By Peter OBIORA InvestAdvocate
Uyo (INVESTADVOCATE)-The International Monetary Fund (IMF) Wednesday said the Nigerian economy is expected to grow at seven percent (7%) and has insisted that Asset Management Corporation of Nigeria (AMCON) should be phased out gradually.
This is coming on the heels of the conclusion of the Fund’s Article IV consultation with the Nigerian authorities.
Gene Leon, the Fund’s mission chief and senior resident representative in the country said Nigeria’s economy has continued to perform strongly in 2013; but growth is projected to increase to about 7% in 2014.
The IMF said Nigeria’s real Gross Domestic Product (GDP) grew by 6.8% in the third quarter (Q3) of 2013 compared to the same period in 2012 supported by robust performance in agriculture, services and trade.
“Oil theft and production losses have adversely impacted export receipts and government revenues, leading to a significant drawdown from Excess Crude Account,” the IMF said.
According to the Fund, inflation declined to 7.8% (end-September 2013) from 12 percent at end 2012, in part owing to lower food prices and monetary policy implemented by the Central Bank of Nigeria (CBN). “Inflation should remain subdued in the single digits,” the Fund said.
The IMF affirmed that the Nigerian naira has been stable, and the banking sector is well capitalized with low levels of non-performing loans.
The IMF reported that Nigeria could be affected, however, by a decline in oil prices, the pace of recovery in global economic and financial conditions, capital outflows, continued losses in oil production, or increased security concerns; but said that the economy could still be managed due to relatively flexible exchange rate regime, improved financial crisis management capacity, and a stable banking system.
“Fiscal consolidation is progressing well, and the momentum needs to be preserved through the ongoing election cycle. Key public financial management reforms are underway, including the implementation of a Treasury Single Account (TSA) and integrated information management systems, but lower-than-budgeted oil revenues are impacting budgetary plans at Federal, State, and Local levels and highlighting the need for rebuilding fiscal buffers to manage oil revenue volatility. Moving toward a sustainable non-oil primary deficit path will require resolve in continuing fiscal consolidation, including through resisting procyclical election spending, mobilizing non-oil revenue, improving efficiency in the public sector, and strengthening transparency in oil sector governance,” the IMF said.
According to the IMF, Nigeria’s current monetary stance is appropriate and should remain geared towards sustaining low inflation and a stable financial system.
Managing liquidity in the banking system remains a priority, and will be aided by the implementation of the TSA and prudent fiscal management. Likewise, the CBN has maintained stability of the naira, containing inflation and facilitating business confidence.
Also, the IMF has insisted that AMCON should be phased out gradually due to ongoing initiatives to strengthen the supervisory framework, including supervision of banking groups.
The Fund in the beginning of the second quarter (Q2) of 2012 advised the Nigerian authorities to wind down the activities of AMCON in order to curb moral hazard and fiscal risks.
Mustafa Chike-Obi, Managing Director/ Chief Executive Officer (MD/CEO) of AMCON has said that the aggregate face value of the non-performing loans to be purchased in the first phase is about N2.2 trillion and the Asset Management Corporation is buying them at an appropriate price of between N800 billion and N1trillon.
