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Tag: IMF

  • Nigeria’s economy still vulnerable despite exiting recession – IMF

    Nigeria’s economy still vulnerable despite exiting recession – IMF

    The International Monetary Fund (IMF) said on Friday that the Nigerian economy was still vulnerable despite the country exiting recession.

    The IMF in a statement issued by its Media and Press Officer, Raphael Ranspach, welcomed the Federal Government’s actions to improve the power sector and business environment under the Economic Recovery and Growth Plan (EGRP).

    The Fund said the macroeconomic and structural reforms remained urgent to contain vulnerability and support sustainable private sector led growth.

    The IMF said its staff team led by the Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, visited the country from December 6 to 20 to conduct the 2018 Article IV consultation, which led to this report.

    The statement said: “Overall growth is slowly picking up but recovery remains challenging. Economic activity expanded by 1.4 per cent year-on-year in the third quarter of 2017 – the second consecutive quarter of positive growth after five quarters of recession — driven by recovering oil production and agriculture.

    “However, growth in the non-oil-non-agricultural sector (representing about 65 per cent of the economy) contracted in the first three quarters of 2017 relative to the same period last year.

    “Difficulties in accessing financing and high inflation continued to weigh on companies’ performance and consumer demand.

    “Headline inflation declined to 15.9 per cent by end-November, from 18.5 per cent at end of 2016, but remains sticky despite tight liquidity conditions.

    “High fiscal deficits – driven by weak revenue mobilisation – generated large financing needs, which, when combined with tight monetary policy necessary to reduce inflationary pressures, increased pressure on bond yields and crowded out private sector credit.”

    NAN

     

  • Nigerian economy attractive to investors, says IMF

    Nigerian economy attractive to investors, says IMF

    The International Monetary Fund (IMF) said yesterday that Nigeria was still on international investors’ radar despite currency controls being implemented in the country. It however, said worries about repatriating funds out of Nigeria following currency controls last year still dominates investor fears.

    Miriam Tamene, an IMF senior financial sector expert, said there is interest in Nigeria’s securities market. However, investors were being careful because fears of getting trapped still exist.

    Nigeria introduced capital controls following dollar shortages triggered by a currency crisis last year. The naira hit a record of 520 to the dollar, prompting the Central Bank of Nigeria (CBN) to restrict fund flows.

    In April the bank liberalised the market to allow investors trade the naira at market-determined rates in a bid to attract inflows into debt and stock markets.

    The stock market has gained 45 per cent so far this year, helped by demand for consumer goods and banking shares after the central bank lifted currency restrictions for investors.

    Tamene’s comments came after her team visited Nigeria’s Securities and Exchange Commission (SEC) as part of consultations on developments covering the economy. The report of the consultation will presented to IMF board in February.

    “Investors are interested in Nigeria, but with difficulties they had in getting their money out recently, that confidence is not there yet,” Tamene said in a statement released by the SEC.

    Nigeria’s currency market for investors has traded $22.37 billion since it was launched, according to market operator FMDQ OTC Securities Exchange.

    On Wednesday traders said some foreign investors were booking profits from treasury bills and bidding to repatriate funds abroad, creating a liquidity squeeze on the currency market, after debt yields fell.

  • Nigeria still investors’ destination – IMF

    Nigeria still investors’ destination – IMF

    The International Monetary Fund (IMF) said on Wednesday that Nigeria is still a destination for investors.

    The Senior Financial Sector Expert, Debt and Capital Market Instruments Division, Monetary and Capital Markets Department, IMF, Miriam Tamene, said this in a statement issued by Securities and Exchange Commission (SEC) in Abuja.

    Tamene spoke when she led a team of IMF officials to the SEC office in Abuja.

    She noted that the Fund was pleasantly surprised to receive numerous indication of interest by investors eager to invest in Nigeria.

    The IMF official, however, stated that many of them still nursed the fear that they may not be able to retrieve their funds anytime they decide to leave the country.

    She urged monetary and regulatory authorities in Nigeria to roll out policies that would bring down the inflation rate in the country as well as increase access to domestic funds.

    This, Tamene noted would ensure that the economy attained further growth in 2018.

    “At the annual meetings of IMF, we were pleasantly surprised when we saw many investors interested in the Securities Market in Nigeria.

    “A lot of people thought that Nigeria is still investors destination, the main concerns most of them had was the fear that they may not be able to take out their money anytime they want to hence they are being very watchful.

    “Investors are interested in Nigeria, but with difficulties they had in getting their money out recently, that confidence is not there yet.

    “It has improved though, but they are still watching. It is still so much fragile and not what they can take for granted just yet,” she stated.

    NAN

     

  • IMF: debt service may consume 60% of govts’ revenues 

    IMF: debt service may consume 60% of govts’ revenues 

    The International Monetary Fund (IMF) has warned that Nigeria and other oil producing countries in Africa may be overburdened with the high cost of debt servicing.

    It said such costs are expected to absorb over 60 per cent of governments’ revenues this year in Nigeria, Angola and Gabon. Public debt, the IMF said, rose above 50  per cent of gross domestic product (GDP) in 22 sub-saharan African countries at the end of 2016.

    Unveiling a report titled: “Fiscal Adjustment and Economic Diversification”, its Senior Resident Representative and Mission Chief for Nigeria (Africa Department), Mr. Amine Mati said diversification and fiscal consolidation are needed to be implemented in the region.

    “Fiscal pressures pose risks to the weakened financial sector in Nigeria and other sub-Saharan Africa countries,” IMF said.

    It  noted that exchange rates pressures have eased in many countries such as the case of Nigeria but cautioned that debt stocks have risen throughout the region.

    “Diversification offers a path to growth, since the region is imbued with significant potential for raising revenues,” IMF said.

    It said what the region required was getting the policy mix right and playing to their strengths.

    The IMF report noted that growth has picked up but is set to remain subdued with inflationary pressures receding. It therefore forecast a GDP growth of 2.6 per cent in 2017.

    According to the report, broad-based slowdown in sub-Saharan Africa is easing, but the underlying situation remains difficult.

    Hesaid growth is expected to pick up from 1.4 per cent  last year to 2.6per cent this year, reflecting the one-off factors particularly the rebound in Nigeria’s oil and agricultural production, the easing of drought conditions that impacted much of eastern and Southern Africa last year early 2017 and a more supportive external environment

    While 15 out of 45 countries continue to grow at five per cent or faster , growth in the region as a whole will barely surpass the rate of population growth and in 12 countries, comprising over 40 per cent of sub-saharan Africa’s population income per capita is expected to decline in 2017.

    An additional growth of 3.4 per cent is expected in 2018, but IMF said “momentum is weak and growth will likely remain well below past trends in 2019. Ongoing policy uncertainty in Nigeria and South Africa continues to restrain growth in the regions two largest economies.

    “Excluding these two largest economies, the average growth rate in the region is expected to be 4.4 per cent in 2017, rising to 5.1 per cent in 2018-19. But even where growth remains strong, in many cases it continues to rely on public sector spending, often at the cost of rising debt and crowding out of the private sector.”

  • IMF sees Uganda 2017/18 growth at 5 per cent

    IMF sees Uganda 2017/18 growth at 5 per cent

    Uganda’s economy is seen expanding by five per cent in the 2017/18 fiscal year, up from four per cent in the previous period, lifted by favourable weather, the International Monetary Fund said.

    The East African economy is Africa’s biggest coffee exporter followed by Ethiopia and also cultivates a range of other agricultural commodities including tea, cocoa and tobacco.

    “Growth is projected to reach five per cent in 2017/18 (July-June) from four per cent in 2016/17, supported by
    better weather conditions,” the IMF said in a statement released late on Friday.

    Private sector credit growth remained slow, and the IMF praised the central bank for extending its ongoing policy easing cycle.

    Last month Bank of Ugandan, the central bank, cut its benchmark policy rate by 50 basis points to 9.5 per cent.

    It was the first time the bank had lowered the rate to below the psychologically important level of 10 per cent since the country introduced an inflation targeting monetary policy in 2011.

    The IMF said core inflation was projected to remain around the medium term target of 5 per cent.

    NAN

  • Govt to IMF: our strategy ’ll mitigate debt service risk

    Govt to IMF: our strategy ’ll mitigate debt service risk

    The Federal Government has told the International Monetary Fund (IMF) and other  partners that its revenue and debt management strategy will mitigate Nigeria’s debt service risk and fast-track her development.

    As a measure of its confidence, the Federal Government says its recent decision to refinance some of the last administration’s debts will see the country save N91.65 billion per annum.

    Finance Minister Mrs. Kemi Adeosun expressed this confidence when she received some of Nigeria’s international development partners, including the International Monetary Fund (IMF), in Abuja.

    Mrs. Adeosun said: ”The proposed refinancing of US$3 billion worth of short terms Treasury Bills into longer tenured international debt is expected to save N91.65 billion per annum”.

    The new debt refinancing initiative, she explained, will lead to significant benefits, particularly reduction in costs of funds.

    “Other benefits of our revenue and debt management strategy include: improvement in foreign reserves as well as reduced domestic debt demand, which will reduce crowding-out of the private sector and support the aspirations of the monetary authorities to bring down interest rates,” the minister said.

    The government’s strategy, she said, “would achieve a number of objectives that include: mobilising revenue whilst reducing the debt burden by lengthening the maturity profile, increasing foreign exchange reserves, reducing crowding-out of the private sector, and creating savings in debt service cost.”

    The minister noted that a key element of the economic reform strategy was the mobilisation of revenue to improve the debt service to revenue ratio, which is being undertaken through a number of initiatives, including the plugging of leakages and the deployment of technology for revenue management.

    She specifically cited Health Pay, a pilot cashless revenue project in the health sector, which recorded material increases in revenue, the ongoing Voluntary Assets and Income Declaration Scheme (VAIDS), which is expected to impact positively  on the volume of tax collections.

    According to Mrs. Adeosun, “the difference in our economic strategy is that we are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue”.

    This, she said: “is a long term strategic reform which is critical to our future economic growth and in the short term will enable our debt service to revenue ratio to improve”.

    The government, according to her, “does not see a significant devaluation risk as the implementation of the Economic Recovery Growth Plan (ERGP) reforms progresses over the medium term, such that the naira is expected to strengthen”.

    Specifically, the benefits of the government’s revenue and debt management strategy will result in: Savings in Debt Service Cost amounting to N76.375 billion per annum from US$2.5bn borrowing and N91.65 per annum from US$3 billion refinancing of short-term domestic debt”.

    The government anticipates a boost in foreign reserves with increased dollar inflow; Reduced Debt Burden and Rollover Risk because of lengthening of maturity profile and the  creation of space for borrowing by the private sector as a result of the crowding-out of the private sector.

  • Economic growth to rise to 3.4% in sub-Saharan Africa in 2018 – IMF

    Economic growth to rise to 3.4% in sub-Saharan Africa in 2018 – IMF

    Economic growth is expected to rise to 3.4 per cent in sub-Saharan Africa in 2018 from 2.6 per cent in 2017, the IMF said in a report on Monday.

    The IMF, however, warned that rising debt and political risks in larger economies would weigh down future growth.

    The IMF said a good harvest and recovery in oil output in Nigeria would contribute more than half of the growth in the region this year.

    The fund added that an uptick in mining and a better harvest in South Africa as well as a rebound in oil production in Angola will add to growth.

    The fund said South Africa has been clouded by the rule of Jacob Zuma, who has battled scandals, including corrupt allegations ahead of his ANC party’s conference in December to elect a new party leader.

    “Key downside risks to the region’s growth outlook emanate from the larger economies, where elevated political uncertainty could delay needed policy adjustments and dampen investor and consumer confidence,” the IMF said in a report launched in Harare.

    “A further pickup in growth to 3.4 per cent is expected in 2018, but momentum is weak, and growth will likely remain well below past trends in 2019.”

    To help maintain growth, IMF advised countries to diversify from dependence on commodities and oil, implement fiscal reforms to stimulate growth and attract private investment.

    The IMF said public debt would rise to 53 per cent of GDP this year from 48 per cent in 2016.

    More worryingly, it said, most countries were now borrowing from local banks, which could distabilise the domestic financial sector and fuel inflation.

    Debt servicing costs were also up, but high debt levels were in particular complicating the economic outlook for six nations, including Zimbabwe, which is gripped by a crunch forex shortage.

    “Debt servicing costs are becoming a burden, especially in oil-producing countries … and are expected to absorb more than 60 per cent of government revenues in 2017,” IMF said.

    The IMF said that while some countries had made progress in reducing their fiscal deficits, others, like Africa’s most advanced economy South Africa would see the deficit widen.

    South Africa on Friday raised its estimate for this year’s budget deficit, saying the country faced sluggish economic growth, shortfalls in revenue and costly bailouts of struggling state-owned companies.

    The IMF in thye report added that inflation pressures are easing especially in east Africa, which was hit by drought and the governments there increased maize imports to cut food prices.

    The IMF said in other places like Zimbabwe the high cost of imports is raising price pressures.

    NAN

  • IMF: banks must recapitalise

    IMF: banks must recapitalise

    Many commercial banks need to raise new capital and boost their capital adequacy ratios for them to drive the desired growth in the economy, the International Monetary Fund (IMF) said at the weekend.

    The IMF’s Mission Chief for Nigeria, African Department, Amine Mati, said the commercial lenders needed recapitalisation to secure fresh funds to boost the Federal Government’s chances of achieving the Economic Recovery and Growth Plan (ERGP) target. The ERGP, a Medium Term Plan for 2017 to 2020, is designed to help the Federal Government jumpstart the economy.

    Mati spoke at the 2017 Chartered Institute of Bankers of Nigeria (CIBN) Investiture with the theme: Coherent set of policies for greater exchange rate flexibility.

    He advised the Federal Government to embark on full Value Added Tax (VAT) reform and cancel tax holidays and exemptions that erode the Company Income Tax (CIT) base. He also urged the government to increase taxes on alcohol and tobacco and broaden VAT by revisiting exemptions.

    The last mass recapitalisation in banking occurred in 2005 when the minimum capital base was raised from N2 billion to N25 billion. That exercise reduced the number of banks from 89 to 25 after mergers and acquisitions. Now, there are 21 commercial banks, four merchant banks and one non-interest bank.

    The Central Bank of Nigeria (CBN) has continued to advise banks to double provisions on performing loans to two percent to build adequate buffers against unexpected losses, as liquidity ratios fall. Besides, lower revenues for government and oil companies due to plunging crude prices have led to unsecured exposures for banks that are likely to increase credit risk and loan losses. The level of non-performing loans has risen to nearly 15 per cent against five per cent regulatory threshold and lenders need new capital to maintain sound capital adequacy ratio.

    While the capital adequacy ratio of most banks is generally above the minimum regulatory threshold of 15 per cent, the adoption of Basel II implies additional capital as banks grow their risk assets.

    Besides, banks that are designated as systemically important banks (SIBs) are expected to provide for additional 100 basis points to increase their minimum capital adequacy ratio to 16 per cent as against the general requirement of 15 per cent. National and regional banks need only 10 per cent capital adequacy ratio.

    Many banks are already accessing the Eurobond market for tier-2 capital. Market sources said more lenders may return to the capital market for additional funds in the months ahead to create a headroom for loan growth.

    On exchange rate policy, Mati described the Investors’ & Exporter’s Forex Window as a good move to address market segmentation, adding that the CBN should unify/ simplify the forex market. He said the current exchange rate was in line with market expectations, but there are significant headwinds, amidst structural challenges and elevated risks.

    CBN Deputy Governor (Financial System Stability) Joseph Nnanna, who was elected Fellow of the CIBN, said the exchange rate was converging and moving southward.

    He said although the IMF wants the CBN to unify the rates, that can happen organically or inorganically. “For us at the CBN, we believe that organic convergence is the way to go. Inorganic convergence, which is forced, will always produce an arbitrage and that we don’t want,” he said.

    In Nnanna’s view,  the exchange rate has greatly stabilised. “Before, the naira exchange rate to a dollar was for almost N500/ dollar. Today, it has come down through a combination of policies. We didn’t force it down. It came down organically or naturally, and that’s the way it is supposed to be,” he said.

    He said the exchange rate will not rise as the end of year approaches.

    “No, the rate will not go up, take it from me. We have achieved stability and the stability is here to stay. The sustainability of the dollar interventions is already evident, the foreign reserve is growing. As I speak, it is $34 billion. When we had volatility, the reserve was as low as $20 billion. But let me say one thing: Nigeria can make do with a reserve level of $20 billion,” Nnanna said.

    “All we need to manage the economy and manage it properly is a reserve that can cover at least three months of import.”

    On the I & E Forex Window, the CBN Deputy Governor said it had remained a huge success as it performed beyond the CBN’s expectation. “Within four months, the I & E Forex window was introduced, we have seen volume of over $10 billion and above – it’s a huge success. I believe other countries can copy a page from us,” Nnanna said.

  • Rich Nigerians should pay more tax- Senate

    Rich Nigerians should pay more tax- Senate

    Asks FG to implement free compulsory education

     

    The Senate yesterday backed the Federal Government’s position that rich Nigerians should be made to pay more taxes as a way to engender wealth redistribution in the country.

    The upper chamber said that said that people who earn higher emolument should pay high taxes on luxury goods.

    Deputy Senate President, Senator Ike Ekweremadu, who presided over yesterday’s plenary said the rich must pay more taxes, while poor Nigerians should pay less.

    He said with more money in government’s confers, more Nigerians will be lifted out of poverty.

    Ekweremadu was contribution to a motion on eradication of poverty raised by Senator Ali Wakili and 22 others to commemorate United Nations International Day for the eradication of poverty.

    Ekweremadu said, “In other countries of the world, governments make deliberate efforts to get their people out of poverty. This is the practice all over the world. Nigeria should not be different. We need to provide for our people and get them out of poverty.

    “There are so many ways we can achieve this. Government needs to implement policies that will take us out of poverty. One of them is the issue of taxation. The rich need to pay more taxes, while the poor should pay less. When the rich pay more taxes, there will be enough money to get our people out of poverty.

    “We have our able youths who are jobless, despite the fact that they are educated. This cannot continue. We need to provide jobs for our youths and take them off the streets. As a parliament, we will take the necessary steps to ensure that this is achieved.”

    Read: Nigeria loses over N15tr yearly to tax evasion 

    Minister of Finance, Mrs. Kemi Adeosun, had while speaking to the press at the annual meeting of the World Bank and International Monetary Fund (IMF) in Washington DC on Sunday, insisted people with higher income must bear a greater part of the tax burden.

    Wakili in the motion noted that a recent report released by the National Bureau of Statistics (NBS), no fewer than 112 million Nigerians representing 67.1 per cent of the country’s estimated population, now live below the poverty level.

    He said that commemoration is intended to promote dialogue and understanding between people living in poverty and their communities and society.

    “It is meant to demonstrate the strong bonds of solidarity between people living in poverty and people from all works of life, and the commitment to work together to overcome extreme poverty,” Wakili said.

    Senator Shehu Sani, (Kaduna central) in his contribution lamented that more than 80 per cent of Nigerians live below the poverty level.

    The lawmaker said that successive governments have not done enough to implement programmes that will lift Nigerians out of poverty.

    Senator Jibrin Barau (Kano North) described poverty as a weapon of mass destruction.

    He noted that China in the last 20 years has lifted more 300 million of its citizens out of poverty.

    Barau urged the Federal Government to do more and implement social programmes to lift the living conditions of Nigerians.

    Lawmakers, after a brief debate, called on the Federal Government to declare free education at every level.

    The upper chamber said that policies and programmes evolved by the Federal Government through the Social Investment Programmes and other poverty alleviation and eradication measures be vigorously pursued.

  • IMF: there’s disconnect between Nigeria’s population, economic growth

    IMF: there’s disconnect between Nigeria’s population, economic growth

    International Monetary Fund (IMF) Managing Director, Christine Lagarde, has said some West African nations economy, including Nigeria, is not growing at the same rate with their population.

    She spoke with reporters at the ongoing IMF annual meetings in Washington DC, United States (U.S).

    She said:“Sub Saharan Africa is one region of the world where growth is way suboptimal. Those countries (grow at) 2.5 per cent. That is too low for the demographic expansion of the region.

    “There are different countries if we are to look at Rawanda, it is a different situation from that of Togo and Ghana is going to be different from Mozambique and so on. It is still too low for the demographic growth. For that region to take advantage of the demographic dividend of all the young people, who are coming up and trying to have access to the economy and have a job, it is too low.”

    Lagarde said IMF would engage commodity-dependent countries on building up their buffers as such countries are not faring as well as countries with diversified economies.

    “We are engaging them in the direction of stabilising; for those that are doing well, build up their buffers and more importantly, diversify the sources of their economic growth.

    “What we observed is that those that are heavily commodity dependent are faring less well than those that are well diversified,” she said.

    The best way to reduce inequality within a population, according to her, is to reduce the gender gap between men and women, not making the rich pay more taxes.