Nigeria’s economy will be growing at a slower pace in 2016 than sub-Saharan Africa’s as a whole, the International Monetary Fund (IMF) said on Tuesday.
After an extended period of strong economic growth, sub-Saharan Africa is set to experience its lowest economic growth rate in 15 years – yet the region’s growth will outpace Nigeria’s.
According to its April 2016 regional economic outlook for sub-Saharan Africa, IMF said the continent is set to face a second difficult year, projecting a GDP growth of three percent for 2016.
Nigeria’s projected GDP growth rate for the same year is at 2.3 percent – the country’s lowest in 16 years.
The IMF advises that it is “Time for a Policy Reset” – with Antoinette Sayeh, director of the IMF’s African department, saying “Africa needs a substantial policy reset to reap the region’s strong potential”.
“This is particularly urgent in commodity exporters and some market access countries, as the policy response to date has generally been insufficient,” Sayeh said.
The slowdown reflects the adverse impact of the commodity price slump in some of the larger economies and more recently the drought in eastern and southern Africa.
“The sharp decline in commodity prices, a shock of unprecedented magnitude, has put many of the largest sub-Saharan African economies under severe strain,” IMF said in a statement.
“As a result, oil exporters, such as Nigeria and Angola but also most countries of the Central African Economic and Monetary Union, continue to face particularly difficult economic conditions.
“Non-energy commodity exporters, such as Ghana, South Africa and Zambia, have also been hurt by the decline in commodity prices. Several southern and eastern African countries, including Ethiopia, Malawi, and Zimbabwe, are suffering from a severe drought that is putting millions of people at risk of food insecurity.”
Sayeh insists that the outlook remains favourable, saying “many countries in the region continue to register robust growth. In particular, most oil importers are generally faring better with growth in excess of 5 percent in countries such as Côte d’Ivoire, Kenya, and Senegal, as well as in many low-income countries”.
IMF said in most of these countries, growth is being supported by ongoing infrastructure investment efforts and strong private consumption.
“Faced with rapidly decreasing fiscal and foreign reserves and constrained financing, commodity exporters should respond to the shock promptly and robustly to prevent a disorderly adjustment.
“As revenue from the extractive sector is likely durably reduced, many affected countries critically need to contain fiscal deficits and build a sustainable tax base from the rest of the economy.
“For countries outside monetary unions, exchange rate flexibility, as part of a wider macroeconomic policy package, should also be part of the first line of defense.
“Given the substantially tighter external financing environment, market access countries in which fiscal and current account deficits have been elevated over the last few years will also need to recalibrate their fiscal policies. Such recalibration would help them to rebuild scarce buffers and mitigate vulnerabilities if external conditions worsen further.”