Nigeria: IMF Says Nigeria's Economy Doing Poorly, Cuts Growth Projection

Skyline of Lagos.
9 October 2018

The International Monetary Fund (IMF) has cut the growth projections made for Nigeria to 1.9 percent from 2.1percent, saying the country's economy is doing poorly.

Gian Maria Milesi-Ferretti, deputy director at IMF's research department made this known yesterday while addressing journalists at the ongoing annual meetings of the International Monetary Fund and World Bank Group in Bali, Indonesia.

He said the aggregate growth rate of Africa is being held down by its three largest economies. The IMF economist identified the three economies as Nigeria, South Africa and Angola.

"The aggregate growth rate for the continent is held down by the fact that the three largest economies are not performing up to their full potential," he said.

"Nigeria's growth, 1.9 percent this year; 2.3 next year. South Africa, only 0.8 percent this year. Angola, contracting by 0.1 percent this year. So the aggregate -- over three percent this year, close to four percent next year -- is despite the largest economies in the continent doing poorly.

"The continent could do much better once these economies are on a more solid footing, particularly South Africa and Nigeria because they are really large and affect a number of countries in their neighbourhood."

Previous World Economic Outlook Report

Recall that in the World Economic Outlook report released in July this year, the Bretton Wood institution had projected that Nigeria's economy would grow by 2.1 percent in 2018 and 2.3 percent in 2019.

In the October edition of the report, IMF cut the growth projections for 2018 to 1.9 percent.

"In Nigeria and Angola, tighter monetary policy and moderation in food price increases contributed to tapering inflation. In Nigeria, inflation is projected to fall to 12.4 percent in 2018, from 16.5 percent in 2017, and to rise to 13.5 percent in 2019," the report read.

The World Bank recently cut its growth projections for Nigeria by 0.2% citing reduction in oil production levels, and contraction in the agricultural sector, following the herder-farmer crisis.

Cuts global growth to 3.7 %

Meanwhile, in own speech, the IMF Economic Counsellor and Director of Research Department, Mr. Maurice Obstfeld at a press briefing on the World Economic Outlook (WEO), in Bali, Indonesia, yesterday said the Fund has cut global growth projection to 3.7 per cent for this year and next year.

The new projection is a marginal reduction of the 3.9 per cent projection of last April's World Economic Outlook report.

Mr. Obstfeld said, "The latest World Economic Outlook report projects that global growth will remain steady over this year and next, at last rate of 3.7 percent. This growth exceeds that achieved in any of the years between 2012 and 2016, and it occurs as many economies have reached or are nearing full employment and as earlier deflation fears have dissipated.

"Thus, policy makers still have an excellent opportunity to build resilience and implement growth-enhancing reforms.

"Last April, at the time of our last World Economic Outlook, the world economy broad-based momentum led us to project a 3.9 percent growth rate for both this year and next.

"Considering developments since then, however, that number now appears overoptimistic. Rather than rising, growth has plateaued at 3,7 percent.

There are clouds on the horizon, says Obstfeld

"Growth has proven to be less balanced than we had hoped. Not only have some downside risks that the WEO identified been realised, the likelihood of further negative shocks to our growth forecast has risen. In several key economies moreover, growth is being supported by policies that seem unsustainable over the longer term. These concerns raise the urgency for policymakers to act".

According to him, the report showed that the negative revisions for emerging markets and developing economies would be more severe, at minus 0.2 and 0.4, respectively.

Specifically on the African continent, Mr. Obstfeld said that growth was been held down by Africa's three largest economies of Nigeria, South Africa and Angola.

"The aggregate (for Africa) over 3 percent this year, close to 4 percent next year- is despite the largest economies in the continent doing poorly.

"The continent could do better once these economies are on a more solid footing, particularly South Africa and Nigeria because they are really large and affect a number of countries in their neighbourhoods."

The IMF put growth in the advanced economies at 0.1 percent lower, including downgrades for the Euro area, the United Kingdom and Korea.

"These revisions are also geographically diverse, encompassing important economies: in Latin America, notably India, Brazil and Mexico. In Emergin Europe, notably Turkey. In South Asia, notably India. In East Asia notably Indonesia, Malaysia and Philipines.

"In the Middle East, Iran. And in Africa, South Africa," the director said.

He noted that although petroleum exporting countries such as Nigeria , Kazakhstan, Russia, Saudi Arabia, "are going to benefit from higher prices, broadly speaking, we see signs of lower investment in manufacturing , coupled with weaker trade growth."

Regarding the effects of the trade policy issues between the United States of America and China, the IMF Research Director said that it led the Fund to downgrade the forecast for China's growth in 2019, especially given the tariffs that America has already imposed on about $200 billion imports from China.


The Managing Director /CEO, Capital Bancorp Plc, Mr. Aigboje Higo said: "I think the economy may not have performed poorly but underperforming, considering favourable oil prices. There is still no fundamental reforms of the economy. Issue of right sizing of federal bureaucracy, fuel subsidies, cost reflective tariffs, Petroleum Information Bill, PIB still outstanding. The way the MTN issues have been handled even if there are grounds for it was rather unfortunate.

The Chairman, Association of Stockbroking Houses of Nigeria, ASHON, Chief Patrick Ezeagu said: " The IMF projection actually mirrored the reality on the ground. With politics taking the front seat, governance and economic growth will take a nap from now till after the election. However, depending on the outcome of the election, it won't be out of place to argue that the economy has the potential to do better than the IMF has retrospectively downgraded."

A chartered stockbroker/ Managing Director, Sofunix Investment & Communications, Mr. Sola Oni said: "Sola Oni, said: "It is a wakeup call to everyone (countries) saddled with the responsibilities of charting the course of economic growth and development. The International Monetary Fund (IMF) adduced the cut in forecast to trade increased tension and debt burden among countries. Economic models are failing. Every country should re-assess its fiscal and monetary policy to ensure that it supports employment and productivity."

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