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•Revises Nigeria’s growth prospects downwards to 2.9%
•Edun: With global rise in debt service cost Nigeria focused on encouraging domestic, foreign investments
Eromosele Abiodun and Nume Ekeghe in Marrakech
The International Monetary Fund (IMF) yesterday, applauded recent economic reforms such as fuel subsidy removal and unification of the exchange rates initiated by President Bola Tinubu, noting that the measures were a pathway towards stronger and inclusive growth.
However, the multilateral institution revised Nigeria’s growth prospects downwards to 2.9 per cent for 2023, a decline of -0.3 per cent from the 3.2 per cent it had predicted for the country in its July World Economic Outlook (WEO).
This was just as Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, yesterday, expressed concern over the rising debt service cost globally, saying the situation has forced the federal government to focus more on stimulating domestic investments while also encouraging foreign investments.
In addition, the IMF also lowered its 2024 projection for Nigeria to 3.1 per cent from the 3.2 it had earlier projected for 2024.
The IMF disclosed this during the launch of the World Economic Outlook (WEO) at its ongoing Annual Meetings in Marrakech, Morocco, yesterday.
Responding to a THISDAY question, the Divisional Chief at IMF, Daniel Leigh, commended the reforms on the exchange rate and fuel subsidies.
He added: “We see African growth at 3.34 per cent and that is above average but it is below the potential that Africa has and it needs to catch up more quickly.
“For Nigeria in particular we have a growth forecast that goes from 3.3 per cent this year, to 2.9 per cent next year before going up to 3.1 in 2024. There is a downward revision for this year, partly this is because of the demonetisation, the high inflation, the shocks to agriculture and hydrocarbon output.
“That is coming on top of all those external headwinds.
“We also add that President Tinubu has moved quickly with important reforms including ending the fuel subsidies and unifying the official exchange rates. We welcome these initial bold reforms because we see them as paving the way towards stronger and inclusive growth.”
On his part, Chief Economist, IMF, Pierre-Olivier Gourinchas said: “On Sub-Saharan Africa, there is a slight downward revision for the region as a whole. We are expecting growth at about 3.3 per cent this year and that’s about 0.2 percentage downward revision. There is a slight downward revision for next year to about four per cent.”
The IMF WEO further added that the projected decline reflected in a number of cases, worsening weather shocks, the global slowdown, and domestic supply issues, including, notably, in the electricity sector.
Speaking further, Edun noted that the hike in interest rate among the multilateral institutions and debt sustainability were of concern to Nigeria, adding that the Tinubu’s administration was focused on attracting foreign investment and the flow of funds that are non-debt.
The minister who stated this during an interview on the sidelines of the ongoing IMF/World Bank Annual Meetings in Marrakech, Morocco, disclosed that the federal government would soon introduce tax reforms aimed at optimising the efficiency of revenue generation through improved tax collection methods.
Also, he said there were on-going meetings centered on addressing the financing deficit faced by both Nigeria and other developing nations. He advocated for Nigeria to assume a more significant role in decision-making and raised concerns related to Nigeria’s inclusive growth.
According to him: “Debt sustainability is a big issue. Clearly, with interest rates going up around the world, there is the issue that debt service is taking a larger share than is practical that is warranted of resources in developing countries around the world. “And in Nigeria, what we are focusing on as an administration is to increase the flow of funds that are non-debt.
“So rather than focusing on borrowing, there’ll be a focus on encouraging investment, domestic investment and foreign. The Managing Director, of the World Bank did say it’s really simple: the money is in the rich countries.
“The investments, the opportunities and the scope for investment as a whole and expansion of business ideas are in poor countries. So, it is bridging the two that are important and in Nigeria, the focus will be on creating an environment for domestic and foreign investors to thrive.”
Edun added that currently, there is inadequate concessional financing, rising interest rates even within multilateral institutions. According to him, there was the pressing concern of escalating global interest rates contributing to a prominent debt issue and a substantial financing gap for the developmental needs of developing nations.
He added: “Basically, what we have at the moment is not meeting the expectations and the requirements of developing countries, such as Nigeria. There is not enough concessional financing; interest rates are going up even within the multilateral institutions. “Interest rates are so high around the world that the issue of debt is one that is top on the agenda. And of course, there’s a financing gap, there is not enough funding to fund the developing requirements of the poorer countries.
“And that’s what the conversation at this meeting was all about. There is need for reform and the need for improvement. In fact, they talked about a bigger, better and bolder World Bank Group that would also mobilise the private sector funding and of course, for Nigeria, one of the high points was that something that the government of President Bola Ahmed Tinubu has emphasised also came to the fore here, and that is domestic resource mobilisation.
“The fact that we have to depend on our own resources, our own savings to a larger extent. We must be efficient in collecting taxes and fees and payments that are due, we must be more efficient and cost-effective with our expenditure and we must create a bigger base of financing from our own resources.
“We must rely on ourselves and we must pull ourselves up much more than relying on others. I think that was an important message that came out.”
Speaking on inclusiveness in decision-making, he added: “On one hand, as far as the international, multilateral development banks and institutions are concerned, we along with other Africans are calling for a bigger voice, a third seat in the governance of the World Bank and IMF, and for Sub-Saharan Africa, and at the end of the day for Nigeria.
“So, we are saying we want greater representation at the table in which some of these decisions are taken and of course coming back home, it’s all about what is being done and there are major steps being taken to reform the tax environment.
“There will shortly be announcements of measures that rationalise and improve efficiency, which consolidates the issue of tax revenue and domestic resource mobilisation.”
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