• Thursday, July 25, 2024
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Nigeria’s low per capita growth driven by insufficient policy adjustment, infrastructure gap – IMF

These 5 recommendations came with IMF’s approved $3.4b relief fund to Nigeria

The International Monetary Fund (IMF) on Wednesday said Nigeria’s low per capita growth is driven by insufficient policy adjustment, a large infrastructure gap, low private investment, and banking sector vulnerabilities.

This is coming as the Washington-based Fund projected Nigeria’s economy to expand at 2.5 percent in 2020, up from 2.3 percent in 2019, driven by both oil and non-oil sectors. Medium-term growth is projected at slightly higher than 2.5 percent, implying no progress in per capita growth.

The Fund stated this in its latest report on Regional Economic Outlook (REO) for sub-Saharan Africa themed “Navigating Uncertainty”, which it launched in conjunction with the Nigerian Economic Summit Group (NESG) in Lagos.

“Competition among firms is generally deemed an essential driving force of market economies,” said Amine Mati, senior resident representative for Nigeria/Africa department, giving highlights of the report.

“An adequate competition policy framework is essential to protect consumer welfare and derive the expected developmental benefits from product market reforms such as deregulation and privatization,” Mati said.

He said empirical analysis suggests that increased competition can boost real per capita GDP growth rate by about 1 percentage point through improved export competitiveness, productivity growth, and investment.

Mati said long-term investment and healthy competition should be present in a business environment in order to achieve sustainable economic growth, adding that it is necessary for policymakers to mitigate risk in the business environment by establishing the right polices that will be attractive to investors.

Also, Nigeria’s inflation rate is expected to rise by 11.7 percent next year from 11.3 percent projected in 2019, while the country’s current account balance will contract by 0.2 percent in 2019 from 1.3 percent in 2018.

The country’s inflation rate, a measure of composite changes in the prices of consumer goods and services, increased by 11.6 percent in October 2019 from 11.2 percent in September.

IMF projects government debt to reach 31.4 percent of GDP in 2020 from 29.9 percent in 2019 and 27.3 percent in 2018.

According to the report, economic activity in the region’s three largest economies – Nigeria (an oil exporter), South Africa (a non-oil, resource-intensive country), and Ethiopia (a non-resource-intensive country) – illustrates the bifurcated growth paths in the region.

South Africa’s growth is projected to remain subdued, increasing only mildly from 0.7 percent in 2019 to 1.1 percent in 2020, as private investment and export growth are expected to remain low. Medium-term growth is projected to be slightly lower than 2 percent, barely above population growth.

This reflects structural constraints (including high cost of doing business, inflexible product and labor markets, and low public enterprise efficiency) which are expected to keep business confidence and private investment lacklustre.
“Sluggish growth in Nigeria and South Africa is likely to limit positive spillovers to their trading partners, especially remittances, financial sector activity, and import demand,” IMF said.

Economic experts at the public presentation of the IMF’s latest report on Regional Economic Outlook (REO) for sub-Saharan Africa called for a reformation of the country’s economic and investment policies in order to foster sustainable growth and development in the country and also improved healthy competition which will drive activities in the business environment.

Bismarck Rewane, CEO, Financial Derivatives Company, said the country has various economic problems. However, he said, the problems can be solved through alignment of beliefs and favourable economic practices as well as policy and structural reformation.

Rewane said “structural reformation is necessary to achieve economic growth and protecting industry is something policymakers should come to terms with”.

He also said that economic growth is a fiscal issue that can be supported with monetary policy, especially if adequate lending culture can be transmitted into activities that will spur growth.

Speaking on Nigeria’s closure of its borders, Rewane said, “The border closure basically serves two purposes. First is giving statistical data as to how much economic activity goes on in the country, and secondly, it reveals the measure of informal economic activities in the country.”

He said the border closure so far is achieving its purpose.

Jumoke Oduwole, special adviser to the president on doing business, said during her presentation that the country has abundant opportunities available in various sectors ranging from the micro, small and medium enterprises, ICT, agriculture among others open for investors.

She said the economy needs better competitive advantage on the global market, which can be achieved with improved infrastructure and reformed ease of doing business policies.

She urged private sector stakeholders to collaborate with the government in order to embark on sustainable economic growth.