in inflation, and ensuring that needed fiscal consolidation is as growth-friendly as possible.
“The latter is particularly important in countries with pegs, where the exchange rate cannot act as a shock-absorber. Over the longer term, countries highly dependent on one or a few commodity products should work to diversify their export bases.”
The Nigerian government is presently focusing on diversifying the economy away from oil and also achieving self sustenance to reduce its spending on importation. External reserves has been rising gradually as the government is tapping into all sources to get the needed funds and foreign exchange to spur the economy into growth.
With a proposed budget of N6.866 trillion, the government hopes to spur economic growth with N1.765 trillion focused on capital expenditure. The country is expected to come out of the throes of recession which it entered last year as the crash of global oil price affected the value of the naira.
The declining value of the naira translated to higher costs as inflation reached 18.55 per cent an 11 year high in December 2016 having risen consecutively since 2015.
The IMF however noted that underlying vulnerabilities such as high corporate debt, declining profitability, weak balance sheets and thin policy buffers pose risks among some other large emerging market economies.
These vulnerabilities it said “imply that these economies are still exposed to tighter global financial conditions, capital flow reversals, and the balance sheet implications of sharp depreciation. In many low-income economies, low commodity prices and expansionary policies have eroded fiscal buffers and led in some cases to a precarious economic situation, heightening their vulnerability to further external shocks.”
