For Nigeria to sustain its current gross domestic product (GDP) growth rate, it would need to take the bold decision to implement some policy reforms, according to the International Monetary Fund (IMF).
The much-needed reforms according to Ari Aisen, IMF resident representative to Nigeria, include fiscal, trade, exchange rate and monetary policy reforms.
“We just recently saw a 4.03 percent GDP growth year-on-year, which is a robust reading of growth. This recent quarterly growth had a favourable base effect so there is a technical issue favouring that and so no one should be under the illusion that this performance will continue forever,” Aisen said while giving a keynote address on Wednesday at the IMF Public Presentation of the fall 2021 Issue of the Regional Economic Outlook.
Nigeria’s GDP grew by 4.03 percent in real terms in the third quarter of 2021, showing sustained growth over the last four quarters since the exit from the 2020 recession.
Acknowledging that Nigeria’s GDP growth rate is back to pre-COVID-19 levels, the IMF representative said, it is, however, “not on a per capita basis.
According to him, the “continuous growth on these levels, in our view, will require reforms.”
Explaining further, Aisen said the GDP of Africa’s most populous nation is not recovering in real-time and it is certainly far away from the pre-2016 shock.
“You are not recovering in real GDP but the population is growing and that is why poverty is increasing,” he said.
Going forward, IMF cited some of the downsides risks Nigeria is likely to face in the near future and they include COVID-19, spending pressure and the ability to mobilize more revenue.
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“Spending pressures is a big risk especially within this narrow fiscal space that we have in Nigeria coupled with low revenue being mobilized.”
Persisting insecurity and the forthcoming elections were some of the other downside risks cited by the international organization.
On the upside, IMF cited the much talked about Dangote refinery that is expected to commence operation in 2022.
“The faster-than-expected reaching of the Dangote refinery’s production capacity is an upside for Nigeria,” Aisen said, adding that it can help Nigeria to save some foreign exchange and will be positive for the country’s economic development.
The Petroleum industry act which, according to Aisen provides some legal certainty was another upside as it “can be helpful in Nigeria’s growth and development,” when properly implemented.
The Washington-based international financial institution expects a 2.6 percent GDP growth for Africa’s largest economy this year and projected that it will increase marginally to 2.7 percent per annum over the medium term. “It is just above the population growth rate implying stagnant per capita income in the medium term.”
“Over the medium term, moving away from inward-looking policies through trade, monetary and foreign exchange reforms, enhancing public trust through governance and fiscal transparency reforms, and improving welfare through job creation and agricultural reforms are priorities,” it said.