A TIMELY WARNING FROM THE IMF
Yet again, a cautionary advice on the vulnerability of the Nigerian economy and the need for government to put all hands on the plough, has come. This time, from the Managing Director of the International Monetary Fund (IMF), Ms Christine Lagarde. During a recent visit to Nigeria, the IMF boss advised government to take acute cognizance of recent happenings in the global economy and initiate genuine economic reforms that will stabilize the Nigerian economy and rebuild the nation's depleting oil and foreign reserves.
She noted that if the managers of the Nigerian economy and the leadership fail to retool the economy and prudently manage the resources, Nigeria risks an economic disaster with unpleasant consequences. This, she said, is likely because of looming global financial meltdown in which fragile economies such as Nigeria's could be most vulnerable.
Pointing at the present economic slowdown in advanced economies such as the United States and global debt crises in some European countries such as Greece, Poland, Spain and some Asian nations like China, Ms Lagarde, the first woman to hold the top post at IMF, stated that any future financial turbulence will adversely affect demands for Africa's exports for which Nigeria is the leading oil supplier to European markets and America. All of this, she added, will inhibit private and public financing, cash outflows and remittances and Foreign Direct Investments (FDI) to countries like Nigeria.
To get out of the trap, she called for proactive policy measures in the areas of fiscal buffers, fiscal discipline, formulation and implementation of people-friendly programmes as well as beefing up our oil and foreign reserves, realistic exchange rate, debt reduction and diversification of the economy.
Instructively, the warning from the IMF comes against the current niggling concerns about the management of the Nigerian economy and other unhealthy developments such as rising youth unemployment, insecurity and mounting debt profile. Her advice is not only forthright but timely. It can only be ignored at our own peril. In the past one year at least, concerned citizens and reputable financial institutions have expressed deep concern about the dwindling fortune of the economy, cautioning government to keep its eyes on the happenings in the global economy and the domestic issues such as debt crisis, budgetary deficits and their impact on the economy.
Undoubtedly, the advice by the IMF boss underpins the fact that no economy operates in isolation of external factors. Therefore, the management of any economy requires fiscal discipline, genuine reforms and good governance. At the moment, only few will agree that the wheel of the Nigerian economy is running smoothly. For instance, domestic debt has hit an all time high of N6 trillion, unemployment at 22 per cent, while the exchange rate has depreciated considerably, leading to the recent devaluation of our national currency. In short, the general economic outlook is bleak, and the cost of governance is rising. The fear is that Nigeria is on the brink of bankruptcy.
This fear, experts say, is real and constitutes a present danger to the economy and the country at large. The hard fact is for government to see the advice by the IMF boss as a wake up call and put itself in the thick of the challenges facing Nigeria. Exemplary leadership that is receptive and responsive is important. Policy consistency is necessary for the economy to have a steady and sustainable growth. There should be a genuine commitment to diversify the economic base, away from the present dependence on oil, as recent statistics show that Nigeria's oil reserves may dry up in about 30 years time. This suggests that all hands must be on deck to create new resource base. Beyond that, government should cut down on its expenditure as such profligacy ultimately leads to too much borrowing that can bring the economy to its kneels.
As government mulls over the timely counsel from the IMF, we call for a collective action on how to salvage the economy. This collective action must harness all the resource base, the necessary talents in the country and bring them to bear on the management of the economy because sound economic base is the main plank upon which meaningful development can take place.