Nigeria needs to recalibrate its budget for lower oil prices, says IMF
Releasing the results of its routine 'Article IV' assessment of Nigeria's economic policies, the IMF said economic growth had been steady but too low in per capita terms with inflation remaining high. The Fund predicted the country's economy would expand at 3.4 percent this year and 3.2 percent in 2026.
As Africa's largest oil producer, Nigeria is under strain from relatively low international crude prices, which traded around $68 a barrel on Wednesday.
'The international economic environment that Nigeria lives in and operates in is marked by the very, very large uncertainty, and in particular, international oil price volatility impacts Nigeria directly through the fiscal and the external balances as well as inflation,' said Axel Schimmelpfennig, the Fund's mission chief for Nigeria.
The complex outlook made it especially important for policymakers to build and maintain buffers while being ready to respond to shocks or seize opportunities.
'Turning to our policy messages, the key challenge now is to tackle high poverty and food insecurity,' he said further.
Nigeria's government has supported the poorest part of its population through direct cash transfers since 2007 but has struggled to scale them up because of a lack of data on their impact and as large numbers of the population have no bank account.
The 2025 budget is squeezed by Nigeria's assumption of oil production of 2 million barrels per day and an oil price of $75 a barrel.
International Brent crude futures spiked higher last month in response to tension in the Middle East but are under pressure from a shift in policy by the OPEC+ group, of which Nigeria is a member, to regain market share rather than curtail supply.
'Achieving the government's 2025 budget targets will require additional measures, largely reflecting the drop in oil prices compared to when, when the budget was approved,' Schimmelpfennig said in a briefing to journalists.
'Keeping the fiscal deficit a percent of GDP unchanged, compared to 2024 will be important to support the fight against inflation,' he added.
Recouping fuel subsidy savings and making administrative gains could mobilize some domestic revenues, but the central bank needed to maintain a tight stance and a positive real rate to bring down inflation and support stability, the Fund said.
It said savings from fuel subsidies would amount to 2 percent of 2024 GDP.
Asked about the naira currency and Nigeria's FX markets, Schimmelpfennig said reforms by the government and central bank had been far reaching and fundamental with the result supply and demand was more in balance.
'When we talk to investors, they're happy. They can invest in Nigeria, and when they want, they can bring their proceeds out,' he said. 'You look at the parallel market and the official rate, they're aligned.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Arabiya
5 hours ago
- Al Arabiya
Morocco Bets on Video Game Industry to Provide Jobs and Diversify Economy
Morocco is laying down foundations to build a homegrown gaming industry by establishing a developer hub in the capital, training coders, and launching programs to draw tech-savvy youth into the sector. State officials invited developers, students, and tech companies from around the world to a gaming expo in Rabat this week, where guests tested new games, competed in e-sports tournaments, and heard about new initiatives to bring the burgeoning industry to Morocco. Attendees at the Morocco Gaming Expo battled through shooting games, explored immersive virtual reality worlds, tested educational platforms, and mingled with mobile providers eager to stake their claim in the growing mobile gaming market. The event, in its second year, is one of the few ways in which African countries are diversifying their economies and attracting new industries for their young workforces. Morocco is positioning itself as one of Africa's first countries to roll out targeted strategies for the gaming industry. Mehdi Ben Said, Morocco's Minister of Youth, Culture, and Communication, said the government aims to both attract international game companies to Morocco and incentivize Moroccan developers to create their own products. With youth unemployment close to 30 percent and many young people eyeing opportunities abroad, the gaming industry could be a way to spark job growth and diversify opportunities, he said. 'The objective is not only to generate revenue but also to empower youth,' Ben Said said. 'We must offer real alternatives to our young people by opening up new career opportunities.' With more than $200 billion in annual revenue and 3 billion players, the global market for video games is undergoing rapid growth. But even as smartphones have become ubiquitous in the Middle East and Africa, the industry has remained concentrated in East Asia, North America, and Western Europe. Driven primarily by game sales, Morocco's industry currently generates over $500 million annually, according to state officials, who aim to double this revenue by 2030. Morocco is launching training programs in game design, programming, and virtual reality alongside an industrial park where startups can incubate new games. The initiative includes a $26-million investment to open Rabat Gaming City, featuring training, co-working spaces, and full-scale production studios. For students, the industry offers a chance to turn a passion into a career, said Fadwa Bezzazi, coordinator of Universite Mohammed V's undergraduate club in computer science and virtual reality. 'Students who are already spending money on mobile or PC games want to find ways to put what they're learning in the classroom into practice. I'm not going to say we're preparing them for the future because that future is already here,' she said.
Al Arabiya
6 hours ago
- Al Arabiya
Ethiopia Says a Controversial Power Dam on the Nile That's Opposed by Egypt Has Been Completed
Ethiopia's prime minister said Thursday that a controversial power dam on the Nile is now complete – a major milestone for his country amid a dispute with Egypt over equitable sharing of the water. Egypt has long opposed the dam because of concerns it would deplete its share of Nile River waters. Egypt has referred to the dam – known as the Grand Ethiopian Renaissance Dam – as an 'existential threat' because the Arab world's most populous country relies almost entirely on the Nile to supply water for agriculture and its more than 100 million people. Negotiations between Ethiopia and Egypt over the years have not led to a pact, and questions remain about how much water Ethiopia will release downstream if a drought occurs. Ethiopian Prime Minister Abiy Ahmed, in his address to lawmakers Thursday, said his government is preparing for its official inauguration in September. 'While there are those who believe it should be disrupted before that moment, we reaffirm our commitment: the dam will be inaugurated,' he said. Abiy said his country remains committed to ensuring that 'our growth does not come at the expense of our Egyptian and Sudanese brothers and sisters. We believe in shared progress, shared energy and shared water,' he said. 'Prosperity for one should mean prosperity for all.' Ethiopia and Egypt have been trying to find an agreement for years over the $4 billion dam, which Ethiopia began building in 2011. Tensions over the dam – the largest in Africa – once were so high that some observers feared the two countries might go to war over it. But Ethiopia won the diplomatic support of upstream nations such as Uganda, home to a regional partnership of 10 countries that last year signed an accord on the equitable use of water resources from the Nile River basin. The accord of the partnership – known as the Nile Basin Initiative – came into force in October without being ratified by Egypt or Sudan. The dam on the Blue Nile near the Sudan border began producing power in 2022. The project is expected to ultimately produce over 6,000 megawatts of electricity, which is double Ethiopia's current output and enough to make the East African nation of 120 million a net energy exporter. The dam is located about 500 kilometers (311 miles) northwest of the Ethiopian capital of Addis Ababa. It is 1,800 meters long and 175 meters high and is backed by a reservoir that can hold up to 74 billion cubic meters of water, according to the main contractor. Ethiopia insists the dam is a crucial development that will help pull millions of its citizens out of poverty and become a major power exporter. It was not immediately possible to get a comment from Egypt, which has long asserted its rights to Nile water according to the terms of a colonial-era agreement. The agreement between Egypt and the UK gave downstream Egypt and Sudan rights to the Nile water, with Egypt taking the majority. That agreement, first signed in 1929, took no account of the other nations along the river basin that have demanded a more equitable accord.
Arab News
6 hours ago
- Arab News
Pakistan pushes ahead with agri bank privatization under IMF-backed reform plan
KARACHI: The government on Thursday appointed a consortium of financial advisers for the sale of Zarai Taraqiati Bank Limited (ZTBL), a state-owned agricultural lender, according to an official statement. The decision, made during a meeting of the Privatization Commission (PC) Board chaired by Muhammad Ali, Adviser to the Prime Minister, signals the government's intent to fast-track key transactions under its broader economic reform program. The board approved the selection of a consortium led by Next Capital Limited, which ranked highest among six qualified bidders. 'ZTBL is among the priority transactions in the current privatization pipeline. The appointment of a top-tier consortium of FAs [financial advisers] reflects the government's strong commitment to executing the process in a professional, transparent and timely manner,' the Privatization Commission said in a statement. Pakistan's privatization program, long encouraged by the International Monetary Fund (IMF) under various loan arrangements, is aimed at reducing fiscal losses from poorly performing state-owned enterprises (SOEs), improving governance and boosting private sector participation. The IMF has repeatedly called for structural reforms, including divestment from commercial entities, to ease pressure on public finances and strengthen the country's economic outlook. Alongside the appointment, the PC Board also approved the formation of a Negotiation Committee to finalize the Financial Advisory Services Agreement (FASA) with the selected consortium. Other shortlisted bidders included major consortiums led by Arif Habib Limited, A.F. Ferguson, AKD Securities, Bridge Factor and JS Bank. ZTBL provides agricultural credit and rural banking services across Pakistan. Its privatization is seen as part of a broader effort to reform the financial sector and reduce the state's commercial footprint.
