Declining Commodities Prices: G-24 Seeks More Support for Nigeria, other Affected Countries

By Chika Amanze-Nwachuku in Washington D.C, USA

The Inter-governmental Group of 24 on International Monetary Affairs and Development, (G-24) has called for further work from the IMF and other International Financial Institutions (IFIs) on mechanisms to support countries coping with the sharp drop in commodity prices like Nigeria.

The falling oil prices have taken a toll on economies of oil producing countries, with countries that rely on exports earnings such as Nigeria being hard hit.

But the Central Bank of Nigeria (CBN), as the apex financial regulator in the country has adopted several measures to strengthen the Naira and stabilise the economy.

At its 95th meeting in Washington D.C. the G-24 noted that the sharp drop in commodity prices had adversely effected the global economy, as nations continued to face weaker global demand, tighter financial conditions, more volatile capital flows, and heightened security  challenges.

The meeting chaired by Minister of Finance and Public Credit of Colombia, Mauricio Cárdenas, with the Minister of Finance and Economic Cooperation of Ethiopia, Abdulaziz Mohammed as First Vice -Chair; and Minister of Finance of Sri Lanka, Ravi Karunanayake as Second Vice- Chair, which also had the Nigerian Minister of Finance, Mrs. Kemi Adeosun in attendance, warned that these headwinds could further weaken member countries’ growth outlook and contribution to global growth.

 The Group observed that the recovery of the global economy remained modest, with greater downside risks, adding that while growth in advanced economies had remained sluggish, it was moderating in emerging markets and developing countries (EMDCs), which still accounted for the bulk of global growth.

 “In light of this global reality, managing our policy space, making our economies more Resilient to support macroeconomic stability, as well as achieving higher, more balanced and inclusive growth remained our priorities. Exchange rate flexibility, where appropriate and reserve buffers, where available, could contribute to cushioning

the impact of external shocks. We will continue to strengthen our fiscal and structural reforms and our financial systems, based on country- specific priorities, to diversify our economies and enhance our growth prospects, promote employment, competition, and productivity, while implementing macroeconomic and social policies to address inequality and alleviate poverty’’, the 24 member group stated in a communique issued at the end of the meeting.

The meeting also okayed the IMF’s ongoing work towards strengthening the International Monetary System (IMS) with efforts in three key areas: mechanisms for crisis prevention and adjustment; global cooperation on issues and policies affecting global stability, including spillover effects from systemic economies; and a large enough and more coherent Global Financial Safety Net (GFSN).

The communiqué added, “We also support the IMF’s review of the GFSN, including the adequacy of the IMF resources and its lending toolkit, and look forward to concrete follow-up steps. In this regard, we reiterate our call for predictable and adequate liquidity support in times of need.

We note the potential for greater and more effective cooperation between the different layers of the GFSN, especially between the Fund and regional financing arrangements (RFAs). We also call for further work from the IMF and other International Financial Institutions (IFIs) on mechanisms to support countries coping with the sharp drop in commodity prices. We welcome the inclusion of the renminbi in the SDR basket. We look forward to the discussion on possible allocation of SDRs and support further work to examine the broadening of SDR use in the IMS.

“Adequately and appropriately scaling up quality investments in sustainable infrastructure will be particularly critical to delivering the development, climate and economic growth agenda.

“In addition to mobilising our domestic resources through financial deepening, we call for scaled-up support from MDBs through strengthening policy and institutional frameworks, increasing lending, and effective leveraging of private sector resources. We note the ongoing efforts by MDBs to optimise the use of their own balance sheets while promoting dialogue with credit rating agencies to foster more appropriate methodologies in assessing the MDBs’ financial strength.

“We welcome the forthcoming inaugural global infrastructure forum. We call for further and productive dialogue towards ensuring the adequate capitalisation of MDBs”.

“Effective international tax cooperation is an essential complement to our efforts to mobilise domestic resources. We strongly support the participation of developing countries on an equal footing in the widespread and consistent implementation of outcomes of the G20/OECD

Base Erosion and Profit Shifting (BEPS) Project.

“We welcome the joint initiative of the IMF and

the WBG on capacity building on tax administration and call for delineating concrete steps on how they can support enhancing the participation and voice of developing countries on international tax issues. “Furthermore, we urge the IMF and the WBG to strengthen their support to combat illicit financing flows.”