Contrary to the federal government's projection of 2.19 percent growth in the economy for 2017, the International Monetary Fund (IMF) on Tuesday affirmed its earlier forecast of only 0.8 percent growth for Nigeria this year.
This is well below the global economic growth projection of 3.6 percent a slight increase from the 3.5 percent earlier projected in July.
Banking system fragilities, defective policy implementation and foreign exchange market segmentation, the IMF said, will continue to threaten sustained economic growth in Nigeria.
Unveiling its World Economic Outlook (WEO) on Tuesday in Washington DC, United States, at the on-going World Bank Annual meetings, the IMF stated that “growth in 2017 is projected at 0.8 percent, owing to recovering oil production and ongoing strength in the agricultural sector.
“Nigeria is going to have stronger growth this year because agriculture and oil production are doing better but there are still downsides and there is still a lengthy adjustment to lower oil prices ahead,” Maurice Obstfeld, IMF’s Economic Counsellor, said of Nigeria's growth outlook.
“However, concerns about policy implementation, market segmentation in a foreign exchange market that remains dependent on Central Bank interventions (despite initial steps to liberalize the foreign exchange market), and banking system fragilities are expected to weigh on activity in the medium term,” Obstfeld said.
In its WEO earlier this year, the IMF had raised projections for Nigeria’s economic growth to 0.8 percent, from the 0.2 per cent that it had projected in the WEO report of October 2016, saying the revision reflects high oil production due to security improvements in the country’s oil producing region.
The 2.19 percent 2017 economic growth forecast by the federal government may have been overly too optimistic given that the National Bureau of Statistics (NBS) had given 0.55 percent as the actual Gross Domestic Product (GDP) for the second quarter of 2017.
Overall, the IMF however downgraded its growth projection for the sub-Saharan Africa economy to 2.6 per cent for 2017 and 3.4 per cent for 2018, from 2.7 per cent and 3.5 per cent respectively projected in July.
“For 2017, most of our upgrade owes to brighter prospects for the advanced economies, whereas for 2018’s positive revision, emerging market and developing economies play a relatively bigger role. Notably, we expect sub-Saharan Africa, where growth in per capita incomes has on average stalled for the past two years, to improve overall in 2018,” Obstfeld explained.
According to him, “what we see in the headline numbers is growth this year and better outcome which is largely driven by the larger economies such as Nigeria, South Africa and Angola where one of the factors that had being laying on growth and allowing for a somewhat better outcome but not necessarily a strong one in particular with the case of Nigeria is stronger oil production after the problems and anticipating better agricultural production are playing a role likewise in South Africa, a rebound in agricultural has ease drought in that region and stronger mining output are helping.
“So these are the dissipating of negative factors and it is not a very strong growth impetus that is coming. That is not to say that a number of economies are not growing stronger; many countries are growing at five percent so that is a favorable story although it comes with risks, with some countries with public debt has been quiet strong."
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