The International Monetary Funds (IMF) says Nigeria has acted wisely by instituting crucial reforms in exchange rate, and removing petrol subsidies that hurt government’s revenue deployment and funding for critical projects.
Director of the African Department, at the IMF, Abebe Selassie, communicated the Fund’s position during the presentation of Regional Economic Outlook for Sub-Saharan Africa, at the ongoing IMF/World Bank Spring Meetings in Washington DC.
He said: “The Fund said it has been really impressed by how much reforms have been undertaken in recent years, most notably trying to go to the heart of the cause of the macroeconomic imbalances in Nigeria. That , of course, are related to the fact that oil subsidies were picking up a very large share of the limited tax revenues that the government have tackled that”.
Meanwhile, the Director-General, World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala, said that Africa’s trade with the United States is very limited so the continent as a whole is not that impacted by tariff hike by the US.
Speaking at the sidelines of the ongoing IMF/World Bank Spring Meetings in the US, she said that WTO has done the analysis.
“Subs Africa exports. 6.5 per cent of Africa’s exports only go to the US, and 4.4 per cent of its imports come from the US. So, the impact for the continent as a whole is not that bad. However, it’s good news and bad news. Good news is that it’s limited. Bad news is, well, we’re not trading that much, which is not a good thing,” she said.
She added: “But the problem is that within Africa, there are a handful of countries that are very severely impacted because they’ve got high reciprocal tariffs put on them, and these are poor countries.”
Selassie disclosed that before the subsidy removal, government’s revenues were not necessarily being used in the most effective way to help the most vulnerable people.
According to him, here was also the issues related to the imbalances in the external side with the exchange rate extremely out of line.
Selassie applauded government’s expansion of social protection to help the most vulnerable.
“This has all been very good to see, but more can be done, particularly on expanding social protection and also enhancing a lot more transparency in the oil sector so that the removal of subsidies does translate into flow of revenue into government budgets. So, there’s a little bit more work to do in these areas,” he said.
He said many African economies have made significant progress in infrastructure funding, including building of roads, schools, and other key infrastructure.
He however, asked that the governments should effectively collect taxes to enable it bridge budget deficits and support more growth of the economy.
In terms of the reforms, Selassie said the pressing thing, is that we have been really been impressed by how much reforms have been taken at the moment.
He said that government should look at how reforms savings have been spent, and ensure that such funds are committed to projects that help the poor and vulnerable in the society.
He said: “Removal of petrol subsidy means more revenue for government. I advise that government diversifies the economy from oil, given what is happening to commodities prices at the global markets. I do not advocate for spending cut, even as borrowed funds should optimised for societal good”.
Okonjo-Iweala added: “I’ll just use two as an example. One is Lesotho, that everybody is talking about, that has 50% reciprocal tariffs. It exports $200 million worth of textiles to the US, imports about $3 million worth of goods from the US. So very little. And if you look at that, if those tariffs are implemented on Lesotho, it will lose almost half a percentage point of its GDP growth, which is huge for a poor country”.
She said the WTO has asked the US, to look at least developed countries, the poorest, and to try to waive these reciprocal tariffs to remove them, so that the poorest countries and Africa as a whole, that we don’t have these tariffs on us.
She advised that Africa should do more within the continent, to rely on its own resources.
She said: “So, when you need investment, you have to do so much more in terms of mobilizing domestic resources to put infrastructure in place, removing bureaucratic barriers so investment can come in”.
“And this is what we need to do. And we need to trade more. We cannot trade more externally, where our trade is only three per cent of world trade, or internally, where intra Africa trade is 16 to 20 per cent at most. If we don’t add value to our products, we keep exporting the same things, you know, commodities that are not processed, we don’t create jobs. We must attract investment to change that, and then trade internally”.
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