Five years after her first visit to Nigeria, the managing director of the International Monetary Fund, Christine Lagarde, last week paid a visit to the country meeting with the presidency, lawmakers as well as policy makers and private sector chiefs.
Her visit coincides with a period when Nigeria is faced with revenue challenges in the wake of falling oil prices, weaker currency and the uncovering of a barrage of corruption in high places. It is also a time that the country is proposing running the largest budget and deficit in its history.
Due to these factors, many Nigerians had viewed her visit with a lot of scepticism and suspicion that the IMF managing director was in town to negotiate an IMF loan with the Nigerian government. Although she had promptly denied such a motive, trade unions still warned the Nigerian government to be wary of the Fund.
However, John Campbell a Ralph Bunche Senior Fellow for Africa Policy Studies sees the visit differently as reflected in his blog posted on the Council on Foreign Relation. He noted that the IMF visit and endorsement of the Buhari-led government policies is a boost to the Nigerian financial system economy.
While Nigeria may have been blacklisted by JP Morgan and downrated by some rating agencies, Campbell believes that Lagarde’s visit and endorsement is bound to strengthen Buhari‘s hand with international credit markets.
Campbell and had noted that President Muhammadu Buhari faces a serious economic crisis related to the plunge in the world price of oil, slow rates of economic growth, the prospect of rising American interest rates, a falling national currency, and declining government revenues. At the same time, he is working to restructure the economy away from undue dependence on oil by increasing infrastructure investment and vigorously pursuing an anti-corruption agenda demonstrated by the arrests of high-profile public figures.
The IMF MD during her visit had praised the Buhari led government noting that Nigerians have created a large and diversified economy that has grown by about seven per cent a year over the last decade, as she added that this “has been a remarkable achievement, a testament to Nigeria’s immense potential.”
Although growth is expected to slow down in 2016, Lagarde notes that Nigerians are well known for their resilience and strong belief in their ability to improve their nation and lead others by example. “I firmly believe that Nigeria will rise to the challenge and make the decisions that will propel the country to greater prosperity.”
Lagarde had strongly endorsed President Buhari’s policies, ranging from restructuring the economy away from oil to the fight against corruption to cutting waste to capital expenditure to stimulate growth, stating that “given the determination and resilience displayed by the presidency and his team, I don’t see why an IMF programme is going to be needed.”
This display of confidence in the Nigerian government, John Campbell says will not only strengthen “Buhari’s hand politically against his rivals at home, many of whom must be chafing at his anti-corruption campaign. It also is bound to strengthen Buhari‘s hand with international credit markets, should he in fact seek to enter international bond markets.”
The IMF chief however joined forces with voices calling for the industrialization of the country and the need to improve infrastructure and boost agricultural produce not only for consumption but also for exports.
According to her, Nigeria needs to act “with resolve to significantly improve transportation networks and power delivery (i.e. generation, transmission, and distribution). For example, Nigeria could be exporting tomato paste—a staple of Nigerian cuisine—on a large scale, but it imports about half of what it needs. This is why Nigeria needs to build more roads and better rail networks, so that more farmers can bring their crops to market.”
In her statement at the conclusion of her visit, Lagarde said Nigeria’s role at the regional level has become increasingly recognised as the economy is “no longer dominated by agriculture and oil, with services accounting for almost half of GDP, including a significant home-grown film industry and innovative start-ups from fashion to software development.”
She had discussed with the Nigerian authorities how to maintain economic progress while making the transition towards more inclusive and sustainable growth. “Poverty, inequality, and unemployment levels remain too high, in addition to the challenge of the Boko Haram insurgency.
“Nigeria also has to deal with the difficulties presented by falling oil prices, reduced emerging market demand, and tightening global financial conditions. This has led to sharply lower export earnings and government revenues. The non-oil sector has also been affected and financing for investment is hard to come by.
“Against this background, we discussed a range of policy recommendations related to improving the competitiveness of the Nigerian economy. This includes focusing on the critical area of infrastructure, where power, transportation, and housing are especially key.
“It also includes identifying ways to broaden the revenue base, particularly to create additional fiscal space to offset the impact of lower oil prices; and the need for careful decisions on borrowing, public spending, and managing the cost of fuel subsidies – with a view to safeguarding priority social sectors and the most vulnerable groups. This will require a package of measures involving business-friendly monetary policy, flexible exchange rate policy, and disciplined fiscal policy, and the implementation of structural reforms” Lagarde said in her conclusion statement.
On his own part, the Senate President, Bukola Saraki called for the support of the IMF towards the CBN to bring in low interest loans to small and micro enterprises. “We need to encourage entrepreneurs and make most of our new graduates job creators rather than job seekers. This is an area where we need the financial support and technical assistance of the IMF”, he said.
In recent times, the CBN has channelled its policies towards growing the SMEs sector and engendering local production of consumables. Besides, the N220 billion MSME Development Fund, the apex bank has also charged the banks to drive the real sector by providing more funding to employment generating sectors such as agriculture, mines and steel amongst others. It is also planning a scheme that would stir the entrepreneurial spirit of young Nigerians and create one million jobs in 2016.
Leadership
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