Lagos, Nigeria - The International Monetary Fund (IMF) has hailed Nigeria for the way it weathered the global economic recession and the banking crisis, according to local media reports on Friday. According to IMF, economic growth in the first half of 2010 remained above 7½ per cent and is expected to reach about 8½ per cent for the whole year, on the back of a recovery in oil production and continued strong growth in other sectors.
But IMF said inflation had been stuck in the low double digits for the past two years and foreign reserves have been falling, as the Central Bank of Nigeria (CBN) has focused on maintaining exchange rate stability and low interest rates.
It also observed that the fiscal stimulus intensified in 2010, notwithstanding the already solid growth performance and high inflation.
After rising by 10 per cent in 2009, consolidated public spending increased by 37 per cent in 2010. The non-oil primary deficit has increased by five per centage points to 32 per cent of non-oil Gross Domestic Product (GDP).
“Despite world oil prices well in excess of the budget benchmark price, the government spent all current oil revenues and drew on savings in the Excess Crude Account, at a time when stabilisation called for a rebuilding of buffers. Despite high inflation, the CBN reduced the rate on its standing deposit facility.
“In response to pressure on the currency, the CBN sold reserves rather than raise interest rate or let the exchange rate depreciate. The CBN recently raised interest rates, but short-term real interest rates remain negative,” IMF observed.
In spite of the government's huge spending on mostly overhead and recurrent formation, the IMF said the economic outlook for 2011 remained bright.
“The economic outlook remains positive and risks are generally balanced. Nigeria’s economy is projected to grow by seven per cent in 2011, moderating gradually in subsequent years. Inflation is projected to decline to nine per cent by the end of 2011,' IMF said.
It added: “Near-term risks to growth mostly relate to domestic factors. On the upside, a shift in government spending towards capital formation and planned reforms in the power sector could boost growth, and passage of the Petroleum Industry Bill could unlock additional investments in the oil sector. On the downside, there is a greater risk of lower rather than higher oil production.”
Source: http://www.afriquejet.com
But IMF said inflation had been stuck in the low double digits for the past two years and foreign reserves have been falling, as the Central Bank of Nigeria (CBN) has focused on maintaining exchange rate stability and low interest rates.
It also observed that the fiscal stimulus intensified in 2010, notwithstanding the already solid growth performance and high inflation.
After rising by 10 per cent in 2009, consolidated public spending increased by 37 per cent in 2010. The non-oil primary deficit has increased by five per centage points to 32 per cent of non-oil Gross Domestic Product (GDP).
“Despite world oil prices well in excess of the budget benchmark price, the government spent all current oil revenues and drew on savings in the Excess Crude Account, at a time when stabilisation called for a rebuilding of buffers. Despite high inflation, the CBN reduced the rate on its standing deposit facility.
“In response to pressure on the currency, the CBN sold reserves rather than raise interest rate or let the exchange rate depreciate. The CBN recently raised interest rates, but short-term real interest rates remain negative,” IMF observed.
In spite of the government's huge spending on mostly overhead and recurrent formation, the IMF said the economic outlook for 2011 remained bright.
“The economic outlook remains positive and risks are generally balanced. Nigeria’s economy is projected to grow by seven per cent in 2011, moderating gradually in subsequent years. Inflation is projected to decline to nine per cent by the end of 2011,' IMF said.
It added: “Near-term risks to growth mostly relate to domestic factors. On the upside, a shift in government spending towards capital formation and planned reforms in the power sector could boost growth, and passage of the Petroleum Industry Bill could unlock additional investments in the oil sector. On the downside, there is a greater risk of lower rather than higher oil production.”
Source: http://www.afriquejet.com
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