IMF Opens Up About Nigeria’s Economy, Makes Damning Prediction
Nigeria’s economy will probably contract this year as energy shortages and the delayed budget weigh on output, according to the International Monetary Fund.
“I think there is a high likelihood that the year 2016 as a whole will be a contractionary year,” Gene Leon, the fund’s resident representative in Nigeria, said in an interview in the capital, Abuja, on July 8.
While the economy should look better in second half of the year, growth will probably not “be sufficiently fast, sufficiently rapid to be able to negate the outcome of” the first and second quarters,” he said.
The IMF had initially cut its 2016 growth forecast for Nigeria to 2.3 percent in its April Regional Economic Outlook from 3.2 percent projected in February.
The World Bank on the other hand lowered its forecast to 0.8 percent last month, citing weakness from oil-output disruptions and low prices.
Leon said “most people would agree that if you should fix one thing in this country, it should be power. There is a need to start changing the power equation from 2016, from today, not tomorrow or later.”
If growth falls to zero percent “then that’s a huge gap the country has to fill,” Leon said. If expenditure stays as planned, and revenue is less due to the lack of growth “then we should see not smaller but potentially a larger deficit.” He said.
The central bank’s Monetary Policy Committee “may be open to tolerating a little more inflation if growth emerges as the priority, as opposed to choking inflation and squeezing the little life out of growth.”
“But the central bank, in conjunction with the MPC, needs to be clear to participants in markets what exactly their priority is,” Leon added.