IMF says Nigeria needs quick help on ailing economy

International Monetary Fund (IMF) managing director, Christine Largarde, yesterday said Nigeria was presently going through an ‘alarming economic situation’ and urged the authorities to quickly seek help, and especially resolve the 2016 budget that had faced terrible controversies between the executive and legislature.

Speaking on the tough Nigeria’s situation during two separate press events at the ongoing Spring Meetings of the World Bank and IMF in Washington DC, Largade said it would be critical for the authorities to seek urgent help, wherever they could find, and that her institution stand ready to assist the country.

The IMF fears that the Nigerian authorities are not doing enough to avert a looming economic crisis and has in its latest World Economic Outlook on Tuesdaylowered Nigeria’s 2016 growth projections to 2.3 percent from its earlier January forecast of 3.2 percent.

The Bretton Wood Institution is concerned that the negative impact of lower oil prices in the oil rich nation is now compounded by disruptions to private sector activity through exchange rate restrictions.

Lagarde said it would be quite important for Nigeria to allow for a more flexible exchange rate- though not a panacea for all the problems- but that the policy on banning some 41 items from accessing FX for import is worsening the already bad situation.

Addressing a press conference to officially kick-start the Spring Meetings, Lagarde said of course that the global low price of commodities as far as Nigeria is concerned is a critical issue.

“I recall 80 percent of your export and 60 percent of your (Nigeria’s) revenues or the other way round is actually oil dependent and so when there is a massive decline in the price of oil, those group also take a similar hit.

“So, it has a major impact on the country and our recommendation is that Nigeria seeks help from the international institutions that can best help,” Largade responded to BusinessDay concerns on huge the new risks were and what the authorities ought to be doing.

“Second that Nigeria is open minded about using flexibility of the exchange rate in order to absorb some of these shock. We believe that it will be more efficient than to have a lis of products that the list of products that are barred from being imported in the country.

“Thirdly, we believe that it is really important that budget be quickly decided and approved and we stand ready to help Nigeria if it comes to seek our help.

Largaded recalled that she visited Nigeria early in the year when he met with the government p, including the lawmakers on urgent need to begin to look at how to fix the economy.

“I believe that having visited Nigeria in January, that it is also really important that the country looks at diversifying its economy because the prices of oil might stay low for longer, she said.

She acknowledged that Nigeria is full of energy, of smart people that can really transform some of its activities including in the agricultural sector where she said “there is just too much by way of imports. And there could be a lot of transformation in Nigeria and local production.”

Both the World Bank and IMF are alerting that 2016 will be quite a difficult year and want countries to begin to look ahead for solutions.

The IMF particularly downgraded global growth, having found that present growth is too slow, too weak, fragile to help in redistributing wealth.

Speaking at a different forum- live interview with BBC Stephen Sackur, Largarde also during the meetings, the IMF boss repeated her earlier warnings that Nigeria presents much more risks in the face of present unfolding global crisis.

Her words, “I will not hide from that question…Nigeria is one of those countries with huge potential, fantastic youth but also a very alarming situation because it is very, very heavily dependent on the oil resources both in terms of fiscal revenue and interms of exports,

“So as a result of that, we have spoken publicly, and I have actually gone to the Senate of Nigeria to exhaling our views, we believe that a more flexible exchange rate is in the interest of the Nigeria pm population.

The IMF chief warned that if this does not happen, “we will continue to see that dual exchange rate, the official and non-official one and putting in place those list of products and services that are forbidden in Nigeria for import cannot be a substitute to a more flexible exchange rate.

“We are not suggesting that flexible exchange rate is the panacea in all cases, but in that particular instance, we believe that it could help .

“We know it is going to be difficult, and we very much hope that the Nigerian government and the leadership of President  Buhari will able to distinguish the value of moving in that direction rather than causing circumstances that could precipitate a much more difficult decision making process an some stage.

“But we remain pretty available to help, we believe that it is doable, it can be addressed, as I said, Nigeria is a country that has very strong resources and a great people but the right policy mix is needed which include, naming other things, a more flexible exchange rate,” she maintained.

 

Onyinye Nwachukwu