IMF warns Nigeria over rising debt profile, calls for urgent diversification

The International Monetary Fund (IMF) has cautioned that Nigeria should carefully manage its debt profile as it could be worse if nothing is done to cushion it.

The International body has also called on Nigeria and other oil dependent economies in Africa to urgently diversify.

This was contained in IMF 2017 Economic Outlook released on Thursday, which claimed that public debt rose above 50 per-cent of Gross Domestic Product (GDP) in 22 sub-Saharan African countries at the end of 2016 and that there was the possibility for a rise as high as 60 per cent in countries like Nigeria, Gabon and Angola which had always depended on oil.

The report entitled, “Fiscal Adjustment and Economic Diversification,” was presented by IMF Senior Resident Representative and Mission Chief for Nigeria (Africa Department), Mr. Amine Mati.
According to the international body, the debt stocks have risen all over the region, explaining that exchange rates pressures have eased in many countries.

Currently, Nigeria’s debt is said to have risen to as much as N20 trillion.

Noting that fiscal pressures pose risks to an already weakened financial sector, IMF drummed the need for the implementation of fiscal consolidation plans in the region, stressing that economies in the region are driven by large fiscal deficit and depreciation while debt stocks have risen throughout Africa.

IMF therefore called for actions to avoid crowing out the private sector from the capital markets in the region and insisted that diversification of economies and fiscal consolidations in the African region were imperative..
While it noted that the region recorded a modest growth recovery, it said that the recovery was not sufficient to raise the gross domestic product (GDP) per capita in many countries of the region.

The IMF further noted that growth has picked up but is set to remain subdued.

It said that positively oil exporting economies like Nigeria are recovering at the same time that inflationary pressures are receding. It forecasts a GDP growth of 2.6 per-cent in 2017.

IMF said, “Broad-based slowdown in sub-Saharan Africa is easing, but the underlying situation remains difficult. He revealed that growth is expected to pick up from 1.4 per-cent in 1016 to 2.6 per-cent in 20117 reflecting the one-off factors particularly the rebound in Nigeria’s oil and agricultural production, the easing of drought conditions that impacted much of eastern and Southern Africa in 2016 and early 2017 and a more supportive external environment.

“While 15 out of 45 countries continue to grow at 5 per-cent or faster, growth in the region as a whole will barely surpass the rate of population growth and in 12 countries, comprising over 40 per-cent of sub-saharan Africa’s population income per capita is expected to decline in 2017.

READ ALSO: Heritage bank fears it will collapse if it remits NPA’s $21.3m with it, MD tells Reps

“A further pick-up in growth to 3.4 per-cent is expected in 2018 but momentum is weak and growth will likely remain well below past trends in 2018.

“Ongoing policy uncertainty in Nigeria and South Africa continues to restrain growth in the regions two largest economies.

“Excluding these two largest economies, the average growth rate in the region is expected to be 4.4 per-cent in 2017 rising to 5.1 per-cent in 2018-19.

“But even where growth remains strong, in many cases it continues to rely on public sector spending, often at the cost of rising debt and crowding out of the private sector.”

 

 

RipplesNigeria… without borders, without fears

Click here to join the Ripples Nigeria WhatsApp group for latest updates.

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now