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Despite a 2% growth forecast for Nigeria in 2018 by the International Monetary Fund (IMF), the reality may be different as Africa's largest economy remains vulnerable to oil shocks. This is mainly because the government's efforts to diversify the economy through the non-oil sector, agriculture and taxation have so far been unsuccessful. Bamidele Famoofo writes
While Nigeria, the largest economy in Africa, was projected to grow its economy by two percent in 2018 and 2.3 percent in 2019, both forecasts from the International Monetary Fund (IMF) are based on According to the IMF team, which recently visited Abuja as part of its routine economic review mission, the country remains vulnerable to price and oil price shocks despite the respite it has benefited from the rise in oil prices. prices and short-term portfolio inflows in recent times.
Oil
It was about 60 years ago that Nigeria found crude oil on its land. Since then, the oil and gas sector has become one of the sources of the country's economy. Available information shows that Nigeria derives about 90% of its oil foreign exchange earnings. In addition, at least 20% of GDP comes from oil. Therefore, it is no wonder that the oil and gas industry is one of the most crucial in Nigeria.
In the early 1950s, crude had an insignificant share in total export. According to statistics, it covered about two percent (2 percent) of export products. The real increase in crude oil began between 1960 and 1970. Nigeria could only supply 5 million barrels per year in the 1960s. However, by the early 1970s, this number had risen to 600 million barrels. . As a result, government revenues from the oil industry increased from NAF 66 million in the 1970s to N10 billion in the 1980s. With increased production capacity, revenues from oil sales increased significantly. since the 1980s.
Between 1999 and 2016, Nigeria gained 77.348 billion N in the oil and gas industry, according to data compiled by the Central Bank of Nigeria. ). But this, according to economic experts, has not translated into good livelihoods for its citizens. In 2017 alone, Nigeria fetched 7.3 billion nairas from petroleum product sales, according to figures from the National Petroleum Corporation (NNPC) of Nigeria.
Non-Petroleum
According to statistics published by Financial Derivatives Company Limited, a leading economic research and analysis company, non-petroleum exports increased 55% to reach $ 1.26 billion. third quarter of 2017. "This represents a meager 2.6% of projected total exports to $ 48 billion for 2017 and implies that the country still relies heavily on oil and gas."
"Non-oil revenues remained below expectations, with returns from tax administration measures – including the Voluntary Asset Income Scheme (VAIDS) and increased tax audits – but not yet fully realized, "the IMF said.
The poor performance of non-oil was linked to poor performance in the sector. lower purchasing power is weighing on consumer demand and credit risk continues to limit bank lending.
"Corporate tax collection efforts have improved, but budget deficits and the late adoption of the 2018 budget have hampered its implementation," says the fund.
Recommendations
The IMF team headed by the Principal Resident Representative and Head of Mission for Nigeria, Amine Mati, went to the Nigeria between late June and early July to discuss recent developments in the financial situation, update macroeconomic projections and review the implementation of reforms with senior officials, the government urged to take urgent action "on a coherent set of policies to reduce vulnerabilities and increase growth in the medium term. "
sustainable measures to increase currently low tax revenues – including avoiding new tax exemptions – and ensuring that fiscal targets are met even in an election year.
According to the fund, this process should be supported by a monetary policy of monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market. He stressed that structural reforms were needed to boost inclusive growth, particularly in the energy sector, where he noted that more rapid progress would be needed to ensure that funding gaps in the sector were met. in a sustainable way. way.
Achievements
The statement adds: "Rising oil prices and short-term portfolio inflows have eased external and fiscal pressures, but the recovery remains International reserves have remained stable at around $ 47 billion, supported by some convergence in existing currency windows, and despite some reversal of foreign flows since April.
"Inflation has fallen to its lowest level for over two years. Real gross domestic product (GDP) increased by 2% in the first quarter of 2018 compared to the first quarter of last year.
He stated that current government spending in Nigeria remained in line with expectations, indicating that the postponement from 2017 until 2018, helped to increase capital expenditures in the first four months of 2018, despite the late approval of the budget of 2018.
He added: "The decline in yields has kept interest payments in the budget envelope, but the interests of the federal government" reforms to to improve the business environment are advancing, including through the identification of priority investment projects and the adoption of the Companies Act and Related Issues (CAMA) – a point Legislative Benchmark "Implementation of the Energy Sector Recovery Plan Progresses Through Mini-Network Policy and Regulations on Eligible Customers and"
"Under current policies, pe Looking ahead, growth is expected to be around 2% in 2018, led by lower than expected oil production and relatively weak agricultural growth.
"The budget deficit will narrow slightly, with higher oil revenues offsetting higher spending, including those projected in a supplementary budget Inflation will recover in the second half of 2018, with base effects dissipating and increased spending and supply constraints in agriculture putting pressure on prices. "The increase in oil exports would keep the current account surplus, helping to stabilize gross international reserves even though the pace current foreign portfolio exit continues. "
Growth Initiative
In a frenzied move to diversify the oil economy, the federal government in April 2017, launched its blue economic plan dubbed Plan de Economic Recovery and Growth (ERGP). It was a medium-term plan covering the period 2017-2020.
An ambitious roadmap to revive the economy on the path to growth and reach a 7% growth rate by 2020 [2]
ERGP is the Focus Laboratories on Power , agriculture and manufacturing which was inaugurated by the Vice President, Prof. Yemi Osinbajo.
According to Professor Osinbajo, Focus Laboratories would further stimulate economic growth and ensure continuity in Nigeria's determination to build a competitive economy.
"The labs will work by bringing together all public and private sector officials to achieve the ERGP's goal of achieving economic growth of seven percent by the time 2020, "said Osinbajo. the government would improve electricity production and its operational capacity to 10 gigawatts by 2020.
But two years before the deadline, the federal government has only managed to 'get it off the ground'. to generate four gigawatts.
The Minister stated that the removal of bottlenecks had become imperative. $ 245.5 billion would be needed to implement the ERGP, of which $ 195.98 billion would come from the private sector and $ 49.15 billion from the public sector
"The objectives are to restore economic growth, to invest in people and build a competitive global economy, "Udoma revealed.
Senate Deputy Speaker Ike Ekweremadu, who represented Senate Speaker Bukola Saraki at the launch of the Lab, congratulated the government's executive arm for ensuring the implementation of the plan. Dr. Idris Jala, head of the Malaysian Performance Management Unit (PEMANDU), said that Malaysia's economic history is very similar to the Nigerian experience
. recommended transformational leadership at all levels, which involved taking action that could be painful in the short term but beneficial in the long term for people.
"Malaysia has also used the laboratory process with great success as a transformation tool Nevertheless, analysts have warned that the level of commitment of the government and the private sector would determine the possibility of generating investments of 24 billions of dollars for the country in the laboratories
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