How Nigeria Can Surpass its GDP

The International Monetary Fund and financial experts advise Nigeria to step up its anti-poverty campaign and technological development in order to raise its GDP

|  By Chinwe Okafor  |  Oct. 28, 2013 @ 01:00 GMT

FOR Nigeria to attain and surpass its Gross Domestic Product, GDP, projection of 7.4 percent by 2014, it needs to step up its anti-poverty policy and, as well develop its technological base. This was the position of the International Monetary Fund, IMF, and its stakeholders within the financial sector, during the presentation of its October 2013 Regional Outlook, in Lagos on October 31.

Members of the high table
Members of the high table

The stakeholders said that the uncontrollable downside risks from external factors, especially in the area of capital inflow might weaken the prospects for growth in Nigeria and the sub-Saharan Africa region if not monitored. Antoinette Sayeh, director, African department, IMF, said that the downside risks for the sub-Saharan Africa region mainly comes from external factors, noting that a further weakening in emerging markets, including some of sub-Saharan Africa’s new economic partners or in advanced economies might affect sub-Saharan Africa’s prospects for growth which can occur mostly through commodity price declines.

She said the region’s growth was expected to pick up by 2014, despite the global headwinds that have moderately lowered the region’s performance in 2013 but that a strong investment demand would continue to support growth in most of the region, while the output will be projected to expand by five percent in 2013 and six percent in 2014.

“It is heartening to note that sub-Saharan Africa’s economies have generally maintained a strong pace despite some tensions observed in the external environment, including somewhat slower growth in emerging market economies and this is a reflection of continued sound macroeconomic policies as well as robust domestic demand, in particular investment in infrastructure and productive capacity.”

Sarah Alade, deputy governor, Central Bank of Nigeria, CBN, said though the economic outlook remains commendable, it did not capture the peculiar nature of the country’s economy thus lumping it with that of other countries within the region. She said though the country was yet to have a capital flow measures put in place, the apex bank “monitors daily capital inflows and analyzes the transition of such funds within the financial system. The CBN assumes that everything that comes under foreign direct investment has a short tenure and we try to mitigate the risks which will arise from exposure to such funds.

Cross section of audience at the event
Cross section of audience at the event

“We are working to ensure that there is financial stability having recorded price and exchange rate stability. When IMF made its policy prescriptions, it didn’t consider the situation in Nigeria because this is a country where we monetize our oil revenue. The policy direction is clear both in terms of the Monetary Policy Ratio, MPR, and the Credit Reserve Ratio, CRR. The MPR is a signalling rate and not a transaction rate. We remain committed to price stability as well as financial stability,” she said.

Abebe Selassie, deputy director, African department, IMF, said that the widening current account deficits in sub-Saharan Africa since 2008 tended to reflect higher investment rates, although in some countries lower current account balances also reflect lower saving. However, he added that reserve buffers were low in a number of countries and, in some, widening external current account deficits had resulted in significant debt accumulation. “Most Sub-Saharan African countries are particularly weak at monitoring capital flows. Data gathering system needs to be strengthened to allow monitoring of these flows and to achieve this, these countries have to adjust their macroeconomic policies, limit systemic financial risks through macro-prudential policies and develop capital flow measures as part of a comprehensive macroeconomic approach.”

Bismarck Rewane, chief executive officer, financial derivatives company, advocated proactive measures to manage volatility in price, production and capital flows, while giving consideration to the political climes of some of the countries and that there would be a lot of volatility in commodity prices, production as well as security issues during the election year.

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