What the IMF predicted about Nigeria’s Economy Recovery
In an online article published by the IMF in February, 2021, titled ‘Five Questions About Nigeria’s Road to Recovery’ it was noted that Nigeria’s recovery is expected to be weak and gradual under current policies. Real GDP growth in 2021 is expected to turn positive at 1.5 percent. Real GDP is expected to recover to its pre-pandemic level only in 2022. The near-term outlook is subject to downside risks from pandemic-related developments with Nigeria experiencing a second wave. Over the medium term, a subdued global recovery and decarbonization trends are expected to keep oil prices low and Organization of the Petroleum Exporting Countries quotas in place, restricting oil-related activities, fiscal revenues, and export proceeds. Non-oil growth is also expected to remain sluggish, reflecting inward-looking policies and regulatory uncertainties.
According to it, Nigeria has of the lowest revenue levels as a share of GDP worldwide. A large share of revenues is spent on the country’s public debt service payments, leaving insufficient fiscal space for critical social and infrastructure spending and to cushion an economic downturn. In this context, mobilizing revenues through efficiency-enhancing and progressive measures is a top near-term priority. Revisiting tax exemptions and customs duty waivers, increasing and broadening the base for excise taxes, developing a high-integrity taxpayer register, enhancing digital infrastructure, and improving on-time filing and payment are important measures.
It predicted that once economic recovery takes root, Nigeria will need to increase the value-added tax rate to at least 10 percent by 2022 and 15 percent by 2025—the average in countries belonging to the Economic Community of West African States—to create effective fiscal space.
IMF increases Nigeria’s growth prospect to 2.6%
The International Monetary Fund has increased Nigeria’s growth prospect to 2.6 per cent and 2.7 per cent for 2021 and 2022, respectively, despite reducing the rate of global growth prospect due to the COVID-19 Delta variant, according to a Punch report.
According to the October 2021 World Economic Outlook Report, which was released on Tuesday, the growth forecast for Nigeria was originally pegged at 2.5 per cent in 2021 and 2.6 per cent in 2022.
However, in view of the 3.7 per cent 2021 and 2022 growth forecast for sub-Saharan Africa, Nigeria is 1.1 per cent behind in 2021 and one percent behind in 2022.
Despite the slight positive outlook for Nigeria, the IMF has slightly downgraded global growth projections for 2021.
The projection for 2021 was downgraded by 0.1 percentage points to 5.9 per cent, while the global growth forecast for 2022 remained unchanged at 4.9 per cent.
The IMF justifies this, stating that supply chain disruptions negatively affected recovery in the advanced economies, while lack of access to Covid-19 vaccines held back prospects for the emerging economies.
She said, “The momentum has weakened, hobbled by the pandemic. Fuelled by the highly transmissible Delta variant, the recorded global recovery continues but the COVID-19 death toll has risen close to five million and health risks abound, holding back a full return to normalcy.
“Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.”
Gopinath added that the outlook for the low-income developing country group had darkened considerably due to worsening pandemic dynamics.
She said the downgrade also reflected more difficult near-term prospects for the advanced economy group, in part due to supply disruptions.
“Partially offsetting these changes, projections for some commodity exporters have been upgraded on the back of rising commodity prices. Pandemic-related disruptions to contact-intensive sectors have caused the labour market recovery to significantly lag the output recovery in most countries,” Gopinath added.