Analysts suspect IMF’s claim on Nigeria as Africa’s biggest economy
The recent affirmation by the International Monetary Fund (IMF) that Nigeria is the biggest economy in Africa has increased its average Cumulative Productivity Index (CPI) forecast for 2016 to 14% from 11% in 2015 has started to elicit reactions from economic pundits.
In an interview with Dr. Ken Igboanugo, a financial analyst, he described the position of the IMF as very dangerous for Nigeria, insisting that “The IMF may not have studied the economic indicators’ in the country well at this time”.
He said “Nigeria should be very careful in welcoming the new comment form IMF, considering the fact that we did not agree to its advice when the IMF boss came to Nigeria few months ago.
“I therefore wonder why IMF should all of a sudden see Nigeria as greater than South Africa and Egypt.
Igboanugo queried the indices considered by IMF before arriving at the new report, saying “As things stand in Nigeria today, our manufacturing capacity is down, our oil output is down, the small and medium enterprises are being frustrated by poor access to funding and dearth of infrastructures”.
“Now, all these growth support systems I have mentioned are all in very good state in South Africa and Egypt, so how come we are bigger than them.
“However, if IMF is referring to size of our landmass and population, it can be understandable. Otherwise, I can say that it made that comment in order to lure the federal government to draw a fund borrowing plan that may plunge the country to another round of protracted foreign debt crisis.
He recalled that last month, the Manufacturers Association of Nigeria (MAN) decried the closure of many companies due to dwindling fortunes and those that are still struggling, are being pushed out of production line by forex crisis.
However, an Economist and managing partner at Udegbe & Co., Mr. Tony Udegbe said “It is very important for people to understand that the way and manner the IMF looks at issues are not always very conventional. The variables it considered before coming out with the position may be strange to many analyst.
Continuing, he said two things may be responsible for the statement from IMF which may include that the international body want to use the gimmick to woo the federal government to come and borrow money to fight recession, or it has seem a clearer vision that the federal government’s efforts in easing recession will work at last or are working now.
Mrs. Nma Unaka, a branch manager of one of the new generation bank said the meaning of the IMF position is that the government policies are still in the right direction and should be supported by all.
She said Nigerian economy is very important to both the international economy and African economy in particular, stressing that what IMF has done is to tell Nigerians to keep hope alive.
Only yesterday, the IMF came out with a report that Nigerian economy has once again overtaken South Africa and Egypt and it expects the government to secure financing from multilateral development banks and bilateral sources to exit recession.
Nigeria lost its spot as Africa’s biggest economy to South Africa in August 2016, following the recalculation of the country’s Gross Domestic Product.
But the IMF’s World Economic Outlook for October 2016, puts South Africa’s GDP at 280.36 billion Dollars, from 314.73 billion Dollars in 2015.
Besides, latest estimates from the IMF put Nigeria’s GDP at 415.08 billion Dollars, from 493.83 billion Dollars at the end of 2015.
Although Egypt’s 2016 data was reported as unavailable, its 2015 size remained at 330.15 billion Dollars while that of Algeria, one of the largest economies on the continent, was put at 168.31 billion Dollars.
Global growth is projected to slow to 3.1 percent in 2016 before recovering to 3.4 percent in 2017.
The forecast, revised down by 0.1% point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union (Brexit) and weaker-than-expected growth in the United States.
On growth estimates for 2017, IMF predicted that the Nigerian economy will grow by 0.6% in 2017, effectively lifting the country out of an officially declared recession.
In the IMF’s WEC report released on October 5, Nigeria’s real GDP is expected to increase marginally by 0.6% with Consumer Prices rising by 17.1% also, Fitch ratings on the other hand, also projected a 2.6% growth in Nigeria’s GDP for 2017.
Nigeria’s Current Account Balance is however also forecast to slump further by 0.4% next year.
Beyond 2017, IMF expects global growth to gradually increase by 3.8% in 2021.
This recovery in global activity, which is expected to be driven entirely by emerging market and developing economies, is premised on the normalization of growth rates in countries like Nigeria, Russia, South Africa, Latin America, and parts of the Middle East.
Although the global rating agency had reduced its forecast for the country’s 2016 GDP growth to 1% from 1.5% due to weak performance in the first half of the year, Fitch believes the economy will bounce back in 2017 but with downside risks if dollar liquidity remains tight.
Furthermore, Fitch believes that dollar liquidity will not significantly improve until market participants become more comfortable with the sustainability of the exchange-rate level, which is likely to require further narrowing of the spread between the official and parallel market rates.