IMF’s 2.5% projection: Analysts raise concern over insecurity

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Uthman Salami and Kayode Tokede

With International Monetary Policy (IMF) projecting 2.5 per cent Gross Domestic Product (GDP) growth in 2021, analysts have expressed concerned over looming insecurity that might hamper economy stability in the country.

The IMF had revised upward its growth forecast for the Nigerian economy in 2021 to 2.5 per cent from its earlier projection of 1.5 per cent it announced in January.

The multilateral institution  said with the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, but noted that imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued foreign exchange shortage.

Responding, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf raised concerned over insecurity in the country, maintaining that 2021 economy growth of Nigeria by IMF is based on assumptions.

According to him, “The IMF projection of 2.5per cent GDP growth in 2021 will stand depending on the sustainability of the underlying assumptions. Surely, the oil price outlook must have been a major factor.

“We have seen an uptrend in crude oil price in recent months.  If this is sustained, the projection will stand.

“It is also hoped that the economy does not suffer any significant shocks from a deterioration in the COVID-19 pandemic situation.  Happily the pandemic spread was not as devastating as was initially feared.

“However, the ravaging insecurity in the country remains a major risk to the growth outlook.

“Meanwhile, there is a great deal of reforms that need to take place in the foreign exchange policy space,  the regulatory environment,  the ports environment,  and the trade policy regime.

“All of these are crucial to the strengthening of investors’ confidence.”

The Nigerian economy exited recession in the fourth quarter of 2020 with a modest 0.11 per cent growth.

Speaking with our correspondent in a telephone chat, the former President of Chartered Institute of Bankers of Nigeria (CIBN) and a lecturer of economics at Babcock University, Professor Segun Ajibola expressed that IMF projection is based on assumption, stressing that the federal government and Central Bank of Nigeria (CBN) interventions are driving force to economy growth.

According to him, “The projection is always a package because for every projection there is always assumption.

“So I believe the projection of 2.5 per cent growth is based on a number of assumptions.

“It would have been assumed that certain things will happen this year that tend to grow our domestic economy.

“What are the likely assumptions to be relevant in our own environment? We have assumption like government decision and policies such as tax incentives, interventions, CBN policies and support over foreign exchange for critical sectors of the economy.

“Another set of assumptions is that COVID-19 pandemic will have been curtailed and Nigerian as a country will be able to resist the third wave of virus thereby we will have some kind of economic stability.”

He added that, “I also believe that there will be assumption in key micro-variables which will be put underneath of inflation, depreciation in the value of the naira.

“So far we are able to put all these factors under good control, we should be able to meet up with the projection.

“Already, what we have as at now, we are out recession from last quarter of last year. The first quarter of this year is a bit encouraging. So if we can continue to maintain this trajectory, 2.5 per cent is very well achievable.”

IMF had expressed concern with the resurgence of fuel subsidies in the country, noting the importance of introducing market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor.

“Tax revenue collections are gradually recovering but, with fuel subsidies resurfacing, additional spending for COVID-19 vaccines, and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 per cent of GDP,” the statement by IMF added.