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Nigeria needs adjustment over oil price, says IMF


Oya Celasun. PHOTO: Flickr

The relative stability in the price of crude oil at the international market notwithstanding, the International Monetary Fund (IMF) has said Nigeria’s economy remains in the zone of crisis, as returns from the commodity fall short of capacity to push the needed growth.

However, the global institution retained its 2017 Gross Domestic Product (GDP) forecast for the country at 0.8 per cent on the back of assessed recovery in oil production, expected sustainable growth in agriculture and higher public investment.

The Economic Counsellor and Director of Research, IMF, Maurice Obstfeld, who dropped the hint yesterday at the unveiling of the world economic outlook on the sidelines of the ongoing IMF/World Bank Spring meetings in the United States, said Nigeria was still reeling under the challenges of 1.5 per cent contraction in 2016 and as such, must make serious adjustments.


The contractions, he noted, were due to disruptions in the oil sector coupled with foreign exchange, power and fuel shortages, some of which still remained unresolved.

But the Chief of IMF’s World Economic Studies, Mrs. Oya Celasun advised Nigeria and other commodity-dependent nations to effectively diversify their revenue streams as a way out of the crisis.

Her words: “Many commodity exporters still need to adjust fully to structurally lower commodity revenues because commodity prices – the recent rebound notwithstanding – remain low, restraining stronger growth in Nigeria and other oil exporters within the Economic Community of Central African States.

“Many of the largest non-resource intensive countries will find it increasingly hard to sustain growth through higher public capital spending, as they have done in the past, in the face of rising public debt and a slowing credit cycle.”

Obstfeld pointed out that sub-Saharan Africa, over which Nigeria is a major influence, will witness a modest recovery this year, as its growth prospect has been projected to rise to 2.6 per cent in 2017 and 3.5 per cent in 2018, largely driven by specific factors in the largest economies, which faced challenging macroeconomic conditions in 2016.

The outlook for the region, however, remains subdued. Inflation in 2017 is expected to remain at double-digit levels in a few large economies like Nigeria, Angola and Ghana, reflecting, among other factors, the pass-through of large depreciations.

Obstfeld said that the economic upswing that has been expected for some time now could materialise in 2018, as the fund’s study raised global projection for 2017 to 3.5 per cent, up from a recently forecast of 3.4 per cent.

But in 2018, all forecasts were held steady at 3.6 per cent, as growth remains tepid in many advanced economies, and commodity exporters continue to struggle.

“While there is a chance that growth will exceed expectations in the near term, significant downside risks continue to cloud the medium-term outlook, and indeed may have intensified since our last forecast.

“One salient threat is a turn toward protectionism, leading to trade warfare. Mainly in advanced economies, several factors -lower growth since the 2010-11 recovery from the global financial crisis, even slower growth of median incomes and structural labour market disruptions – have generated political support for zero sum policy approaches that could undermine international trading relationships, along with multi-lateral cooperation more generally,” he added.


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IMFOya CelasunWorld Bank
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