We were heralded into the last few days rounding off year 2020 with what seems to be cheering news from the International Monetary Fund (IMF): ”Nigeria is the biggest economy in Africa in terms of the size of her Gross Domestic Product (GDP)”. More so, the IMF added that globally “Nigeria is ranked 26th largest economy with Gross Domestic Production (GDP) of $442,976 billion in year 2020”.
This news won’t have much cheering to handlers of the Nigerian economy at this point going by the undercurrent recession as well as COVID-19 pandemic impacts. The Nigerian economy contracted in the fourth quarter with poor revenue generation, high inflation, and abysmal depreciation of the naira. This in all expectations point to a doom economy outflows for Nigeria; but the latest IMF-released report is highly a gladding information for the Buhari administration in the face of its critics.
This multilateral institution, fondly known as IMF, a Bretton Wood institution, in her well-dissected document “World Economy Outlook (WEO)”, stated that “Nigeria maintained its leads as the biggest economy in Africa in terms of the size of the country’s GDP”. In addition, the IMF report ranked Nigeria 26th largest economy with an average GDP of $442,976 billion globally.
However, no matter how cheering this news maybe, there is concern which the Nigerian authority must take note of and address its consequences based on the report on year 2020 IMF Article IV Constitution on Nigeria.
For instance the IMF World Economy Outlook (WEO) on Nigeria stated that “the country’s economy is buffeted from side to side by a cocktail of issues”. In other words, issues identified by IMF includes “uncertainties over the covid-19 pandemic, low oil prices, capital outflows and balance of payment challenges”. A look at the above suggests that in real term, the Nigerian economy has been exposed to the remnants shock from the global economy tension that is not just peculiar to the country alone; but the country is not guarded appropriately.
Subsequently, the IMF report also made another obvious revealing verdict that “supply shortages have pushed up headline inflation to 3 months high”. Thus, in clear term, we are all witness to the upsurge in commodities’ price hike, especially food as well as other items that includes transportation, services and charges. This for instance erodes the purchasing power of Nigerians.
In another summation, the IMF disclosed in a crystal clear analysis the Buhari administration’s economy policies impact, stating that “under current policies, the outlook is challenging. It alleges that Real GDP projection contracts at 3 per cent in 2020”. To many analysts and economy observers in Nigeria, the under current recession turbulent is much expected as the government of the day failed to initiate people-centred economy policies.
We must however not lose track with the side of the projection that necessitates cheer and gladness in the camp of Nigerian government. The IMF was generous enough to acknowledge the efforts of the Godwin Emefiele-lead Central Bank of Nigeria’s tackling of the “reins of inflation”.
According to IMF projection, “food price is expected to remain double digit above the CBN target”. Therefore, the CBN must maintain a focus adherence to see to defeat of double digit that is softly reducing the value of the naira and subsequent purchasing power of the people.
Controversially, the IMF further noted the downturn of the economy “following a significant decline in revenue collection from all levels that were already among lowest in the world”. We are all aware of slump in crude oil, the sole revenue generation for the Nigeria state, this support the IMF findings in this regards. Succinctly, the IMF report maintained that “fiscal deficits are projected to remain elevated in the medium term”. Thus, we are all alive to see level of borrowing, bond and treasury bills sold by CBN and Debt Management Office (DMO) with both domestic and external debt standing at N32.225 trillion.
As a way of encouraging the Nigeria state, IMF said “recovery is projected to start in 2021,with subdue growth of 2 per cent and output recovery only in 2020.The report calls for “broad market reform” in order to address the present economic reality. A reality of widespread poverty, inefficient health and educational services, low levels of human capital development, unemployment and underemployment, poor drinking water accessibility, epileptic energy and power output, environmental degradation, poor housing and transport system, deplorable road networks are all pointers of negative characteristics of the Nigeria state. Insecurity is another bigger challenge, and one wonders how did Nigeria emerge biggest GDP in Africa, and occupying 26th largest in the world as ranked by IMF? All the aforementioned challenges are not suitable for, or compatible with economic production and business activities in real sense of it. The way forward is our linking effectively the agricultural to industrial sectors, making our research institution’s innovations suitable for manufacturing and factory setting. With this, Nigeria’s target to be among the 20 largest economies in the world is certain. Meanwhile, we must be careful with the “broad market reform” suggestion.