IMF Advices Nigeria To Remove All Forms Of Fuel Subsidy

The International Monetary Fund (IMF)
on Friday stated that the current drop in
oil prices offers a unique opportunity for
Nigeria and seven other oil-producing
countries in Africa to implement
politically difficult oil subsidy reforms.
IMF’s Director for African Development,
Antoinette Sayeh who made the
submissions at a press conference in
Washington DC, United States of
America at the ongoing IMF/World Bank
Spring Meetings, added that in the short
run, dealing with oil shock should be the
priority.
Removal of oil subsidy in Nigeria and
other African countries has been a very
sensitive and controversial issue.
The IMF said although the eight African
oil exporting countries would be hard hit
with generally limited fiscal and external
pressure, they are expected to undertake
significant fiscal adjustment, which will
ultimately dent their growth outlook.
“Faced with a massive shock and with
limited buffers, oil exporters will have no
choice but to undertake fiscal
adjustment. Spending cuts should be
directed, to the extent, to non-priority
recurrent spending, but significant cuts
in public spending cuts in public
investment are unavoidable.
“Where feasible, exchange rate flexibility
will also be important, to preserve scarce
external reserves. The drop in oil prices
also provides a unique opportunity to
advance politically difficult energy
subsidy reforms across the region,”
Sayeh said.
But she noted that Sub-Saharan Africa’s
economic outlook remained favourable,
pointing out that the region is set to
register another year of solid
performance
However, she regretted that security-
related risks, including those posed by
Boko Haram and Al Shabab had recently
posed risks to the positive outlook.
“Indeed, the region’s economy is
expected to expand at four and half per
cent in 2015, and will continue being one
of the fastest growing region’s in the
world- in fact, second only to emerging
and developing Asia.
“That said, the economic expansion this
year will be at the lower end range
experienced in the recent years. This
mainly reflects the impact of the sharp
decline of the oil and commodity prices
that we have witnessed over the last six
months. However, as always for a region
with so much diversity, the effect of this
shock will be highly heterogeneous
across the region,” she said.
Although she observed that Nigeria and
the other seven other oil producers on
the continent would be hard hit, she said
much of the rest of the region’s near-
term prospects remained quite positive.
According to her, most countries stand
to benefit from lower oil prices, adding
that for some of them, this positive effect
will be partly offset by the decline in oil
prices of some of the non-oil
commodities they export.
“Overall, growth in oil importers, in
particular, low-income countries should
remain solid, driven by investment in
infrastructure and strong consumption.
Sayeh, however, pointed out that a
notable exception to this favourable
picture among oil importers was South
Africa, “where growth remains lack luster,
held back by continuing problems in
electricity sector.”
She pointed out that in addition, the
Ebola scourge, although abating,
continues to exact a heavy economic
and social toll on Guinea, Liberia and
Sierra Leone.
On whether the IMF could provide the
kind of financial support to countries
threatened by insecurity as was the case
with Ebola-affected nations, Sayeh said
such a possibility was fluid.
According to her, with dwindling revenue
and deficit budget profiles, such
countries needed some kind of support
from other countries to mitigate the
financial impact of fighting insurgency.