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Nigeria’s 2018 economic recovery remains challenging – IMF

The International Monetary Fund (IMF) has said Nigeria’s economic outlook for 2018 remains challenging as private sector lending remains low and foreign exchange inflows are mostly short-term.

IMF in a statement issued in Washington during the weekend by Lucie Fouda, the Fund’s Press Officer, said higher oil prices and portfolio flows had helped strengthen fiscal and external buffers.

It added that action on a coherent set of policies to reduce vulnerabilities and increase growth over the medium term remained urgent.

It said an IMF staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, visited Nigeria from June 27 to July 9 to discuss recent economic and financial developments, update macroeconomic projections and review reform implementation.

The Fund said at the end of the visit, the IMF staff team leader issued a statement.

The IMF quoted Mati as stating that, “Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging.

“International reserves remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April.

“Inflation declined to its lowest level in more than two years. Real Gross Domestic Product (GDP) expanded by two per cent in the first quarter of 2018 compared to the first quarter of last year.

“However, activity in the non-oil non-agriculture sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.”

It said corporate tax collection efforts improved but revenue shortfalls and the late adoption of the 2018 budget impeded its implementation.

“Revenue from higher oil prices is limited by net losses from retail fuel sales while non-oil revenue remains below expectations, with yields from tax administration measures – including the Voluntary Asset Income Declaration Scheme (VAID) and increased tax audits – yet to fully materialise.

“Current spending remains in line with expectations. Carryover from 2017 to 2018 helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget.

“Lower yields have kept interest payments within the budgeted envelope, but the Federal Government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year,” the team leader said.

The Fund said reforms to improve the business environment were progressing, including through identification of priority investment projects and the adoption of the Company and Allied Matters Act (CAMA) – a legislative landmark for private sector development.

According to IMF, the implementation of the Power Sector Recovery Plan is advancing through a mini-grid policy and regulations on eligible customers and meter asset providers.

“Under current policies, the outlook remains challenging. Growth would pick up to about two per cent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth.

“The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget.

“Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices.

“Increased oil exports would keep the current account in surplus, helping stabilise gross international reserves even if the current pace of foreign portfolio outflows continues,” the Fund said.

According to IMF, a coherent set of policies to reduce vulnerabilities and increase growth remains urgent.

“This includes specific and sustainable measures to increase the currently low tax revenue – including through avoiding new tax exemptions – and ensuring budget targets are adhered to even in an election year.

“This process should be supported by keeping monetary policy tight through appropriate monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market-determined exchange rate.

“Moving ahead with structural reforms is needed to invigorate inclusive growth, particularly in the power sector where faster progress would be needed to ensure financing shortfalls in the sector are met in a sustainable manner,” it said.

The Fund said the team held productive discussions with senior government and Central Bank of Nigeria officials, and also met with representatives of the banking system, the private sector, civil society, and international development partners.

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FDI 2018 In Africa: Nigerians Mobilise N26.640bn

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Nigerian startups raised a total of N26.640billion or $73.6 million, up 800 percent from the N3.240billion or $9.2 million between April and June this year, according to the latest Nigeria News Direct report on Foreign Direct Investment.

The Q1 2018 report noted that a total of $4,241,196 was raised by 13 startups, mostly from foreign investors, while grants made up almost 70per cent of the deals.

The report added that the amount in the Q2 was mobilised from 30 local and foreign investment firms by 41 startups. Main beneficiaries include 12 companies that provide financial services, 7 agritechs firms, 4 startups active in governance and 3 logistics.

Most of the resource of N17.280 billion or $47.5 million was of type C financing. The online payment provider Cellulant was the only beneficiary of this type of financing. Three other startups received N5.04billion or $13.5 million in type a financing while over N3.6billion $10.2 million was granted as donation to 10 companies.

In another development, a Houston-based private equity firm, Denham Capital, specialising in mining, gas and energy sectors, announced it closed a mining fund worth $558 million that will be deployed on several markets including Africa. The fund targets operable or close-to-be exploitable projects.

“The close of our first mining fund marks a significant and strategic milestone for Denham Capital. We are pleased that our limited partners share our belief that there is a robust pipeline of opportunities across the global mining sector,” said managing partner and co-founder, Carl.

Let’s note that the amount of capital committed to Africa is not specified but markets would surely compete to attract the largest share. Moody’s revealed that China’s economy, which drives the global demand for mining resources, is already seeking for other suppliers outside Africa.

Denham is already active in Africa. The firm’s African portfolio includes Endeavour, which has projects in Ghana, and the wind energy project with Biotherm. However, these projects are yet to be achieved, according to report.

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IMF Raises Nigeria’s 2019 Growth Forecast to 2.3%

The International Monetary Fund (IMF) has raised Nigeria’s Gross Domestic Product (GDP) projection for 2019 to 2.3 per cent, up from the 1.9 per cent it had predicted for the country previously.

The fund stated this in its World Economic Outlook (WEO) update titled, ‘Less Even Expansion, Rising Trade Tensions,’ released Monday.

The multilateral institution attributed its higher growth forecast for the country in 2019 to improved outlook for oil prices.

 

Although Nigeria’s second quarter 2018 GDP figures are yet to be released by the National Bureau of Statistics (NBS), the country had recorded growth rate of 1.95 per cent in the first quarter of the year, lower than the 2.11 per cent recorded in the fourth quarter of 2017.

 

In addition, the IMF in the latest report noted that the recovery in Sub-Saharan Africa was set to continue, supported by the rise in commodity prices.

 

For the region, growth was expected to increase from 2.8 per cent in 2017, to 3.4 per cent this year, rising further to 3.8 per cent in 2019 (0.1 percentage point higher for 2019 than forecast in the April WEO).

 

The Fund stated, “The upgraded forecast reflects improved prospects for Nigeria’s economy. Its growth is set to increase from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 2.3 per cent in 2019 (0.4 percentage point higher than in the April WEO for 2019).

 

“Despite the weaker-than-expected first quarter outturn in South Africa (in part due to temporary factors), the economy is expected to recover somewhat over the remainder of 2018 and into 2019 as confidence improvements associated with the new leadership are gradually reflected in strengthening private investment.”

 

Commenting on the latest WEO, The Economic Counsellor and Director of the Research Department, IMF, Maurice Obstfeld, noted that overall growth in sub-Saharan Africa would exceed population growth over the next couple of years, allowing per capita incomes to rise in many countries.

 

However, he noted that despite some recovery in commodity prices, growth would still fall short of the levels seen during the commodity boom of the 2000s.

 

“Adverse developments in Africa—civil strife or weather-. shocks, for example—could intensify outward migration pressures, especially toward Europe,” Obstfeld explained.

 

According to him, amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced.

 

He stated that growth remains generally strong in advanced economies, but has slowed in many others, including countries in the euro area, Japan, and the United Kingdom.

 

He said, “In contrast, GDP continues to grow faster than potential and job creation is still robust in the United States, driven in large part by recent tax cuts and increased government spending.

 

“Even US growth is projected to decelerate over the next few years, however, as the long cyclical recovery runs its course and the effects of temporary fiscal stimulus wane.

 

“For the advanced economies, we project 2018 growth of 2.4 per cent, down 0.1 percentage point from our April WEO. We maintain an unchanged forecast of 2.2 per cent growth in those economies for 2019.

 

“For emerging market and developing economies as a group, we still project growth rates of 4.9 per cent for 2018 and 5.1 per cent for 2019. These aggregate numbers, however, conceal diverse changes in individual country assessments,” he added.

 

He urged countries to embrace multilateral cooperation.

 

“A truly global effort is also needed to curtail corruption, which undermines faith in government in so many countries. “Finally, recurrent surges in international migration pressures, which have proven so politically destabilising recently, cannot be avoided without cooperative action to improve international security, support the Sustainable Development Goals, and resist climate change and its effects,” he said.

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IMF Raises Nigeria’s 2019 Growth Forecast to 2.3%

The International Monetary Fund (IMF) has raised Nigeria’s Gross Domestic Product (GDP) projection for 2019 to 2.3 per cent, up from the 1.9 per cent it had predicted for the country previously.

The fund stated this in its World Economic Outlook (WEO) update titled, ‘Less Even Expansion, Rising Trade Tensions,’ released Monday.

The multilateral institution attributed its higher growth forecast for the country in 2019 to improved outlook for oil prices.

Although Nigeria’s second quarter 2018 GDP figures are yet to be released by the National Bureau of Statistics (NBS), the country had recorded growth rate of 1.95 per cent in the first quarter of the year, lower than the 2.11 per cent recorded in the fourth quarter of 2017.

In addition, the IMF in the latest report noted that the recovery in Sub-Saharan Africa was set to continue, supported by the rise in commodity prices.

For the region, growth was expected to increase from 2.8 per cent in 2017, to 3.4 per cent this year, rising further to 3.8 per cent in 2019 (0.1 percentage point higher for 2019 than forecast in the April WEO).

The Fund stated, “The upgraded forecast reflects improved prospects for Nigeria’s economy. Its growth is set to increase from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 2.3 per cent in 2019 (0.4 percentage point higher than in the April WEO for 2019).

“Despite the weaker-than-expected first quarter outturn in South Africa (in part due to temporary factors), the economy is expected to recover somewhat over the remainder of 2018 and into 2019 as confidence improvements associated with the new leadership are gradually reflected in strengthening private investment.”

Commenting on the latest WEO, The Economic Counsellor and Director of the Research Department, IMF, Maurice Obstfeld, noted that overall growth in sub-Saharan Africa would exceed population growth over the next couple of years, allowing per capita incomes to rise in many countries.

However, he noted that despite some recovery in commodity prices, growth would still fall short of the levels seen during the commodity boom of the 2000s.

“Adverse developments in Africa—civil strife or weather-. shocks, for example—could intensify outward migration pressures, especially toward Europe,” Obstfeld explained.

According to him, amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced.

He stated that growth remains generally strong in advanced economies, but has slowed in many others, including countries in the euro area, Japan, and the United Kingdom.

He said, “In contrast, GDP continues to grow faster than potential and job creation is still robust in the United States, driven in large part by recent tax cuts and increased government spending.

“Even US growth is projected to decelerate over the next few years, however, as the long cyclical recovery runs its course and the effects of temporary fiscal stimulus wane.

“For the advanced economies, we project 2018 growth of 2.4 per cent, down 0.1 percentage point from our April WEO. We maintain an unchanged forecast of 2.2 per cent growth in those economies for 2019.

“For emerging market and developing economies as a group, we still project growth rates of 4.9 per cent for 2018 and 5.1 per cent for 2019. These aggregate numbers, however, conceal diverse changes in individual country assessments,” he added.

He urged countries to embrace multilateral cooperation.

“A truly global effort is also needed to curtail corruption, which undermines faith in government in so many countries. “Finally, recurrent surges in international migration pressures, which have proven so politically destabilising recently, cannot be avoided without cooperative action to improve international security, support the Sustainable Development Goals, and resist climate change and its effects,” he said.

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