IMF’s Nigeria economic outlook

The report projects Nigeria’s oil exports would decline by 6 percentage points of GDP to $56 billion from $88 billion, and oil revenues by 2.4 percentage points of GDP from 2014 levels. This will contract fiscal spending and the aggregate demand shocks could lower growth by about 1.5 percent last year to 4.3 percent in […]

The report projects Nigeria’s oil exports would decline by 6 percentage points of GDP to $56 billion from $88 billion, and oil revenues by 2.4 percentage points of GDP from 2014 levels. This will contract fiscal spending and the aggregate demand shocks could lower growth by about 1.5 percent last year to 4.3 percent in 2015, it adds.
Inflation is seen rising above 11 percent on the effects of exchange rate depreciation, reflecting the pass-through of higher domestic prices for imports, according to the report. It adds however that the effect is likely to be contained in part due to lower food prices from increased local production of staples.
 “These developments also increase risks to the banking sector, given its significant exposure to the oil industry and the potential for capital outflows,” the report notes.
This is certain to lead to a contraction in public spending at a time when some federal ministries, agencies and departments are unable to pay workers’ salaries for months. There is indeed cause to be worried, at least for the immediate future.
The IMF report appears to have provided a more realistic assessment of the Nigerian economy than the glowing everything-is-okay picture that the Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala and other top government officials, have sought to portray it to the Nigerians public. The austerity measures announced last year by the finance minister have so far not had any impact on the economy.
To make picture gloomier, demand for Nigeria’s crude oil in the international market is also on the decline; add to this the issue of depleted foreign reserves and what becomes almost self-evident is that the fall in oil prices is not going to end any time soon.
Nigeria finds itself in this situation because the government failed to build on the gains of its decade-long economic growth when oil prices hovered around $100 per barrel. Today, poverty and unemployment remain among the major problems confronting the economy because the growth was not inclusive.
Addressing truly economic transformation is now imperative. The federal government must think more seriously about its heavy dependence on oil earnings and develop the non-oil sector as well, which has the huge potential to raise additional revenue to run the government.
More attention should also be given to agriculture. This sector once was the country’s mainstay and its biggest foreign exchange earner, but was unwisely neglected over the years with the discovery of crude oil. Adding value to farm produce will create more jobs through its upstream and downstream integration with other sectors of the economy, increase export revenues, boost income for the people engaged in it and reduce poverty.
The government should also strengthen the country’s infrastructure, especially power supply and rail transportation.  Nigeria cannot attain the goal of becoming the 20th biggest economy in the world by 2020 unless ends its reliance on oil exports.
The power sector is a special area of serious resource commitment; finding a permanent solution to the challenge it offers is critical to unlocking the nation’s industrial potentials. Past efforts, including privatisation of generation and distribution components, have so far not taken the country to where it should be.
One of the causes of the haemorrhages that public coffers suffer is stealing out of them by public officers and their collaborators. The negative effects of corruption on the economy need to be taken more seriously with a determination to punish everyone involved.