The International Monetary Fund (IMF) has released its World Economic Outlook (WEO) in which it advised Nigeria to adopt flexible foreign exchange (FOREX) regime to restore values of revenues and the naira.
Speaking at a media briefing to unveil the report at the ongoing IMF/World Bank Spring Meetings in Washington D.C, its Chief of World Economic Studies Division, Oya Celasun, said the economy can benefit, if exchange rate regime allows for adjustment.
She also challenged Nigeria and other African countries to adjust their fiscal policies, in line with the continued drop in crude oil prices.
“Fiscal policy has to adjust to new realities of oil price fall, even though it is a difficult adjustment. It requires coherent of policies. In many cases, that should be achieved by focusing more on domestic revenue mobilisation and to some extent, by rationalising expenditures,” she said.
Celasun said there was also broader need to diversify the economy away from basic commodities for growth, such as crude oil to achieve sustainable growth.
Also speaking at the press conference, its Economic Counsellor/ Director of Research, Maurice Obstfield, said the Fund will continue to engage governments in emerging markets, but added that it was hard to be optimistic because of the challenges faced by such economies.
He said each African country remains different in terms of economic challenges they face, and such problems will require diverse solutions.
He projected that world economy will grow at 3.5 per cent this year, up from 3.1 per cent last year, and 3.8 per cent in 2018.
He said despite the signs of growth, many countries will continue to struggle this year with growth rates significantly below past readings. “Commodity prices have firmed since early 2016, but at low levels, and many commodity exporters remain challenged- notably in the Middle East, Africa, and Latin America. At the same time, a combination of adverse weather conditions and civil unrest threaten several low-income countries with mass starvation,” he said.
According to him, income growth could fall slightly short of population growth in sub-Saharan Africa, but not by nearly as much as last year.
Extracts from the WEO showed that while chance growth will exceed expectations in the near term, significant downside risks continue to cloud the medium-term outlook, and indeed may have intensified since IMF’s last forecast.
It said commodity exporters, including Nigeria, will account for most of the projected pickup in emerging market and developing economy growth in 2017–19, even though their projected growth recovery is relatively modest compared with the striking decline in their growth rates over the past five years.
It said the negative impact of the large decline in Chinese growth on aggregate growth in emerging market and developing economies is attenuated by China’s rising weight in the group, which reflects a growth rate substantially above most of the rest of the group.
The report said share of the 1.6 percentage point decline in growth between 2011 and 2016 is attributable to the drastic slowdown in Nigeria, an oil exporter that in 2016 accounted for more than 20 per cent of purchasing- power-parity GDP of low-income countries and about half of the GDP of commodity exporters in emerging markets.