Nigeria: Recession – IMF Predicts Nigeria’s Early Exit Next Year


Abuja — The International Monetary Fund (IMF) has projected that Nigeria’s economy will begin to recover in 2021.

It however said the economy will record a subdued real GDP growth of 1½ per cent and output, recovering to its pre-COVID-19 pandemic level only in 2022.

The projection by the IMF team is in agreement to the earlier optimism of the fiscal and monetary authorities.

The Fund however did not state exactly the quarter the economy will likely pick-up in the year

The Fund also welcomed the fiscal transparency measures introduced by the federal government to facilitate tracking and reporting of budget emergency funding.

IMF also applauded the removal of subsidy on electricity tariff, ratification of the African Continental Free Trade Area (AfCFTA) and efforts taken to mitigate impacts of COVID-19 on the economy.

“On the structural front, the approval of the power sector recovery program financing plan, the ratification of the African Continental Free Trade Area (AfCFTA), and the completion of key road projects are positive steps,” the IMF said in a periodic assessment report on the Nigerian economy that was released yesterday.

Going forward, IMF recommended decisive actions to tackle governance weaknesses and implement regulatory and trade-enabling reforms, including the lifting of trade restrictions to unlock Nigeria’s strong growth potential.

Moreover, it said it is critical to continue strengthening the anti-corruption framework and implement plans to improve the effectiveness of the AML/CFT framework.

On the other hand, the Fund “agreed with the CBN that the accommodative monetary stance remains appropriate in the near term given the constrained fiscal space, large fiscal financing needs and strained sovereign external market access.”

However, IMF noted that if Balance of Payment (BOP) and inflationary pressures intensify, there might be a need to withdraw liquidity or raise rates.

“Given weak transmission and record low market interest rates, further cuts in the Monetary Policy Rate are unlikely to provide additional support to the economy. In the medium term, the operational monetary policy framework, along with policy strategy and communication, should be strengthened to establish the primacy of price stability”, it added.

Besides, the Fund said adjustments in the official exchange rate made earlier this year are steps in the right direction, while recommending a multi-step transition to a more unified exchange rate regime, with a market-based, flexible exchange rate.

Noting that the Nigerian authorities have undertaken commendable and timely measures to counter the pandemic’s impact on lives and livelihoods, IMF said more needs to be done.

It stated: “Major policy adjustments embracing broad market and exchange rate reforms are needed to address recurrent BOP pressures and raise the medium-term growth path.

“A durable solution to Nigeria’s recurrent BOP problems requires recalibrating exchange rate policies to reduce BOP risks, instill market confidence and facilitate private sector planning.

“Significant revenue mobilization–including through tax policy and administration improvements–is required to create space for higher social spending and reduce fiscal risks and debt vulnerabilities. With high poverty rates and only a gradual recovery in prospect, revenue mobilization will need to rely initially on progressive and efficiency-enhancing measures, with higher VAT and excise rates waiting until stronger economic recovery takes root.”

Against the assertion of the federal government that the economy would rebound in the first of 2021, IMF said under current policies, the outlook is challenging.

It projected that real GDP would contract by 3¼ per cent in 2020, adding that “the recovery is projected to start in 2021, with subdued growth of 1½ percent and output recovering to its pre-pandemic level only in 2022.

“Despite an expected easing of food prices, inflation is projected to remain in double-digits and above the Central Bank of Nigeria’s (CBN) target range, absent monetary policy reforms. Following a significant decline in revenue collections–from levels that were already among the lowest in the world–fiscal deficits are projected to remain elevated in the medium term. There are significant downside risks to this near-term outlook arising from the uncertain course of the pandemic both globally and in Nigeria”, the Fund further explained.

Acknowledging that the banking sector has been resilient thanks to the ample pre-crisis buffers, IMF recommended vigilance and corrective actions to prevent an increase in financial stability risks arising inter alia from increasing non-performing loans.

In this regard, it advised that “debt relief measures for clients should remain time-bound and limited to clients with good pre-crisis fundamentals, in line with existing regulations.”

According to the Fund, minimum loan to deposit ratio should be reconsidered because of the risk to financial stability associated with pushing credit possibly to higher-risk clients.

Regarding financial inclusion, IMF welcomed notable progress in narrowing gender and regional gaps in access to financial services, including through fostering financial literacy, agency banking and use of fintech.

The Fund welcomed the recent submission of the Petroleum Industry Bill (PIB) to the Parliament, saying “the Fiscal Framework chapter of the bill appropriately rebalances the government take in onshore/offshore production, with the aim of providing a fair share to the government while remaining attractive to investors”.

Govs To Meet Over CBN’s Dry Season Farming Initiative

Meanwhile, the Nigeria Governors’ Forum (NGF) will be holding an emergency virtual meeting on Monday to deliberate on the prospects of dry-season farming as facilitated by the Anchor Borrowers Programme of the Central Bank of Nigeria (CBN).

According to a statement by the spokesman of the NGF, Abdulrazaque Bello Barkindo, the CBN governor, Godwin Emefiele will be addressing the governors to explain the programme, an initiative of CBN, which is aimed at enlightening the governors on the necessary steps to ensure the success of the programme in their various states.

He said the meeting will finalise the agreed partnership between the forum and the CBN.

“Governor of Kebbi State, Abubakar Atiku Bagudu who has been midwifing the NGF group in the agriculture sector will also provide insight on the partnership at the meeting, according to the invitation sent to the Governors by the Director General of the Forum, Mr Asishana Bayo Okauru,” he said.

Barkindo also said an NGF Peer Learning Event (PLE) will be preceding the meeting on the same day.

He stated: “The 6th NGF Internally Generated Revenue (IGR) Peer Learning Event which attracts a host of IGR experts will take place at the Wells Carlton Hotel in Aso Koro District in Abuja.

“The Chairman of the NGF and Governor of Ekiti State, John Kayode Fayemi and the Minister for Finance Budget and National Planning ,Zainab Ahmed will both give a keynote address while there will be goodwill messages from the Executive Chairman of the Federal Inland Revenue Service Mohammed Mamman Nami and Shubham Chaudri, Country Director of the World Bank to Nigeria, Western and Central Africa.

“Some of the key lessons at the event will include how digitalisation helps to sustain revenue collection during the Covid19 pandemic and how states can choose the right incentives for the right taxpayer group.

“Those who are expected to share their experiences based on their success stories include the Jigawa State Commissioner for Finance, Ibrahim Babangida Umar; the Executive Chairman of the FIRS in Lagos State, Ayodele Hamzat Subair and Asuquo Ekpenyong, the Commissioner for Finance in Cross River State. Ten States are expected to attend the PLE which will be declared open by the Director General of the NGF.

FG Makes Yam Priority Crop In 2020 Fiscal Year

Meanwhile, the minister of Agriculture and Rural Development, Alhaji Muhammad Nanono, yesterday said the ministry has made yam a priority crop in 2020 fiscal year out of over 28 crops being promoted in the ministry.

Nanono disclosed in Abuja at a stakeholders meeting on ‘Yam Value Chain Development in Nigeria’.

The minister said the ministry, in addition, was mobilising and engaging the active participation of state governments, youths, women and other stakeholders to boost capacity and production in the sector.

Nanono, who was represented by Mrs Karima Babangida, a director in the ministry, said that food security was the most important form of guaranteeing the sovereignty of any state.

“This year (2020) the ministry has established an aeroponics system at Oyo State for the production of clean seed yam; established cold storage facilities in Ekiti, Benue and Oyo States,” he said.

The minister said that the construction of a modern yam storage facility in Nasarawa State had been completed.

He said that 10,000 one node vine cuttings and 80,000 clean foundation seed yams were distributed to elite farmers in Imo, while 75, 000 seed yams were distributed to farmers in Ibadan.

“In addition, the ministry has introduced dry season yam farming using Benue and Nasarawa as pilot states while plans are underway to distribute seed yams to farmers in Kogi, Niger and Taraba for dry season farming,” he said.