IMF Projects $19bn Oil Import Bill, Trade Imbalances For Nigeria, Others
International Monetary Fund (IMF) has said that higher oil prices will boost the import bill for Nigeria and other oil importers by about $19 billion, thereby worsening trade imbalances and raising transport and other consumer costs in sub-Saharan Africa. It also urged oil exporters in the region to build buffers that could shield them from further economic shocks as inflation in the region is expected to remain elevated in 2022 and 2023 at 12.2 per cent and 9.6 per cent respectively—the first time since 2008 that regional average inflation will reach such high levels.
The fund noted that the effects of the Russia/Ukraine war would be deeply consequential, eroding standards of living and aggravating macroeconomic imbalances.
The fund further said that Sub-Saharan African countries would find themselves facing another severe and exogenous shock.
The IMF is particularly worried that the promising recovery in the region has been disrupted by the war in Ukraine which has exacerbated the already bad fiscal conditions created by the COVID-19 pandemic, leaving no room for manoeuvre.
To enhance resilience to future crises, the fund noted that it was important for these countries to develop effective social safety nets, adding that digital technology, such as mobile money or smart cards, could be used to better target social transfers, as Togo did during the pandemic.
According to IMF, commodity-importers, such as Benin, Ethiopia and Malawi, would need to find resources to protect the vulnerable by reprioritising spending.
It added: “Net exporters, like Nigeria, are likely to benefit from rising oil prices, but a fiscal gain is only possible if the fuel subsidies they provide are contained.
“It is important that windfalls are largely directed to strengthen policy buffers, supported by strong fiscal institutions.”
Economic recovery in the region picked up in the third quarter of 2021 and held up despite the onset of a fourth COVID-19 wave at the end of the year.
It stressed that growth in 2021 had been revised upward from 3.7 to 4.5 per cent.
But this progress has been offset by recent events, especially the Russian invasion of Ukraine which triggered a sharp rise in commodity prices—straining the fiscal and external balances of commodity-importing countries and increasing food-security concerns across the region.
As a result, economic activity is expected to slow to 3.8 per cent this year and is subject to an extraordinary range of risks, the IMF said in the report.
The IMF’s Director of African Department, Abebe Aemro Selassie explained during the press conference the main findings of the Fund’s latest Regional Economic Outlook for Sub-Saharan Africa titled: “A New Shock and Little Room to Maneuver” that the war in Ukraine had already reshaped the near-term outlook for sub-Saharan Africa.
Selassie said: “Why we are very concerned relative to 2008/9 in Sub Saharan Africa is at least back in 2008/9 financial crisis, countries had some buffers some room for manoeuvre. Debt levels were very limited. So countries were able to have a robust fiscal response to that crisis.
“This time, one reason why we’re very worried is that room for manoeuvre has been exhausted even before the pandemic debt levels.