Nigeria’s economic growth is expected to retain its slide in 2010, the International Monetary Fund (IMF) has predicted.
The IMF stated this in its recently released November edition of the monthly country report on Nigeria.
It added that until well into 2010, many factors would continue to weigh on consumption and investment in the country.
“Reduced financing (both foreign and domestic), constraints on public spending, and uncertainty about global and domestic prospects, will weigh on consumption and investment until well into 2010,” the report revealed.
“The crisis-induced growth slowdown, falls in equity market indices, a depreciated naira, lower oil prices, and a period of very rapid credit growth raised questions about bank asset quality. It was learned that governance in some banks had been weak and legal actions are pending. These developments have contributed to a tightening of lending”.
‘Growth depends on success of efforts’
The Fund predicted that the medium term growth outlook depends on the success of efforts to realise the potential of oil and gas reserves and to address the infrastructure gap. “Apart from security related issues holding oil and gas below potential, the policy framework for the oil and gas sector will be critical. The rapid non-oil growth of recent years was sustained by increases in agricultural acreage and the take off in sectors such as telecommunications.”
It said that a decline in real public sector demand of about two per cent is restricting activity just as credit to the private sector has been broadly flat since the first half of 2009 which together do not bode well for the nation’s economy next year.
There might, however, be a silver lining in the cloud with a good harvest in prospect and agricultural production, which grew by over six per cent in 2008, may again do well.
Other non-oil sector growth is expected to fall from nine per cent in 2008 to 4.5 per cent in 2009.
The IMF said that Nigeria’s ambitious targets for non-oil revenues as sources of income are unlikely to materialise because of market conditions and OPEC restriction quotas.
But the situation could change for the better depending on how quickly domestic issues, concerning hydrocarbon production and the banking sector, are resolved.
Conflicting views
There are conflicting views among economists on the report’s gloomy outlook. “We expect inflation rate to further increase marginally next month due to end of year spending and the Central Bank’s accommodative monetary policy,” says Bismark Rewane, an economist and a member of the economic steering committee of the federal government.
But Ayo Teriba, another economist and also a member of the National Economic Intelligence Committee, does not share this view.
“I have not seen that report but generally, I don’t agree with IMF’s views on Nigeria’s growth prospects. IMF tends to be too pessimistic about the outlook of Nigeria,” says Mr. Teriba.
“If they say the growth would remain low, when the National Bureau of Statistics is saying we are growing at six, seven per cent in second and third quarters, so they cannot know better than the Bureau. Nigeria’s growth did not even slow down this year, much less next year, so I don’t share IMF’s view. I think that Nigeria’s economy would hold up, and continue to grow, as it has done this year,” Mr. Teriba added.