The International Monetary Fund (IMF), yesterday admonished Nigerian authorities to, as much as possible, keep to fiscal prudence as a sure way of minimising the adverse effects of prevailing soft oil prices on the economy.
Christine Lagarde, the fund’s managing director, said at the ongoing Spring Meetings of the IMF and the World Bank, in Washington, that cutting down public spending and removing all forms of subsidies often funded with public resources could be part of the options left for Nigeria and other oil exporting countries to overcome current threats posed by declining crude prices at the international markets.
Nigeria, Africa’s largest economy by GDP, derives much of its FX revenue from sale of crude petroleum products, but imports refined products to meet local demand.
But the country and other Organisation of Petroleum Exporting Countries (OPEC), have since June of 2014, suffered a loss of over 50 percent in crude oil price, which continues to threaten budget implementation and other obligations.
Even as government intensifies efforts at expanding income sources, soft oil prices have dealt a crushing blow to Nigeria’s revenues, depleting reserves to intolerable low levels.
This has led to a set of austerity measures being announced last year, including reduction in overseas training by government officials that could help curtail spending as it gets increasingly difficult to effectively implement budget.
At the opening press conference of the Spring Meetings, Christine Lagarde raised concerns noting that the government so much talked-about economic diversification were yet to impact on the Nigerian citizens. She urged the government to take more concrete steps to stem the vulnerability that could arise in the face of the falling oil prices.
Jim Young Kim, the World Bank Group President, corroborates Largrde’s position that critical reform programmes were critical for Nigeria and other developing countries to promote growth.
“Ambitious reform plans signal to investors that governments are proactive about improving long term prospects,” Kim stated at a separate opening press conference of same meetings. “This boosts confidence and often translates into larger capital inflows and lower borrowing,” he added.
Speaking on the impact of falling oil prices of developing countries, Kim said the “picture is mixed” , adding that while lower prices would help reduce poverty, especially in oil importing nation’s, they would also adversely raise poverty and reduce incomes in exporting countries like Nigeria.
ONYINYE NWACHUKWU
