Nigeria Exits Recession And Looks Beyond Oil

Nigeria’s economy is picking up according to the IMF’s latest economic review.

Growth hit 0.8 percent in 2017 after contracting by 1.6 percent in 2016.

The report attributes the increase—in part—to the recent recovery in oil prices.

But as the country emerges from recession, the IMF’s Amine Mati says following through on planned reforms regardless of oil price swings and upcoming elections, is key to lifting Nigeria’s growth rates to where they should be.

Mati heads the IMF team for Nigeria and oversaw this latest economic assessment.

Listen to what she’s got to say in the audio clip by clicking the link below

Amine Mati On Nigeria’s Exit From Recession.mp3

Nigerians Are Going Poorer, Says IMF

Despite the country’s slow recovery from recession, Nigerians are not getting any better as they are growing poorer and economic reforms are urgently needed, the International Monetary Fund has said.

The government is expected by the Fund to “muddle through” in the medium term, and any progress could also be threatened if elections next year consume political energy and resources, it said in a report seen by Reuters on Wednesday.

Since the emergence from recession in the second quarter of 2017, Nigerian officials have repeatedly gloated about them building the economy.

But critics say much of the recovery comes from a return to oil dependence after a rise in global oil prices and a rebound in crude production, more the result of militants in the Niger Delta halting attacks on oil facilities than of economic policy under President Muhammadu Buhari’s administration.

The IMF said in the report that the outlook for growth had improved but remained challenging.

“Comprehensive and coherent” economic policies “remain urgent and must not be delayed by approaching elections and recovering oil prices,” it stated in its annual Article IV review of Nigeria’s economy.

“Higher oil prices would support a recovery in 2018 but a ‘muddle-through’ outlook is projected for the medium term under current policies, with fiscal dominance and structural constraints leading to continuing falls in real GDP per capita,” the IMF added.

In the report, it identified risks to growth, including additional delays to implementing policies and reforms ahead of the 2019 elections, security tensions, and oil prices, a fall in which could see capital flows reversed.

“Further delays in policy action, including because of pre-election pressures, can only make the inevitable adjustment more difficult and costlier,” the report added.

The lender repeated its call for Nigeria to simplify its complex foreign exchange system, a bugbear for the IMF for more than a year, which has left large gaps between official rates and various windows that certain groups can use to get other rates.

“Moving towards a unified exchange rate should be pursued as soon as possible. The IMF staff does not support the exchange measures that have given rise to the exchange restrictions and multiple currency practices,” it stated.

The Fund further singled out the central bank, saying it should discontinue direct interventions in the economy.

The Central Bank of Nigeria frequently injects hundreds of millions of dollars into the foreign exchange market to keep its own rates stable.

Commercial banks struggling to remain solvent were also called out, but not identified by the IMF, including one that the lender said was already insolvent, adding, “Some of these banks are kept afloat through continuous recourse to the CBN’s lending facilities.”

The IMF said it would not comment on purported leaks. A spokeswoman for the Fund said a statement would be issued after the lender’s board’s meeting to discuss its assessment on Friday.

A spokeswoman for the Federal Ministry of Finance did not immediately respond to a phone call and email requesting comment.

Nigeria’s Debt Shift To Increase Exchange Rate Risks — IMF

The International Monetary Fund new borrowing plan that will make the Federal Government rely more on foreign loans than domestic ones will create exchange rate risks, the institution has said.

The government advance to issue USD5.5 billion debt instrument by the end of this year, most of which would go to refinancing existing domestic debt.

The issuance would more than double the country’s outstanding dollar bonds to about USD9 billion and is in line with a strategy to shift the economy’s debt profile by doubling the portion of the foreign debt to 40 percent of the total. IMF’s Africa Department Director,

Mr. Abebe Selassie was quoted by Bloomberg as saying,

“IMF understands the authorities’ needs to rebalance its portfolio of domestic to foreign debt.

Such a shift would, however, make the economy more vulnerable to exchange rate depreciation.”

But the Director-General of the Debt Management Office, DMO, Mrs. Patience Oniha, had noted last month, that she doesn’t see any currency risks given the government’s growth plans that will generate more foreign exchange. Nigeria’s new borrowing plan would entail raising foreign debts through the selling of bonds in tranches of USD2.5 billion and USD3.0billion including a mix of Eurobonds and Diaspora bonds.

With Nigeria’s Eurobonds yielding an average six per cent, almost nine percentage points less than the price for Naira bonds, the government expects to reduce its debt-service costs, which the IMF see as almost tripling to about 62 per cent of revenue this year. Selassie said

“We expect that it will help the government extend its maturity profile, decrease debt-servicing costs, and reduce private sector crowding out.”



Source: Vanguard

Nigeria’s External Reserves Hits $34bn – CBN

The Deputy Governor of Central Bank of Nigeria (CBN) in charge of Financial System Stability, Joseph Nnanna, has said Nigeria’s external reserves have hit $34bn from $33.6bn attained on October 25.

The reserves have been appreciating very fast after hitting $32bn on September 18.

Nnanna, who disclosed the latest figure in Lagos during the weekend while fielding questions from journalists at a forum organized by the Chartered Institute of Bankers of Nigeria, said the exchange rate stability achieved so far by the apex bank had come to stay.

He expressed confidence that the usual end-of-the-year rush would not push up the naira-dollar exchange rate contrary to some people’s expectations.

Asked if the exchange rate would go up as the end of the year was approaching, Nnanna said, “No, the rate will not go up, take it from me. We have achieved stability and the stability is here to stay.

“The sustainability is already evident, the reserves are growing. As I speak, the reserves are $34bn. When we had volatility, the reserves were as low as $20bn. But let me say one thing: Nigeria can make do with a reserve level of $20bn but it is the press who gives the impression that if the reserves fall below $30bn, then there is a problem.

“No, there is no problem. All we need to manage the economy and manage it properly is reserves that can cover at least three months of import. And in fact, as it is, $10bn or $12bn can give us reserve coverage of four months.”

The CBN chief said the Investors and Exporters foreign exchange window had performed beyond the bank’s expectations, adding that forex inflows in the past few months were huge.
Nnanna stated, “Our exchange rate is convergent; we are getting southward. In the IMF, they talk about the need to have one rate. The one rate can happen organically or inorganically.
For us at the CBN, we believe that organic convergence is the way to go. Inorganic convergence, which is forced, will always produce an arbitrage and that we don’t want.”



Source: Daily Post

Beware Of Nigeria’s Fraudulent Anti-Corruption Civil Society Groups, Okonjo-Iweala Tells IMF

NIGERIA’S former Minister of Finance and chair of Gavi, the Vaccine Alliance, Dr Ngozi Okonjo-Iweala, has charged the International Monetary Fund (IMF) and other world bodies to be wary of dealing with civil society organisations (CSOs) claiming to be fighting corruption and promoting transparency in the country.

She said a number of the anti-corruption CSOs currently in the country were actually fronts floated by corrupt people in government in order to give those in power corridors a fake clean bill of health on transparency and open government.

Okonjo-Iweala spoke on Sunday in Washington DC, the United States on the theme Fighting Corruption, at the conclusion of the annual meetings of the World Bank and the International Monetary Fund (IMF).

“From outside, you can’t really do so much. You really need to identify the institutions, the people and those who are willing to work on this reform and support them.

“But you need to ensure you are working with the right CSOs and NGOs. We have a joke in my country that you can have NGI instead of NGO. NGI is non-governmental individuals instead of non-governmental organisations.

“The people you are fighting are also very smart. They are not just sitting back. They also develop their own NGOs to serve as a front for them; people who can certify them that they are very accountable for what they are doing.

“So, you have to be careful. You have to be able to identify those who are the proper people. And we have many NGOs in Nigeria and in the African continent who are fighting really hard that to make the govt accountable. But be very careful not to get bogged down.

“Sometimes people from outside think this is needed to sort out who is who and who is what? Who is telling you the truth and who is making up a story to cover up,” she said.

The former Minister canvassed the strengthening of institutions as well as the e-procurement as a veritable means to fight corruption in Nigeria and other places.

She recalled that with the support of the World Bank and IMF, it took Nigeria 10 years “to build Government Integrated Financial Management System in Nigeria, to get away from cash-based transactions.”

She advised the IMF to identify the real anti-corruption CSOs and support them, adding that these groups had developed tools and frameworks to promote open government and transparency.

“The more of e-procurement we can build institutionally and strengthen the institutions along that line, the more we will be able to fight corruption.

“We really need a systematic plan about fighting corruption. The big story about corruption scandals are the ones people like to read. But actually, fighting corruption and putting the necessary system in place is very uns3xy. It takes time,” she said.



Source: Tribune

IMF Advises Africa on Economy

Countries in sub-Saharan Africa need to get their budgets in order, diversify their economies and look after their poorest people, the IMF said.

According to the IMF’s regional economic outlook, if they do that, there is no reason why the region cannot have the strong growth needed to meet the aspirations of a young and growing population.

That, at least, is the three-pillared prescription from the IMF as expressed by one of its top Africa researchers, Celine Allard, in an official IMF blog post and podcast.

Allard co-authored the Fund’s regional economic outlook.

It found that sub-Saharan economic growth hit only 1.4 percent last year, the lowest level in two decades and well off the five to six per cent rates normally reached.

It was also well below the population growth rate.

“This is a quite broad-based deceleration because we see about two-thirds of the countries having slowed down last year, which is quite substantial,” she said in the podcast.

While some of the reasons for the slowdown are beyond the region’s immediate control, low global commodity prices, drought etc, Allard said some problems are down to a lack of governmental response.

“Part of the deteriorated outlook is a reflection of limited policy adjustment in the region,” she said.

Hence, the first pillar: renewed focus on debt reduction, fiscal policy to raise domestic revenues, and greater exchange rate flexibility.

Allard noted that some of the countries in the region that had kept growth up, such as Senegal and Ivory Coast, had run up large budget deficits to help this along.

With that, though, comes vulnerability, she said, and now is the time to shift gradually to reduce this.

As well as taking action on budgets, the IMF said sub-Sahara needs to focus on economic diversification and improving the business climate so that the private sector can feel confident about investing.

Many countries in the region are overly dependent on commodities, getting a huge boost when they are in demand but suffering when prices fall.

A Bank for International Settlements paper in 2016 estimated that the share of commodities in of sub-Sahara African exports rose to 76 per cent in 2010–14 from 57 per cent in 1990 to 1999.

Allard said the third pillar was to provide social safety nets to protect the most vulnerable in society.

“We know that in some countries there are some programmes, but they are usually fragmented and they need to be better targeted,” she said.


IMF Cautions Zimbabwe on Excessive Spending

The International Monetary Fund (IMF) has warned Zimbabwe against excessive spending as this may worsen cash shortages and ultimately fuel inflation.

The IMF said this in a statement after a two-week mission to the southern African country
“Spending pressures stem from high employment costs, government transfers to support specific economic sectors, and elevated discretionary expenditure. Action on these three fronts, while safeguarding social outlays, is therefore crucial,” IMF team leader Ana Coronel said.

She said a severe drought in the 2015 and 2016 agricultural season and slow reform momentum had led to high expenditure levels by the Zimbabwe government since late 2015.

This was happening against the background of subdued state revenue and foreign inflows, forcing the government to finance the large fiscal imbalances through domestic borrowing.
The IMF said the expansionary fiscal stance and curtailed net capital flows had resulted in cash shortages, hampering economic activities.

Zimbabwe is facing severe bank note shortages since January 2016 and bond notes introduced in November 2016 have not helped to address the cash shortages.
The country also moved out of deflation in March, after having been stuck in negative inflation since 2013.

Annual inflation for the month of April stood at 0.48 per cent, with the Reserve Bank of Zimbabwe forecasting inflation to close the year at between one and two per cent.
The country suffered from hyperinflation during a decade of economic crisis which ended in 2009 when the country abandoned the worthless Zimbabwe dollar and adopted multiple currencies.

The IMF said Zimbabwe’s economy was facing difficulties which require government to take action to unleash the potential of the private sector and ensure that growth benefits the most vulnerable segments of the population.

“Building on the progress already achieved, the government is encouraged to demonstrate that Zimbabwe is open for business.This will include enhancing efforts to tackle corruption, encouraging private sector investment, allowing the market to determine prices, promoting labor flexibility, and creating a stable legal and regulatory framework to reduce policy uncertainty,” Coronel said.

The IMF added that restoration of confidence is essential for Zimbabwe to attract necessary dollar inflows to the economy.

The recovery in agriculture and mining would drive growth this year but maintaining the growth momentum would require action to expedite the authorities’ plans to reduce the fiscal deficit to a sustainable level, the IMF said.

Zimbabwe is expecting higher economic growth of 3.7 per cent in 2017 from an initial projection of 1.7 per cent following a better agriculture season.


Nigeria’s Debt Profile Remains Low-Adeosun

Nigeria’s Minister of Finance, Mrs Kemi Adeosun has explained the reason the International Monetary Fund IMF was concerned over the debt service ratio to revenue of the country.

Mrs Adeosun said this at a news conference after the launching of the International Monetary Fund’s Regional Economic Outlook report on Sub-Saharan Africa, in Abuja, Nigeria’s capital. The IMF in its latest economic report, put the country’s external debt service to revenue at about 66 per cent.

Mrs Adeosun said that the country’s debt profile to GDP remained low; however, the cost of servicing loans had gone up due to fall in government revenue. “The problem is not that our debt is too high, but that our revenue is too low. It is revenue you use to pay debt and our revenue in Nigeria right now is very low.”

“Most of our debt matures between two years. That means that the actual amount of interest we are paying is significant. What we are doing right now is refinancing most of that debt, especially those maturing within the next two years. We are also working on improving government revenue through tax. Our tax to GDP is six per cent; we are one of the lowest in the world. Ghana is 15 per cent, South Africa, 24 per cent.

“So what we are doing is working very hard to see how we can get more people into the tax net and how to get those who are already in the
tax net to pay the right taxes,’’ she said.

Nigeria may Benefit from Multi-million Dollar Africa Initiatives

IMF, Germany, IFC dangle over $2.4 billion investments
Nigeria is in line to benefit from series of multilateral initiatives brokered by the International Monetary Fund (IMF), Germany, the International Finance Corporation (IFC) and leaders of the top Multilateral Development Banks (MDBs).

Under the G-20 Compact with Africa scheme, IMF Managing Director, Christine Lagarde and Germany’s Minister of Finance, Wolfgang Schäuble, at the weekend in Washington DC, signed a €15 million pact in support of capacity development activities across Africa.

The move is to ensure capacity development support for African policymakers’ to address reform challenges in strengthening domestic resource mobilisation, implementing fair tax systems, achieving good financial governance, and fostering financial stability and inclusion.

This also, is in support of 2030 Agenda for Sustainable Development.The Compact with Africa is an initiative launched under Germany’s G-20 Presidency in December 2016 and aims to boost private investment and increase infrastructure development in Africa.

Meanwhile, leaders of MDBs have also agreed to deepen their collaboration to encourage private sector investment in vital infrastructure needed to support sustainable and inclusive economic growth throughout the world and Africa in particular.

At the Global Infrastructure Forum 2017, titled “Delivering Inclusive, Sustainable Infrastructure”, strategies on how MDBs can best work with countries and the private sector to create markets for infrastructure projects topped agenda.

Discussing the challenges of infrastructure at forum, the Deputy Secretary-General of the United Nations, Amina Mohammed, harped on charting enabling framework, rather than identification of the challenges.

Basic infrastructure services- roads, water and sewage lines, and electrical power – are scarce in many developing countries, while more than one billion people that live without electricity.more than 660 million without access to clean water; and one in three people that lack access to flushing toilets and sewerage infrastructure are targeted.

The event brought together potential investors, representatives of the United Nations and the G20 with the heads of the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Inter-American Investment Corporation, International Finance Corporation, Islamic Development Bank, New Development Bank and the World Bank.

Similarly, IFC and Europe’s largest asset manager, Amundi, have agreed to create the largest green-bond fund dedicated to emerging markets, estimated at $2 billion, in efforts to deepen local capital markets and expand financing for climate investments.

IFC will invest up to $325 million in the new Green Cornerstone Bond Fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.

On the other hand, Amundi will raise the rest of the $2 billion from institutional investors worldwide and will provide its services in managing emerging-market debt. The fund aims to be fully invested in green bonds within seven years.

Lagarde noted that with trillions of dollars in capital sitting on the sidelines earning low or even negative returns, deeper engagement with the private sector can create win-win scenarios where investors earn better returns on long-term investments and developing countries get much needed investment and expertise.

“This compact has the potential to mobilize investment and energize inclusive economic growth in Africa. The IMF greatly appreciates the support of the German government for our capacity-building efforts in Africa.”

Schäuble added: “Capacity development is important to improve conditions for private investment in Africa. This is why we support the IMF’s very valuable efforts both financially and conceptually.”

The Guardian

Floating the Naira- CBN Resists IMF

The Central Bank of Nigeria has resisted calls from the International Monetary Fund (IMF) to float the naira, suggesting that the CBN was action the best interests of Nigerians.

Speaking with the media at the World Bank/International Monetary Fund spring meetings in Washington DC, United States, the CBN spokesperson, Mr. Isaac Okorafor, said “The call here in Washington that we should float the naira, liberalise the market – our market is extensively liberalised – and the call to float the naira is a bit laughable in our case.

“Yesterday (Thursday), when Madame Lagarde was discussing the economy of Egypt, she lamented herself the devastating inflation that is in that country.

“Egypt has half of our population; Egypt receives about $12bn in foreign earnings and several billions in tourism. We are 180 million people, our infrastructure is so poor and the productive capacity cannot be fast enough to rise to the benefit of the people from massive depreciation (of the naira).

“If you float the naira today, and given the discoveries by security agencies, you’ll discover that our case will be terrible. Egypt today has an inflation rate of almost 31 per cent; remember that Angola also has about 36 per cent inflation; ours is at 17.26 per cent.

“If we float the naira and we allow speculators and those with corruption money and all the people who create the bubbles to launch into the market, you can yourself imagine the kind of situation we will find ourselves in.

“Yes, we will go all out to practise economic theory the way they say you should allow your currency to float, but of course, you should also know that no country floats its currency, just leaving it to the dictates of the market.

“Our economy has its own peculiarities and we cannot kill our people in the name of floating the naira.”

Nigeria’s Economic Recovery Plan Gets IMF Endorsement

The International Monetary Fund (IMF) wednesday endorsed the Economic Recovery Growth Plan (ERGP) 2017- 2020, launched recently by the federal government applauding it as “how fiscal policy should be thought in developing countries.”

The Fund’s Director, Fiscal Affairs Department, Mr. Vitor Gaspar, conveyed its position on the plan while responding to a question from THISDAY, during a media briefing on the IMF Fiscal Monitor press conference at the ongoing IMF/World Bank Spring meetings in Washington DC.

The IMF official said he had the privilege of visiting Nigeria some months ago and was very happy to understand that for the Nigerian government, fiscal policies in general and tax policy in particular were part of the strategy for development.

Also, IMF’s Assistant Director/Head, Fiscal Policy and Surveillance, Catherine Pattillo, welcomed the country’s ERGP, saying its focus on diversification and attention to some of the problems facing the economy were steps in the right direction.

According to Pattillo: “We very much welcome the ERGP. As you are aware, Nigeria went into recession last year, there have been forecasted recovery, but still very fragile this year and the need to address the fiscal situation is urgent. Our recommendation is for the continued fiscal consolidation.

“One striking statistics I think is the fact that over the past years, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria. So, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue. That would allow the government to implement the social and growth-friendly policies that are part of the objectives of the ERGP.”

A fortnight ago, President Muhammadu Buhari launched the ERGP 2017-2020. The Medium-Term plan has among its broad strategic objectives, the restoration of sustainable, accelerated and inclusive growth and development; investing in the people and building a globally competitive economy.

Meanwhile, the economic growth in Sub-Saharan Africa has been projected to rebound in 2017 after registering the worst decline in more than two decades in 2016, according to the new Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank.

The region is showing signs of recovery, and regional growth is projected to reach 2.6 per cent in 2017, the report released on the side-lines of the ongoing meetings in Washington stated.

However, it anticipated that the recovery will remain weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty.

“Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from the sharp slowdown in 2016, but the recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty. Furthermore, several oil exporters in the Central African Economic and Monetary Community (CEMAC) are facing economic difficulties,” the journal said.

The latest data revealed that seven countries (Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continued to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4 per cent in 2015-2017. These countries house nearly 27 per cent of the region’s population and account for 13 per cent of the region’s total GDP.

According to the journal: “The global economic outlook is improving and should support the recovery in the region. Africa’s Pulse notes that the continent’s aggregate growth is expected to rise to 3.2 per cent in 2018 and 3.5 per cent in 2019, reflecting a recovery in the largest economies.

“It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick. GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production. This is especially the case for Ethiopia, Senegal, and Tanzania.

Quoting World Bank Chief Economist for the Africa Region, Albert G. Zeufack, it said: “A stronger-than-expected tightening of global financing conditions, weaker improvements in commodity prices, and a rise in protectionist sentiment represent downside external risks to the outlook. On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.

The report which was written by World Bank Lead Economist, Punam Chuhan-Pole, explained that as countries moved towards fiscal adjustment, there was need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery.

“With poverty rates still high, regaining the growth momentum is imperative. Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness,” it said.


Source : THISDAY