• Thursday, March 28, 2024
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IMF maintains 2.5% growth for Nigeria in 2020-2021

International Monetary Fund (IMF) on Monday retained 2.5 percent growth for the Nigerian economy in 2020-21, as earlier estimated in October 2019.

The Washington-based Fund released its World Economic Outlook (WEO) titled ‘Tentative Stabilisation, Sluggish Recovery,’ in Davos on Monday.

IMF had in October 2019, projected that Nigeria’s real economy would grow by 2.3 percent in 2019 and 2.5 percent in 2020 compared with 1.9 percent projected in 2018.

In its January 2020 Global Economic Prospects, the World Bank, in January 8 2020, projected Nigeria’s economy to remain broadly unchanged, rising only to an average of 2.1 percent in 2020-22.

Damilola Adewale, a Lagos-based economist and independent consultant, says although the IMF is more optimistic than World Bank that predicted 2.1 percent for FY2020, this points that growth for 2020 will be subdued at about 2 percent. And this kind of growth is weak to lift millions of people out of poverty and generate jobs for the unemployed.

“It also indicates that many Nigerians will be poorer given that per capita income will continue to decline. Not until policy makers take the bold steps to implement friendly policies in line with free market principles, foreign investment will continue to elude the economy and this 2 percent growth syndrome will last at least for five to six years,” Adewale states.

Nigeria’s Gross Domestic Product grew by 2.28 percent (year-on-year), in real terms, in the third quarter of 2019, according to the National Bureau of Statistics (NBS).

The Fund projected global growth to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021—a downward revision of 0.1 percentage point for 2019 and 2020, and 0.2 for 2021 compared to those in the October World Economic Outlook (WEO).

Gbolahan Ologunro, a research analyst at Lagos-based CSL Stockbrokers, says most likely the underlining assumptions to this projected growth is based on favourable oil prices and continued improvement in the real sectors, particularly the agric, manufacturing and telecommunication sectors.

These, according to him, are the bright spots in the non-oil sectors that have shown signs of improvement over the last six quarters. So, with expectation of favourable oil prices, subdued tension between farmers and Fulani herdsmen, which will support agricultural output and continued stability in the FX market, should continue to also support recovery in the manufacturing sector.

“I also believe they are also of the view that the recent policy of the Central Bank of Nigeria trying to improve flow of credits to the private sector with the use of Loan-to-Deposit Ratio might also impact on the economic activities positively,” Ologunro notes.

The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest.

In sub-Saharan Africa, growth is expected to strengthen to 3.5 percent in 2020–21 (from 3.3% in 2019). The projection is 0.1 percentage point lower than in the October WEO for 2020 and 0.2 percentage point weaker for 2021. This reflects downward revisions for South Africa (where structural constraints and deteriorating public finances are holding back business confidence and private investment) and for Ethiopia (where public sector consolidation, needed to contain debt vulnerabilities, is expected to weigh on growth).

Ayodeji Ebo, managing director at Afrinvest Securities Limited, snotes, “For me, it is not something to be excited about because it is still a very weak growth and I feel that there is still a lost that needs to be done. We need more political will and be deliberate in terms of some of the sectors that we can easily improve in terms of our growth.”

For the emerging market and developing economy group, growth is expected to increase to 4.4 percent in 2020 and 4.6 percent in 2021 (0.2 percentage point lower for both years than in the October WEO) from an estimated 3.7 percent in 2019. The growth profile for the group reflects a combination of projected recovery from deep downturns for stressed and underperforming emerging market economies and an ongoing structural slowdown in China.

HOPE MOSES-ASHIKE & BUNMI BAILLEY