The
International Monetary Fund, IMF, yesterday cautioned Nigeria against reckless
spending in view of the growing uncertainty in the global economic environment.
IMF Senior Resident Representative in
Nigeria, Mr. Scott Rogers, gave the warning while presenting the World Economic
Outlook in Abuja.
He urged the Federal Government to
take advantage of the current growth to strengthen her fiscal position by
saving for the future through appropriate polices, “as there is no assurance of
early global economic recovery.
”Rogers said: “The global economic
outlook remains uncertain. The global context has continued to witness slowing
growth mostly marked in the advanced economies.
“The US housing prices remain
depressed and that nation’s week economy is impacting negatively on many other
countries of the world because the US is an export destination of many
countries of the world. The US economy is recovering but the recovery is still
weak.
“If the world economy remains weak, it
will continue to affect countries of the world, especially those with strong
ties with the US and the Euro area which could actually go into recession.
According to him, “Export growth in
Sub-Saharan Africa has remained weak due to the weakening economies of the
advanced countries.”
The IMF chief projected that the situation
could be worse if by January, President Barack Obama failed to reach a deal
with the Congress to raise the deficit ceiling.
“That will mean raise in tax rates and
cut in government expenditure across board which could further weaken the
growth or even throw the economy into recession”, the IMF official said.
Rogers noted that the Nigerian economy
“stands the risk of being faced with lower crude oil prices due to weak global
economy and that in view of this likely negative oil price trend, a high oil price
benchmark for the 2013 budget as being proposed by the National Assembly could
hurt the economy.”
On the way out of the current
challenges, Rogers said there was need for the nation to generate fiscal
surplus while oil prices were high and use it to build the nation’s reserves,
rather than drawing down the Excess Crude Account to be spent.
“Stop spending what is meant to be
saved. Make the oil price rule effective,” he said.
On the petroleum sector, the IMF chief
said that about 80 per cent of petrol consumed in Benin Republic was being
smuggled from Nigeria.
He added that the smuggling, which had
been on for over two decades, had continued to boom due to the high incentive
of high profit on the sale of the commodity in that country and other
neighbouring countries “because Nigeria’s petrol price is the lowest in the
region.”
He attributed the noncompetitive
pricing of petroleum products between the country and neighbouring countries in
the West African sub-region to the fuel subsidy regime which Nigeria had been
sustaining to her national disadvantage.
The IMF boss said: “80 per cent of PMS
consumed in Benin is from Nigeria. Nigeria’s oil price is the lowest in the
region. This has been going on for many years and not a new phenomenon. It will
continue.
“As long as your prices are far below
prices in other countries around you, you will always have products smuggling.
Wouldn’t you like to have efficient
refineries? Wouldn’t you like to see the queues go away and the funds spent on
petroleum subsidy to be redeployed to other critical sectors? Wouldn’t you like
to have better-funded educational sector? Wouldn’t you like a better health
sector? Better transport system?” he asked.
The nation’s external reserves rose to
a 32 month high of $42.56bn this week due to tightening of leakages and a more
prudent fiscal outlook but the Federal Government and states have had a running
disagreement on how to utilise increased earnings from strong oil prices in the
past year.
The Coordinating Minister of the
Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala had proposed
aggressive savings to prepare Nigeria for a possible downturn in the future,
which had resulted in the creation of the Sovereign Wealth Fund but some state
governors had insisted on sharing the funds to finance projects.
There have also been concerns about
Nigeria’ rising domestic debt which threatens become huge problem in the future
while stifling access to credit by businesses.
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