On Thursday, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, advised Nigeria and other African countries to strengthen their fundamentals to withstand the shocks and tensions of the US tariff war with other economies of the world, especially China.
Ms Georgieva noted that for oil producers like Nigeria, a lot can still be done on the fiscal side to have strength amid heightened global uncertainty and falling oil prices.
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The IMF boss made the call in her Managing Director’s Global Policy Agenda at the ongoing Spring Meetings of the World Bank and IMF in Washington.
Speaking specifically to Nigeria’s budgetary concerns amid tariff tension, low oil prices, and global uncertainty, she explained that Nigeria faces a peculiar problem that is different from those of other economies.
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“For the oil producers like Nigeria, falling oil prices creates additional pressure on their budgets. On the other hand, for the oil importers, this is a breath of fresh air,” she said.
“In other words, as you indicated in your question, different countries face different challenges. If I were to come with some basic recommendations that apply to Africa, I would say—and actually they apply to Nigeria, they apply to Egypt, they apply to Ghana, they apply to Coté d’Ivoire.
“First, continue on a path of strengthening your fundamentals. There is still a lot that can be done on the fiscal side to have strength. As I was talking about ASEAN, to have buffers for a moment of shock. And do not use any excuses, oh, it is difficult, we cannot really go for more tax because, yes, you can. There is a lot that can be done to broaden the tax base and a lot that can be done to reduce tax evasion and tax avoidance.”
Oil prices plummeted in the international market in recent weeks amid global uncertainty and tension within the oil-producing cartel, OPEC. Brent crude fell by more than 2% as markets measured the possibility of a faster production increase, hovering around $66 a barrel.
With its budgetary provisions pegged at a crude oil benchmark of $75 per barrel, there have been concerns about the threats that low crude oil prices and revenues constitute for the nation’s economy.
Earlier on Wednesday, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, told investors and fund managers that the government has outlined key strategies to address the impact of falling oil prices and budget shortfalls on the Nigerian economy.
The minister said the government would prioritise some forms of payments, diversify the economy, improve oil production, maximise costs, and stay within the constitutional threshold for budgetary allocation.
Continental Shock
In her address Thursday, Ms Georgieva noted that over the last few years, the African continent recorded some of the fastest growing economies, but low-income countries primarily, and among them fragile conflict-affected countries, fell further behind.
“And now this is a shock for the continent. The direct impact of tariffs on most of Africa, not on all of Africa, but on most of Africa is relatively small, but the indirect impact is quite significant. Slowing global growth means that all other things equal, they will see a downgrade. And actually, we have downgraded growth prospects for the continent,” she said.
She advised the governments to deploy technology for tax administration and collection to boost revenues.
“Second, on the monetary policy side, we know more as I said in the opening—we are no more in a place when you can look at the book of the Central Bank Governor of the neighbouring country and say, oh, they are doing this, I will do the same, because you have to really assess domestic resource mobilisation, what is your inflationary pressures and do the right thing for your country.
“But above all, make it so that the image of the whole continent changes because now everybody suffers from wrongdoing, from corruption or from conflict in one country. It throws a shadow on the rest of the continent.
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“Finally, like with ASEAN (Association of Southeast Asian Nations), deepen interregional trade and cooperation. Remove the obstacles to it. Sometimes there are infrastructure obstacles. The World Bank is working on reducing that infrastructure obstacle to growth and trade.”
Ms Georgieva noted that Africa has so much to offer the world, such as minerals, natural resources, and the young population that must be harnessed for optimal growth.
“I think a more unified, more collaborative continent can go a long, long way to [becoming] an economic powerhouse,” she said.
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