IMF: Delayed Response by Nigeria Hinders Economic Recovery in Africa

The International Monetary Fund (IMF) has expressed worry over what it described as the slow policy response of Nigeria and other oil exporting countries in sub-Saharan Africa to the economic crisis assailing the African region.

The Fund stated this in its October 2016 Regional Economic Outlook for sub-Saharan Africa entitled, ‘Multispeed Growth’ billed to be officially released today.

The Fund said the economic growth in sub-Saharan Africa in 2016 would slow to its lowest level in more than 20 years, adding that average growth in the region is projected to be just 1.4 per cent – “well below population growth, and in sharp contrast to the high growth rates of recent years.”

Director, IMF African Department, Abebe Aemro Selassie, attributed the slowdown to the slump in commodity prices, tight financing conditions coupled with the fact that the policy response in many of the countries most affected by the shocks, “has been delayed and inadequate, raising uncertainty, deterring private investment and stifling new sources of growth.”

The Fund stated: “Worryingly, in the face of strong financial and economic pressures, the policy response in many of the hardest hit countries has been slow and piecemeal, often accompanied by stopgap measures such as central bank financing and the accumulation of arrears, and leading to rapidly rising public debt.

“In oil-exporting countries with flexible regimes, exchange rates have been allowed to adjust only with reluctance, resulting in strong pressures on deposits and foreign exchange reserves.

“As a result, the delayed adjustment and ensuing policy uncertainty have been deterring investment and stifling new sources of growth – making a return to strong growth rates more difficult.”

Although the IMF said modest pick-up in economic activity in the region was likely, it said this would depend on strong policy action being taken to tackle the problems.

Calling for prompt policy action to secure a rebound in growth, the IMF said: “A sustained adjustment effort is needed, based on a comprehensive and internally consistent set of policies.

“This implies fully allowing the exchange rate to absorb external pressures for countries outside monetary unions, re-establishing macroeconomic stability – including by tightening monetary policy where needed to tackle sharp increases in inflation – and focusing as much as possible on growth-friendly elements of fiscal consolidation.
“With limited buffers, the scope to ease the adjustment path will depend critically on the availability of new financing, ideally on concessional terms.”

However, Selassie pointed out that not all countries were performing poorly, listing non–resource-intensive countries such as Côte d’Ivoire, Ethiopia, Kenya and Senegal among those that continue to perform well.
According to him, these countries benefit from lower oil import prices, an improved business environment, and continuous strong infrastructure investment.

He predicted that growth would recover close to three per cent in 2017, stressing: “To make this happen, the hardest hit countries, especially oil exporters, need to act promptly.
“Further delays in addressing the elevated macroeconomic imbalances are certain to undermine growth prospects further and delay a robust and jobrich recovery.”