IMF Seeks Strong, Sound Policy Measures to Restart Nigeria, Sub-Saharan Africa’s Growth

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The International Monetary Fund (IMF) has advised Nigeria and other countries in sub-Saharan Africa to implement strong and urgent policy actions to bolster growth in the region.

It foresees a subdued outlook for the region in the near-term if pressures on sovereigns and spillovers to the private sector intensify.

The IMF, in its latest Regional Economic Outlook, titled: ‘Restarting the Growth Engine; pointed out that growth in sub-Saharan Africa as a whole dropped to 1.4 per cent in 2016—its lowest level in two decade, with a projection that it would record a modest recovery of 2.6 per cent in 2017.

This is in spite of the fact that a number of countries, especially in eastern and western Africa, continue to grow robustly.

Unveiling the report in Abuja yesterday, with the Minister of Finance, Mrs. Kemi Adeosun; the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, and other top public and private sectors players in attendance, the Director of IMF’s African Department, Mr. Abebe Aemro Selassie, said: “The overall weak outlook partly reflected insufficient policy adjustment.”

“The delay in implementing much-needed adjustment policies is creating uncertainty, holding back investment, and risks generating even deeper difficulties in the future. Adjustment in resource-intensive countries has been delayed. In particular, oil exporters such as Angola, Nigeria, and the countries of the Central African Economic and Monetary Union (CEMAC) are still struggling to deal with the budgetary revenue losses and balance of payments pressures, some three years after the fall in oil prices

“Vulnerabilities are also emerging in many non-resourceintensive countries. While they have generally continued to record high growth rates, they have also maintained elevated fiscal deficits for a number of years as their governments rightly sought to address social and infrastructure gaps. As a result, fiscal and external buffers are declining and public debt is on the rise.”

Going forward, the report pointed to a modest growth recovery from 1.4 per cent in 2016 to 2.6 per cent in 2017..

This, it said, would barely put sub-Saharan Africa back on a path of a rising per capita income, adding that the uptick will be largely driven by one-off factors in the three largest countries.

These are a recovery in oil production in Nigeria, higher public spending in Angola, and fading of drought effects in South Africa.

However, for other countries, the outlook remains shrouded in substantial uncertainties, including a possible further appreciation of the United States dollar, a tightening of global financing conditions - especially for countries where fundamentals have deteriorated.

The IMF report further noted that the outlook is further clouded by security issues that have contributed to an increase in food insecurity and even famine in parts of sub-Saharan Africa.

Based on the foregoing, the IMF admonished that “strong and urgent policy action is needed to restart growth where it has faltered and preserve the momentum elsewhere.”

Selassie noted that while restoring macroeconomic stability is a prerequisite, it needed to be complemented with structural reforms to support the rebalancing and policies to strengthen social protection for the most vulnerable.

For the hardest-hit countries, the report noted that strong fiscal consolidation was required, with emphasis on revenue mobilisation.

It added that where available, greater exchange rate flexibility and the elimination of exchange restrictions would be important to absorb part of the shock.

But for countries where growth is still strong, the IMF emphasised the need to address emerging vulnerabilities from a position of strength, including by shifting the fiscal stance toward gradual consolidation

The IMF pointed out that subSaharan Africa remains a region with tremendous potential for growth in the medium term – provided strong domestic policy measures are implemented.

Reacting to the report, the Director, Monetary Policy, CBN, Mr. Moses Tule, said it was analytical and quite comprehensive.

Tule noted that the shock in the prices of commodities adversely hit about 23 countries in the region, adding that for resourceintensive countries, it triggered huge budgetary constraints and fiscal deficits.

He said huge public debt also followed due to humongous borrowing with inflation skyrocketing to as high as 18.2 per cent in Nigeria and 42 per cent in Angola.

Tule observed that from the report, there would be a modest growth, regretting that what he called policy space was highly constrained just as revenue is constrained, leaving room for growth.

He also stated that the sub-region had been hobbled by insufficient reforms and lack of political will to carry through reforms.

Also commenting on the report, Prof. Doyin Salami of the Lagos Business School called for human capacity development and prioritisation of private capital, among others, urging governments in the region to make up their minds on what their roles are in fostering, ensuring and sustaining inclusive growth.