13 April 2008

Africa: IMF Forecasts 9 Percent Growth for Nigeria

Washington — The International Mon-etary Fund (IMF) yesterday forecast nine per cent economic growth and single digit inflation for Nigeria in its newly released Regional Econ-omic Outlook for sub-Saharan Africa.

Deputy Director, African Department of the IMF, Mr. Saul Lizondo at a press briefing on the Regional Outlook expressed optimism that the nation's economy would rebound.

The IMF forecast for Nigeria is coming just as the World Bank said a major chunk of the US$50 billion private capital flows into sub-Saharan Africa in 2007 were directed to Nigeria and South Africa.

The IMF boss said:"The economy will rebound. We are forecasting healthy growth of 9 per cent for the oil and the non-oil sector. And in terms of inflation, we consider that the economy will continue with single digit inflation, in particular, the Governor of the Central Bank has been tightening inflation".

The CBN had forecast a growth rate of 7 per cent for this year and 13 per cent for the year 2020. Currently, inflation is also about 8 per cent. This cheery news from the World Bank depicts that Nigeria is on course to surpass its projected economic growth. Nigeria is currently the 41st largest economy in the world.

Despite the expected impressive economic outlook for Nigeria, Ms. Benedict Christensen also of the African Department of the IMF, who spoke earlier however, noted that, "growth in sub-Saharan Africa should average about 6 per cent, this year," driven by oil exports, with growth in oil imports expected to taper off modestly.

Christensen said: "with higher food and energy prices, inflation is projected to rise slightly to about 8_ per cent this year."

Essentially, she pointed out that, "the immediate prospects are for continued economic expansion but with a widening gap between oil exporters and oil importers."

When compared with the 1990s, Christensen noted that, "the region is better placed to withstand a worsening of the global environment."

"Many countries in the region are less exposed to shifts in global economic conditions. Smaller current account and fiscal deficits, lower inflation, reduced debt, increased foreign reserves, and strengthened policy frameworks have all helped make the region more resilient to external shocks," she said.

"Real GDP expanded by about 6 per cent, fuelled by growing production in oil exporters, and rising domestic investment and productivity across the region" she added. The growth, she explained, was supported by successes in stabilising economies and implementing structural reforms.

She said solid global demand for commodities, greater flows of capital to Africa, and debt relief have helped increase resources and lift growth.

Christensen said the external environment has become less favourable, and risks in 2008 are tilted to the downside.

"The global economy is slowing down, oil prices have risen to record levels, and global financial markets are unsettled. This marks a shift from recent years when demand for sub-Saharan African exports was healthy, and non-fuel commodity prices were growing at double digits.

'Rising oil and food prices pose increasing challenges to many countries and risks to the inflation outlook. If high oil prices are accompanied by a pronounced slowdown in the global economy-bringing weaker non-oil commodity prices-the exports of sub-Saharan Africa would be affected," she explained.

Overall, Christensen noted, the main medium-term challenge for sub-Saharan Africa is to accelerate growth and achieve the Millennium Development Goals (MDG).

She lamented "while a growing number of countries are enjoying robust growth, only a few sub-Saharan African countries seem well-positioned to halve poverty by 2015.

Making the inflows into the sub-Saharan Africa known in its Regional Economic Outlook for sub-Saharan Africa released yesterday, the Fund noted that total inflows during the period under review, was about four times larger than flows in 2000.

"Most flows were directed to Nigeria and South Africa, but the increases also reflect the improved fundamentals elsewhere in the region. In a small group of countries, notably Ghana, Uganda, and Zambia, portfolio flows have been on the rise, attracted by improved risk ratings and higher yields," the report stated.

It noted that private capital flows to sub-Saharan African countries have increased almost fivefold over the past seven years, from US$11 billion in 2000 to US$53 billion in 2007.

The increase in portfolio flows to US$23 billion in 2006, it said, was particularly rapid, reaching about 14 times the 2003 level. "Private debt flows have also increased rapidly since 2004. FDI remained fairly stable at about US$15-21 billion. Nigeria and South Africa together accounted for 47 per cent of total FDI flows; South Africa received 88 percent of the portfolio inflows," the report said.

"In 2006, private capital flows to sub-Saharan Africa overtook official aid for the first time. The bulk of these flows went to South Africa and Nigeria, but portfolio flows are also trending up in a small group of other countries-notably, Ghana, Kenya, Tanzania, Uganda, and Zambia-in response to improved risk ratings and attractive yields.

"At the same time, private capital inflows present a challenge to policymakers, because significant inflows could lead to increased macro-economic volatility and the build-up of balance sheet vulnerabilities, and over time to real exchange rate appreciation and loss of external competitiveness.

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