20 April 2017

Nigeria: IMF Endorses Nigeria's Economic Recovery Plan

The International Monetary Fund (IMF) wednesday endorsed the Economic Recovery Growth Plan (ERGP) 2017- 2020, launched recently by the federal government applauding it as "how fiscal policy should be thought in developing countries."

The Fund's Director, Fiscal Affairs Department, Mr. Vitor Gaspar, conveyed its position on the plan while responding to a question from THISDAY, during a media briefing on the IMF Fiscal Monitor press conference at the ongoing IMF/World Bank Spring meetings in Washington DC.

The IMF official said he had the privilege of visiting Nigeria some months ago and was very happy to understand that for the Nigerian government, fiscal policies in general and tax policy in particular were part of the strategy for development.

Also, IMF's Assistant Director/Head, Fiscal Policy and Surveillance, Catherine Pattillo, welcomed the country's ERGP, saying its focus on diversification and attention to some of the problems facing the economy were steps in the right direction.

According to Pattillo: "We very much welcome the ERGP. As you are aware, Nigeria went into recession last year, there have been forecasted recovery, but still very fragile this year and the need to address the fiscal situation is urgent. Our recommendation is for the continued fiscal consolidation.

"One striking statistics I think is the fact that over the past years, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria. So, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue. That would allow the government to implement the social and growth-friendly policies that are part of the objectives of the ERGP."

A fortnight ago, President Muhammadu Buhari launched the ERGP 2017-2020. The Medium-Term plan has among its broad strategic objectives, the restoration of sustainable, accelerated and inclusive growth and development; investing in the people and building a globally competitive economy.

Meanwhile, the economic growth in Sub-Saharan Africa has been projected to rebound in 2017 after registering the worst decline in more than two decades in 2016, according to the new Africa's Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank.

The region is showing signs of recovery, and regional growth is projected to reach 2.6 per cent in 2017, the report released on the side-lines of the ongoing meetings in Washington stated.

However, it anticipated that the recovery will remain weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty.

"Nigeria, South Africa, and Angola, the continent's largest economies, are seeing a rebound from the sharp slowdown in 2016, but the recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty. Furthermore, several oil exporters in the Central African Economic and Monetary Community (CEMAC) are facing economic difficulties," the journal said.

The latest data revealed that seven countries (Côte d'Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continued to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4 per cent in 2015-2017. These countries house nearly 27 per cent of the region's population and account for 13 per cent of the region's total GDP.

According to the journal: "The global economic outlook is improving and should support the recovery in the region. Africa's Pulse notes that the continent's aggregate growth is expected to rise to 3.2 per cent in 2018 and 3.5 per cent in 2019, reflecting a recovery in the largest economies.

"It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick. GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production. This is especially the case for Ethiopia, Senegal, and Tanzania.

Quoting World Bank Chief Economist for the Africa Region, Albert G. Zeufack, it said: "A stronger-than-expected tightening of global financing conditions, weaker improvements in commodity prices, and a rise in protectionist sentiment represent downside external risks to the outlook. On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.

The report which was written by World Bank Lead Economist, Punam Chuhan-Pole, explained that as countries moved towards fiscal adjustment, there was need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery.

"With poverty rates still high, regaining the growth momentum is imperative. Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness," it said.

Nigeria

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