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IMF cautions FG against reversal in capital flow, price shock

By on November 1, 2013

The International Monetry Fund, IMF, yesterday, urged the Federal Government to commence timely policy actions to avoid risk of oil price shock and the reduction in foreign capital inflow currently raring their ugly ‘heads’ in the country as well as other sub-sahara Africa region.

Speaking in Lagos during the presentation of Africa Regional Economic Outlook for the region, IMF Director, African Department, Antoinette Sayeh asked Nigeria to be serious in the implementation of timely policy actions.

In response, the Deputy Governor, Economic Policy, Central Bank of Nigeria, CBN, Mrs Sarah Alade, affirmed that the CBN was well  aware of all the risks involved and had put in place a strategies to prevent them.

In a presentation titled, “Sub-Saharan Africa: Keeping the Pace”, Sayeh identified the risks to include commodity price risk and the reversal of foreign capital inflows. She said the risks have risen, not only in Nigeria but in the Sub-Saharan region, significantly over the years.

“Looking forward, fiscal consolidation is expected to be strengthened in Nigeria with more moderate oil price projections. As a result, fiscal balance for 2013 and 2014 in Nigeria is projected to remain around 1.8 per cent of GDP, almost the same as in 2012.

“In Nigeria, government expenditure reached a cyclical maximum.
The risk of debt distress in many countries in our view remains low.
“Without significant policy measures, a prolonged negative oil price shock or a permanent real GDP growth shock could undermine the recent progress that had been made in achieving macroeconomic stability.

“Given Nigeria’s strong position, it is important for the country to take timely policy actions to be able to avert future sustainability problems that can arise from such shocks.

“Portfolio flows have gained attraction in some countries and mostly in Nigeria. Foreign Direct Investment, FDI, in Nigeria in 2013 and 2014 are expected to remain relatively unchanged.