- There is little to cheer in IMF’s economic outlook for Nigeria
Much as the latest forecast on the economy by the International Monetary Fund (IMF) gives some room for cheers, one inescapable conclusion is that the economy is still powered largely by the same element that has been its Achilles heel. According to the latest World Economic Outlook (WEO) forecast, Nigeria’s Gross Domestic Product (GDP) is projected to grow by 2.3 percent in 2019 – that is some 0.4 percent higher than the figure of 1.9 percent announced by the fund in April.
Nigeria’s growth, says the IMF forecast “is set to increase from 0.8 percent in 2017 to 2.1 percent in 2018 and 2.3 percent in 2019 (0.4 percentage point higher than in the April WEO for 2019) on the back of an improved outlook for oil prices”.
The fund’s projection for sub-Saharan Africa, by contrast, would appear even more upbeat: 3.8 percent, from 3.7 percent it announced in April. Says the IMF: “The recovery in Sub-Saharan Africa is set to continue, supported by the rise in commodity prices. For the region, growth is expected to increase from 2.8 percent in 2017 to 3.4 percent this year, rising further to 3.8 percent in 2019 (0.1 percentage point higher for 2019 than forecast in the April WEO)”.
The upgraded forecast, it says, “reflects improved prospects for Nigeria’s economy” understandably because the continent’s other economic powerhouse and its most-industrialised economy, South Africa, with which it accounts for 50 percent of the continent’s GDP, hasn’t grown at more than two percent a year since 2013.
To start with, the outlook for Nigeria projects nothing that could be deemed extraordinary in the circumstance that oil prices have remained at the heart of the projection. With pretty little to show of the factors underlying the so-called positive outlook as anything other than the stability and sustained rise in commodity prices, there is a sense in which the rosy outlook could be deemed, if not as somewhat exaggerated but as having the potential to lull Nigeria into an illusion of comfortability. Caution should be the word.
Secondly, after a terrible contraction–the worst in 25 years – caused by lower oil prices and output and crippling shortages of foreign exchange to import basic raw materials, the more pertinent question at this time ought to be whether anything of the structure of the Nigerian economy has changed in any fundamental sense as to warrant boundless optimism from any quarters. The reality of course is that the economy remains highly vulnerable – so much so that a mere threat from the Saudis to turn on the oil taps is already creating ripples on the global energy price landscape at a time the country can do with every petrodollar. The current ruckus at the monthly Federation Accounts Allocation Committee (FAAC) meeting and which has left the finances of most states in precarious situation obviously brings the vulnerability closer home.
Third is the million dollar question of whether an economy whose population growth rate currently stands at 2.6 percent can afford to luxuriate in the illusion of such modest growth.
We therefore take the projections with a pinch of salt. Far from doubting the potential of the Nigerian economy, the issue is whether those managing the economy have the vision, energy and discipline to chart a future that is truly less dependent on oil. Such vision obviously calls for bold measures to address the huge infrastructure gap which Financial Derivatives Company, an economic and financial research firm, once says would require $15bn (N4.59tn) annually for the next 15 years to bridge. It also calls for bold reforms in the educational sector to address the composite issues of youth unemployment and skills acquisition.
