Monday, October 30, 2017

Nigeria: The Path To Recovery

Nigeria: The Path to Recovery 

WASHINGTON, 30 October 2017 / PRN Africa / -- A recovery in oil production and a good harvest in Nigeria, as well as the easing of tensions in the Niger Delta accounts for more than half of the additional growth.

The policy environment has started to improve. Fiscal deficits are stabilizing and current account deficits are narrowing, partly reflecting a slight rebound in commodity prices. The global environment has also been supportive, with strengthening growth momentum in the largest economies, commodity prices off their troughs, and improved access for sub-Saharan African economies to international capital markets.

But while a third of sub-Saharan African countries continue to grow at about 5 percent, income per capita will barely increase in the region. Moreover, in 12 of the 45 sub-Saharan African countries, home to about 40 percent of the region's population, or 400 million people, per capita incomes are expected to decline.

Beyond 2017, growth is expected at about 3½ percent, below the 5 percent mark achieved in the first half of the decade.

Mounting vulnerabilities

Vulnerabilities have increased in the region, notably, due to rising public debt, financial sector strains and low external buffers. Public debt is high not only in oil exporting countries but in many fast-growing economies as well. At the end of 2016, public debt exceeded 50 percent of GDP in nearly half of the sub-Saharan African countries. Debt servicing costs are also becoming a burden, especially in oil-producing countries. In Angola, Gabon, and Nigeria they absorb more than 60 percent of government revenues.

Driving this increase in debt is a combination of large fiscal deficits, a slowdown in growth, and in some countries, exchange rate depreciations. Increasingly, deficits are being financed by domestic banks and ultimately constraining the availability of credit to the private sector. In many countries, banks' liquidity and solvency indicators have deteriorated, and non-performing loans have increased. Despite some narrowing in current account deficits, international reserves are now below adequacy levels in many countries, especially those with fixed exchange rate regimes.

SOURCE International Monetary Fund (IMF)

RELATED: IMF Calls for Action to Strengthen Economic Recovery in Sub-Saharan Africa

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