…says country on track for 2.3% growth
- Rewane: We don’t have debt crisis
lthough her debt profile has increased in recent years, Nigeria’s debt-to-Gross Domestic Product (GDP) ratio is still well below the average for sub-Saharan Africa and Africa as a whole, the International Monetary Fund (IMF) has said.
The IMF Senior Resident Representative and Mission Chief for Nigeria, Mr. Amine Mati, who stated this at the public presentation of the Fund’s October 2019 issue of the “Regional Economic Outlook for Sub-Saharan Africa” in Lagos yesterday, however, said that Nigeria’s revenue-to-GDP ratio is low, adding that the “the potential to increase revenue is high.”
The debt-to-GDP ratio compares a country’s sovereign debt to its total economic output for the year. Its output is measured by the GDP.
He said: “Nigeria’s debt has increased, but the level is way below the average for the region. Even if we include the CBN overdraft and others we are talking about a debt to GDP ratio that doesn’t go beyond 27 to 28 per cent to GDP and that is including Asset Management Corporation of Nigeria (AMCON) overdrafts etcetera.”
According to Mati, with the National Bureau of Statistics (NBS) latest data showing that the country’s GDP grew by 2.28 per cent in Q3’19, Nigeria is still on track to achieve the 2.3 per cent growth the Fund forecast for it this year.
His words: “Nigeria, in the first three quarters, the numbers that came out was at 2.2 per cent and our forecast of 2.3 per cent for the year is still on track depending on how agriculture, ICT fair. But the average for the region is 3.2 per cent. So, 3.2 per cent was in 2019 which is the same growth rate as 2018. So, therefore, 2020, for the region, we project 3.6 per cent.”
“Nigeria is still on 2.3 per cent for 2019, but for 2020, we project a growth of 2.5 per cent, so it is still not growing as fast as the others for a variety of reasons, including some of the structural reforms and others, but it is picking up.”
Giving details of the October 2019 regional economic outlook, which has as its theme, “Navigating Uncertainty”, the IMF official stated that growth in sub-Saharan Africa is projected to remain at 3.2 per cent in 2019 and rise to 3.6 per cent in 2020.
He further stated that growth is forecast to be slower than previously envisaged for about two-thirds of the countries in the region, adding that the downward revision: “reflects a more challenging external environment, continued output disruptions in oil exporting countries and weaker-than-anticipated growth in South Africa.”
Noting that concerns about the US-China trade war was impacting the global economy, including sub Saharan Africa, he stated that most of the countries in the region are back on a sustainable path and have plans to reduce debt through fiscal consolidation.
He said: “For resource intensive countries and the non-resource intensive countries, one thing that is common is that when there is trade shock, they have to react. So, you lose revenues; debt goes up. For most countries, you would see debt is about 50 per cent to GDP and has increased since 2016 in all cases. But what is new is that most of the countries are back on a sustainable path and most countries have plans to reduce debt through fiscal consolidation and seem to have stabilised.”
He, however, pointed out that: “The three largest countries that are driving Sub Saharan growth are Angola, South Africa and Nigeria. Angola has a negative growth; South Africa has a growth below one per cent and Nigeria growing between 2 and 2.5 per cent which is still on the negative per capita growth.”
Specifically, on what would affect Nigeria’s outlook, he said it would be mostly affected by external factors.
He stated: “We had a tightening of global markets at some point which also reduced some flows and investments, but one I need to point out is the risk to global trade tensions. With the trade tensions between America and China, export growth of the region has gone down. And the volume of trade for the region as a whole and globally has gone down almost to zero. So, whatever happens externally, will also impact Africa. The demand is down, but for countries like Nigeria that depend on natural resources lower demand for oil would impact on the price also.”
In addition, Mati emphasised that there is need for African countries to priortise job creation.
“20 million people would be joining the job market in sub Saharan Africa. And these are new jobs that need to be created through structural reforms and whatever reforms are being pursued. So far, we have been able to create only 10 million jobs, so we need more because 10 million new jobs need to be created going forward,” he stated.
Responding to a question at the event, member, President’s Economic Advisory Council and Managing Director, Financial Derivatives Company, Mr. Bismarck Rewane, supported the IMF’s position that Nigeria does not have a debt crisis.
He said: “We don’t have a debt crisis, we have a revenue problem, but there are also other problems such as poverty and productivity. So, it is not as if we have a debt or revenue problem. Also, what we use our revenue for is also important.
“So the government expenditure and the government investment multiplier are much lower than the private sector multiplier and the difference between the flow of wealth and the stock of wealth is a different story.
“The important thing is to be aware and doing nothing would have a major consequence. And I think we are in that stage of awareness and there is a sense of urgency and then there is action taking. There is a flicker of hope at the end of the tunnel.”