IMF: NIGERIA’S ECONOMIC GROWTH TO DECLINE FURTHER IN 2016

Nigeria, April 1, 2016 – The International Monetary Fund (IMF) has predicted economic doom for Nigeria for the remaining part of 2016.

In a statement released after consultations with the Nigerian authorities, the IMF noted the Nigeria’s economic growth will decline further by 2.3 percent, with non-oil sector growth projected to slow from 3.6 percent in 2015 to 3.1 percent in 2016 before rising by 0.5 percent by 2017.

“Growth in 2016 is expected to decline further to 2.3 percent, with non-oil sector growth projected to slow from 3.6 percent in 2015 to 3.1 percent in 2016 before recovering to 3.5 percent in 2017’’, the IMF said.

The IMF based its projections on the results of policies under implementation—particularly in the oil sector—as well as an improvement in the terms of trade.

It added that the general government deficit is projected to widen somewhat in 2016 before improving in 2017, while the external current account deficit is likely to worsen further.

“Key risks to the outlook include lower oil prices, shortfalls in non-oil revenues, a further deterioration in finances of state and local Governments, deepening disruptions in private sector activity due to constraints on access to foreign exchange, and resurgence in security concerns’’, it added.

The board of the IMF however commended government’s policy agenda of enhancing transparency, strengthening governance, improving security, and creating jobs.
IMF board of directors noted that the Nigerian economy has been hit hard by decline in oil prices, which has slowed growth sharply, resulting in macroeconomic imbalances. It however stressed the need for significant macroeconomic adjustment.

The board also highlighted the importance of implementing urgently a coherent package of policies, in consultation with Fund staff and development partners, to safeguard fiscal sustainability and reduce external imbalances, and advancing structural reforms to support inclusive growth.

“Directors emphasized the critical need to raise non-oil revenues to ensure fiscal sustainability while maintaining infrastructure and social spending. They urged a gradual increase in the VAT rate, further improvements in revenue administration, and a broadening of the tax base.

“Directors supported an orderly adjustment of budgets at the sub-national level through reform in budget preparation and execution. They also stressed the importance of strengthened public financial management and service delivery.

“Directors encouraged the implementation of an independent price-setting mechanism to address petroleum subsidies, while strengthening the social safety net. Directors underlined the need for continued efforts to foster transparency and enhanced accountability.

“Directors noted that the policy approach of expansionary monetary policy, together with a relatively fixed exchange rate and exchange restrictions had adversely impacted economic activity. It also raised concerns about the authorities’ commitment to their inflation objective. They underscored the need for credible adjustment to the large terms-of-trade shock, including greater exchange rate flexibility and speedy unwinding of exchange restrictions to facilitate an exchange rate consistent with fundamentals’’, the IMF said.

It welcomed the recent monetary policy tightening and recommended that the central bank target price stability to maintain inflation within the target range.

Directors observed that further strengthening of the regulatory and supervisory frameworks would help improve resilience even as financial sector soundness indicators remain favorable.

It called for intensified monitoring of banks adding that enhanced contingency planning and resolution frameworks would be important. Directors also noted that lowering interest rate spreads and increasing efficiency could enhance credit growth, especially for small and medium enterprises.

The board underscored the need for structural reforms to enhance competitiveness and support investment.

It advised Nigeria to further reduce the cost of doing business through greater transparency and accountability, and promote employment of youth and women.