IMF chief, Christine Lagarde
Nigeria’s economy is likely to contract by 1.8 per cent this year, the International Monetary Fund (IMF) said yesterday, as the country grapples with the impact of low oil prices.
The sharp fall in global prices since 2014 has led to a prolonged economic crisis since the crude sales make up around 70 per cent of government revenue.
The IMF’s projection for this year, contained in its World Economic Outlook update, is down from the 2.3 per cent growth it foresaw in its April forecast. It now forecasts 1.1 per cent growth for 2017, down from 3.5 per cent in the April forecast.
Gross domestic product (GDP) contracted by 0.36 per cent in the first quarter of the year.
“In Nigeria, economic activity is now projected to contract in 2016, as the economy adjusts to foreign currency shortages as a result of lower oil receipts, low power generation, and weak investor confidence,” the IMF said.
Also, data released by National Bureau of Statistics recently showed that the nation’s annual inflation accelerated to 16.5 percent in June, revealing its highest in almost a decade and the fifth monthly increase in a row.
However, the decline in the economy indicators are intensely giving economic experts concerns as further contractions show it is sliding into full recession, with the prediction of further rise in inflation in months to come.
The Nigerian Economists Society warned that the country is about sliding into recession, saying that the flexible foreign exchange policy adopted by CBN could not survive in a non-productive economy.
It stated that Nigeria’s economy was fragile and about to enter into recession because it was characterised by high import-dependency, drastic decline in foreign exchange and double-digit inflation.
The economists, Prof. Akpan Ekpo of the University of Uyo, who spoke at the weekend on the theme: ‘Managing the naira’, added that other variables signalling recession were mass poverty, infrastructural collapse, endemic corruption and growing insecurity in the country.
The Central Bank of Nigeria (CBN) currency restrictions imposed last year in an attempt to protect dwindling foreign reserves prompted investors to flee and led to dollar shortages, pushing down the naira currency’s value on the country’s burgeoning black market.
A communiqué issued at the end of the symposium and made available on Sunday, stated that the problem was compounded by a poor local production structure and high-level consumption of foreign goods and services.
According to him, the inflationary report may reduce with the need to for more spending to boost the purchasing power and Nigerians can be rest assured that the economy will pick up.
He stated that the belated attempt to arrest the deterioration in the system via the recent reforms in the FX flexible market adopted by CBN, partial deregulation of the downstream and followed by passage of the 2016 Budget have translated to some form of stability in each respective sector of the economy.
Wusu was optimistic the remaining half of the year would improve, as quick implementation is required in the policy areas of the economy.
He, however, added, “that does not mean we will not experience recession.”
