IMF Mission Chief
With the economy in sub-Saharan Africa projected to contract by 3.2 per cent this year, and Nigeria set to experience a stronger contraction, a poor record by several indications, how do you think Nigeria can turn the tide?
The COVID-19 pandemic is sparing no country in sub-Saharan Africa (SSA). The IMF is projecting a contraction in real GDP for 2020 that is the worst in known history. As for Nigeria, negative economic impacts of the pandemic are largely transmitting through low oil prices that have repercussions for the broader economy and borrowing costs in the international financial market, in addition to the pandemic-related shutdown of activities. Many commodity exporters are facing similar challenges. In the case of Nigeria, the challenges are being amplified by structural weaknesses that long predate COVID-19.
What are these pre-existing weaknesses and how are they impacting the current situation? Let me highlight three points. First, with fiscal revenue at 8 per cent of GDP, one of the lowest in the world, a significant share of which goes into servicing debt, the fiscal authorities have little room to help the economy. Second, with oil revenues contributing more than half of annual foreign exchange entering the country, the oil price shock and related foreign exchange shortage are negatively affecting the private sector. Third, with 40 per cent of the population living in poverty and food inflation more than double the average in SSA, the impact on livelihood is large.
A passive way to turn the tide would be to wait for the oil prices to climb back to their pre-crisis levels. This is a risky strategy given how uncertain the global outlook and the course of the pandemic are. In addition, even if that were to happen and Nigeria manages to get through, we are likely to see a repeat of the current situation when oil prices plunge the next time.
If Nigeria is to really turn the tide, it needs to generate growth that is well-diversified and job-rich and supported by low inflation. This requires a comprehensive overhaul of macroeconomic and structural policies prioritising productivity growth and competitiveness.
What are the policy gaps identified by the IMF in Nigeria? How is the IMF working with the government to bridge these gaps? Has there been a positive response?
The IMF’s macroeconomic policy recommendations in Nigeria focuses on ensuring job-rich, low-inflation and diversified growth. The growth benefits most Nigerians and lifts people out of poverty. The recent 2-3 per cent real GDP growth rate is too low for a country where the population is projected to double by…