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IMF: Reforms in energy sector critical to Nigeria’s economic growth

 

Tony Chukwunyem

Nigeria will have to implement key reforms in its energy sector if the country is to  record strong economic growth this year, the International Monetary Fund (IMF) has said.
Director of the IMF’s African Department, Mr. Abebe Aemro Selassie, stated this at a press briefing on the release of the Fund’s latest  Regional Economic Outlook for Sub-Saharan Africa Thursday.
Responding to a question on whether the IMF’s 2.5 percent growth forecast for Nigeria this year was not too ambitious given the country’s current challenges, Selassie said: “In the case of Nigeria, ensuring that the country enjoys — unleashes its tremendous potential requires reforms in three areas in our view. I think first and foremost, is that more fiscal space needs to be created through domestic revenue mobilization to pay for investments in health, in education, in infrastructure, which Nigeria swiftly needs, so that’s really.
“Second, I think reforms in the energy sector are going to be paramount. The cost of doing business is very high on account of the inefficiencies in the energy sector, power supply interruptions, and the famous recourse of the use of highly inefficient and harmful generator use up and down the country. Again, getting power supply, getting policies to make sure that Nigeria resolves this problem once and for all, I think, is also paramount. And thirdly, macroeconomic policy calibration, things like creating deep and liquid foreign exchange markets will be important.”
Commenting on the Regional Economic Outlook report, Selassie, said: “Sub-Saharan Africa is continuing to grapple with an unprecedented health and economic crisis. Since our last assessment of the Regional Economic Outlook in October 2020, the region has confronted a second pandemic wave, which outpaced the scale and speed of the first. And many countries continue to face or are bracing for further waves, particularly as access to vaccines remains scant.
“The pandemic has had a devastating impact on the region’s economy. The estimated ‑1.9 percent contraction in 2020 is somewhat less severe than anticipated last October, but it is still the worst year on record. While the region is projected to grow by 3.4 percent in 2021, per capita output is not expected to return to 2019 levels until after 2022.
“The economic hardships have caused significant social dislocation, with far too many being thrust back into poverty. In many countries, per capita incomes will not return to pre-crisis levels until 2025. The number of extreme poor in sub-Saharan Africa is projected to have increased by more than 32 million. The ‘learning loss’ has been enormous, with students missing 67 days of instruction, more than four times the level in advanced economies.”
Selassie said that given that the immediate priority in the region is to save lives, more funding should go into strengthening health systems and cover vaccine procurement and distribution, adding that excess doses in wealthy countries should be redistributed quickly.
“The next priority is to reinforce the recovery and nurture the region’s growth potential through bold and transformative reforms. These include digitalization, trade integration, competition, transparency and governance, and climate-change mitigation,” he added.
He stressed that while the international community, including the IMF, has moved swiftly to help cover the region’s emergency needs last year, further support will be essential to regain ground lost during the crisis.
He cited the potential general allocation of Special Drawing Rights (SDR) from the Fund, which he said, would help provide liquidity to most vulnerable sub-Saharan African countries.
Furthermore, the IMF Director said: “To help boost spending on the pandemic response, maintain adequate reserves, and accelerate income convergence, sub-Saharan Africa’s low-income countries face additional external funding needs of about $245 billion over the next five years or $425 billion for the whole region.”

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