Daily Trust

101.576 IMF cuts Nigeria’s 2021 growth outlook to 1.7%

- From Sunday Michael Ogwu, Lagos

The Internatio­nal Monetary Fund (IMF) has cut its 2021 growth outlook for sub-Saharan Africa’s largest economy to 1.7 per cent compared with a June forecast of 2.6%.

The new outlook, which was made public yesterday, at the ongoing virtual annual meetings of the IMF and World Bank makes Nigeria the fourth-worst performer among nations measured by the IMF.

This is coming months after the release of the June 2020 World Economic Outlook (WEO) has offered a glimpse of how difficult rekindling economic activity will be while the pandemic surges.

The IMF staff survey, usually published twice a year, presents the IMF staff economists’ analyses of global economic developmen­ts during the near and medium term.

The report noted that during May and June, as many economies tentativel­y reopened from the lockdown, the global economy started to climb from the depths to which it had plunged in April.

It however added that, with the pandemic spreading and accelerati­ng in places, many countries slowed reopening, and some are reinstatin­g partial lockdowns. While the swift recovery in China has surprised on the upside, the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks.

With the latest developmen­t, analysts have said Nigeria’s economy is poised to expand at less than half the pace needed by banks next year to avoid a spike in unpaid loans.

The banks need the economy to accelerate after restructur­ing about 40% of loans on their books that would’ve soured and should have been booked as nonperform­ing loans.

Director for sub-Saharan African banks research at EFG-Hermes, Ronak Gadhia, said: “There’s no real sense the economy will bounce back to 4% to 5% growth.

“We expect banks’ credit quality to remain under pressure.”

Nigeria’s gross domestic product will probably shrink 4.3% for this year, the IMF said, as a lockdown to contain the Covid-19 outbreak, lower oil prices and rampant dollar shortages weigh on output. GDP last expanded by more than 3% in 2014.

Chief economist at Vetiva Capital, Mosope Arubayi said: “We won’t have as much money to drive the infrastruc­ture plans that the government intends to implement to open up activities in different sectors of the economy.

“We’re not seeing a situation whereby oil prices will be significan­tly stronger next year.”

Cairo-based EFG predicts that Nigeria’s GDP will increase by 1% to 2% in 2021, “which is very low, and doesn’t help the banks from an asset-quality perspectiv­e,” the analyst said. Earnings per share at Nigerian banks could decline 65% this year, Gadhia said.

 ??  ?? Headquarte­rs of the Internatio­nal Monetray Fund (IMF) in Washington DC, USA.
Headquarte­rs of the Internatio­nal Monetray Fund (IMF) in Washington DC, USA.

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