20 April 2015, Lagos – Director, African Department of the International Monetary Fund (IMF), Ms. Antoinette Sayeh, has called for fiscal adjustments among African oil exporting countries in view of the downturn in revenue and limited buffers.
Ms. Sayeh, who addressed the Africa Region reporters at the ongoing Spring Meetings of the World Bank and the IMF at the weekend in Washington DC, United States (U.S.), said spending cuts should be directed to the extent possible, not only to non-priority recurrent expenditure, arguing that significant cuts in public investments are unavoidable. Where feasible, exchange rate flexibility will also be important, to preserve scarce external reserves, she added.
Ms Sayeh said the drop in oil prices also provides a unique opportunity to advance politically difficult energy subsidy reforms across the region.
She said: “From a more medium-term perspective, the current commodity price shock is also a powerful reminder of the need to make more rapid progress towards economic diversification and structural transformation to ensure strong and durable growth.
“This will require striking the appropriate balance between scaling-up outlays on human capital and infrastructure development and avoiding an unsustainable public debt built-up.”
Besides, she urged countries in the region seeking to raise funds through sovereign bonds to be wary of exchange rate volatility – especially with the U.S. dollar, which has recently risen in value.
On growth, she was very bullish, stressing that countries in the region will expand by 4.5 per cent and will “continue being one of the fastest growing regions in the world-in fact, second only to emerging and developing Asia.”
Acknowledging that the region’s eight oil exporters including Nigeria, will be hard hit by the falling oil prices, Sayeh stressed the need for spending cuts, diversification of the economy, exchange rate flexibility and structural transformation to ensure strong and durable growth.
Oil prices have plunged by more than 50 per cent since June last year, curbing revenue and investment plans in Nigeria which relies on crude proceeds for about 75 per cent of government’s revenue.
Foreign reserves, which the Central Bank of Nigeria (CBN) uses to defend the naira, have also slumped to $29.514 billion as at last Monday.
Reacting to these developments, the Federal Government late last year announced a set of austerity measures, which included cancellation of overseas training for civil servants and the introduction of luxury taxes for certain goods and aircraft, among other cost-cutting measures.
– The Nation