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IMF’s ominous projections

IMF

The projection by the International Monetary Fund (IMF) to the effect that a third of global economies may slip into recession this year has raised concerns, especially in developing countries like Nigeria, which economy struggled to exit two successive recessions in 2016 and a third recession in 2018.

Dropping the hint on a television programme, the Managing Director of IMF, Kristalina Georgieva, said the situation was inevitable, especially with growth in the three biggest economies slowing down. The IMF boss argued that for the first time in 40 years, China’s growth in 2022 was likely to be at or below global growth.

The Fund had in October cut global economic outlook citing the effect of Russia-Ukraine war, high interest rate, and inflationary pressures for its projection. In a similar fashion, it also cut growth for sub-Saharan Africa to 3.6 per cent from 3.8 per cent.

Georgieva said: “We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like a recession for hundreds of millions of people. For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative.”

The new year is going to be “tougher than the year we leave behind as the major economies of the world – the US, Europe and China – experience weakening activity. Why? Because the three big economies – the US, EU and China – are all slowing down simultaneously,” she added.

At the beginning of the 4th quarter, the global financial institution in its forecast put Nigeria’s growth at 3.0 per cent from 3.2 per cent. The Fund said tightening fiscal conditions, and increase in the cost of imported goods was driving the contraction.

It is instructive tat President Muhammadu Buhari has already signed N21.83 trillion Appropriation Bill for 2023 into law, the first annual budget to take effect from January since the administration came into power on May 29, 2015 and, understandably, the last for the Buhari government. 

However, the decision by the National Assembly to increase the federal government’s expenditure from N20.51 trillion to N21.83 proposed in the 2023 Appropriation Bill has raised the projected deficit from N10.78 trillion to N12.1 trillion.

And with the dwindling oil revenue, leakages and extraneous factors, many fear that using over 60 per cent revenue to service its over N44 trillion debt would drag Nigeria into the number of countries that might lightly go into recession.

Speaking at the signing of the eighth and final annual budget of the administration, the president said the aggregate expenditures of N21.83 trillion was an increase of N1.32 trillion over the initial Executive Proposal for a total expenditure of N20.51 trillion.

He explained that the 2022 Supplementary Appropriation Act would enable the administration to respond to the havoc caused by the recent nationwide floods on infrastructure and agriculture sectors.

As is customary, he said, the Minister of Finance, Budget and National Planning, Haiya Zainab Ahmed, would subsequently provide more details of the approved budget and the supporting 2022 Finance Act.

”We have examined the changes made by the National Assembly to the 2023 Executive Budget proposal. The amended fiscal framework for 2023 as approved by the National Assembly shows additional revenues of N765.79 billion, and an unfunded deficit of N553.46 billion.

”It is clear that the National Assembly and the executive need to capture some of the proposed additional revenue sources in the fiscal framework. This must be rectified.

”I have also noted that the National Assembly introduced new projects into the 2023 budget proposal for which it has appropriated N770.72 billion. The National Assembly also increased the provisions made by Ministries, Departments and Agencies (MDAs) by N58.55 billion,” he said.

The president said his decision to sign the 2023 Appropriation Bill into law as passed by the National Assembly was to enable its implementation commence without delay, considering the imminent transition process to another democratically elected government.

He, however, directed the Minister of Finance, Budget and National Planning to engage with the legislature to revisit some of the changes made to the executive budget proposal, expressing the hope that the National Assembly would cooperate with the executive arm of government in this regard.

He urged the National Assembly to reconsider its position on his proposal to securitise the federal government’s outstanding Ways and Means balance at the Central Bank of Nigeria (CBN).

Although the IMF’s projections on the slide of national economies into recession on a global scale is a mere confirmation of earlier apprehensions on the trend, the case of Nigeria is particularly worrisome. The Nigerian economy is already bogged down by hyper-inflation, policy somersault and inconsistencies as well seemingly intractable high profile corruption.

It is, therefore, on the backdrop of this sordid reality that we urge the Buhari government, which tenure elapses on May 28, this year to, as a last ditch effort, move decisively against these evil forces that have over the years posed a stumbling  block to the growth of Nigeria’s economy and stifled the nation’s socio-political development.