• Agriculture, oil to drive 0.8% growth
Nigeria’s inflation figure will remain at double-digit while the economy grows at 0.8 per cent this year, the International Monetary Fund (IMF) said yesterday. The strong performance seen in the agricultural sector and rising crude oil production are to drive the growth, it added.
Speaking during the release of the World Economic Outlook (WEO) at the ongoing IMF Annual Meetings in Washington, D.C, its Chief Economist, Maurice Obstfeld, said Nigeria’s inflation which currently stands at 16.01 per cent in August will remain at double digit throughout the year.
Inflation rate climbed for a 15th consecutive month in January to 18.7 per cent highest since September 2005. The Central Bank of Nigeria (CBN) targets single-digit inflation and made efforts to bring it to current levels.
Obstfeld said the introduction of the Anchor Borrowers’ Programme (ABP) by the CBN which supports local farmers with improved seedlings will continue to stimulate economic growth.
He said: “Nigeria is expected to emerge from the 2016 recession caused by low oil prices and the disruption of oil production. Growth in 2017 is projected at 0.8 per cent, owing to recovering oil production and ongoing strength in the agricultural sector.”
He however expressed concerns about policy implementation, market segmentation in a foreign exchange (forex) market that remains dependent on CBN’s interventions despite initial steps to liberalise the market, and banking-system fragilities are expected to weigh on activity in the medium term.
He explained that allowing greater exchange rate flexibility could act as a shock absorber and facilitate adjustment, supported by monetary policy settings to contain the inflation pressures that may result from currency depreciations.
Continuing, he said financial stability needs to be maintained through enhanced financial sector regulation and supervision and by addressing emerging financial sector vulnerabilities, including increased domestic arrears and non-performing loans (NPLs).
“Inflation in 2017 to 2018 is expected to remain elevated at two-digit levels in Angola and Nigeria, reflecting the persistent effects of past inflationary shocks coming from sharp currency depreciations including of the parallel exchange rate as well as higher electricity and fuel prices and, in the case of Nigeria, reflecting the assumption that monetary policy will remain accommodative going forward,” he said.
The document also showed that many low-income developing countries continue to experience conflict and security disruptions (Afghanistan, Chad, Somalia, South Sudan, Yemen, a few parts of Nigeria), whereas parts of sub-Saharan Africa face food insecurity related to droughts (The Gambia, South Sudan, Somalia).
Economic growth in sub-Saharan Africa is projected to reach 2.6 per cent this year and 3.4 per cent next year with sizable differences across countries.
The main drivers were stronger-than-expected U.S. shale production and stronger-than-expected production recovery in Libya and Nigeria, which are exempted from production cuts. In addition, exports from Organisation of Petroleum Exporting Countries (OPEC) appeared to be sustained at relatively high levels, even with lower production.
The Outlook also upgraded its global growth projections to 3.6 per cent for this year and 3.7 per cent for next—in both cases 0.1 percentage point above its previous forecasts, and well above 2016’s global growth rate of 3.2 per cent, which was the lowest since the global financial crisis.
The report said for this year, most of Nigeria’s upgrade owes to brighter prospects for the advanced economies, whereas for next year’s positive revision, emerging market and developing economies play a relatively bigger role. The IMF expects sub-Saharan Africa, where growth in per capita incomes has on average stalled for the past two years, to improve overall next year.
IMF said oil prices had fallen to less than $44 a barrel by late June, the lowest since November last year, right before the initial production cuts by OPEC were announced.