IMF Advises Buhari over Forex Policy

IMF has advised President Muhammadu Buhari on its forex policy to help alleviate the economic downturn currently faced in the country.

Christine Lagarde, managing director of the International Monetary Fund (IMF), says Nigeria’s economic situation is alarming, calling for a flexible exchange rate regime.

Speaking on the World Bank/IMF special edition of BBC’s HardTalk anchored by Stephen Sackur, Lagarde said Nigeria has a huge potential, especially in her youth.

Largade maintained that IMF was ready to help Nigeria, appealing to President Muhammadu Buhari to take steps to move in the direction of “flexible exchange rate”.

“We are not suggesting that flexible exchange rate is the panacea in all cases, but in this particular instance, we believe that it would help,” she said.

“I know it is going to be difficult, and we very much hope that the Nigerian government under the leadership of President Buhari will be able to distinguish the value of moving in that direction, rather than causing the circumstances that can precipitate, a much more difficult decision making process at some stage.

“We remain completely available to help, we believe that it is doable, it can be address.” Lagarde Sackur

She described Nigeria as a great country with huge potential, but decried the current economic situation.

“Nigeria has very strong resourceful and great people. The right policy mix is needed, which include, in our view, flexible exchange rate,” she said.

“Nigeria is one of those countries where there’s huge potential, fantastic youth but also a very alarming economic situation. It is heavily dependent on the oil resources.

“Both in terms of fiscal revenue and exports. As a result of that, we have gone public and actually gone to the senate of Nigeria to explain our views, we believe that a more flexible exchange rate is in the interest of the Nigerian population.

“If that doesn’t happen, we would continue to see the dual exchange rate, and putting in place a list of those product and services that are forbidden in Nigeria for import purposes, cannot be a substitute to a more flexible exchange rate.”

 

 

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IMF Predicts Gigantic Growth Rate in Mozambique' Economy

 

 

Maputo — The International Monetary Fund (IMF) predicts that Mozambique's average growth rate during the first half of the next decade could reach the staggering figure of 24 per cent per annum.

This optimism is based on the assumption that gas processing facilities in the Rovuma Basin, in the far north of the country, will begin production in 2021.

 

In a report released on Thursday, the authors calculate that by middle of the decade half of the country's output will be generated by natural gas.

 

Off the coast of the northern province of Cabo Delgado huge gas reserves have been found in Rovuma Basin Area 1 and Area 4 totalling an estimated 180 trillion cubic feet of gas. The two operators, US company Anadarko (Area 1) and Italy's ENI (Area 4) are currently developing plans to build Liquefied Natural Gas (LNG) plants to market the gas.

 

The report expects the total investment in these two areas to exceed a hundred billion US dollars. Once production reaches its peak, Mozambique could become the world's third largest LNG exporter after Qatar and Australia.

 

These predictions are based upon the expectation that the two operators will take their Final Investment Decisions (FID) by the middle of this year. However, the IMF acknowledges that gas prices have dropped substantially and further price decreases could pose risks to the viability of the planned liquefaction plants.

 

Despite this, the report assumes that LNG production will begin in 2021, with Area 1 producing about 5.5 million tonnes of LNG a year and Area 4 producing about three million tonnes a year. Funds from initial production are expected to finance the construction of additional LNG units, known as trains, leading to a total of 13 onshore trains and 4 floating trains.

Total production could reach 89 million tonnes of LNG per year by 2028.

This would have enormous implications for the country.

 

Not only would it provide employment, but would transform the financial resources available to the state.

 

The report uses the IMF's own Fiscal Analysis of Resource Industries model to estimate that the average real GDP growth rate between 2021 and 2025 could reach 24 percent. It estimates that after LNG production reaches its peak in 2028, the real GDP growth will moderate to between three and four per cent, with the underlying non-LNG growth rate being around six per cent.

For the state, total fiscal revenues from the LNG projects by 2045 could reach 500 billion US dollars. However, the analysts warn that it is important for the fiscal authorities to be aware of the time lag between gas production and the flow of fiscal revenues.

 

In conclusion, the report warns that “although the economic potential emerging from the projects is tremendous, macroeconomic and fiscal implications are quite sensitive to international commodity price developments and other risk factors, highlighting that the government authorities would be well-advised in taking a cautious approach”.

 

The impact of natural gas on the economy might be much greater than the IMF could possibly predict as new sources of oil and gas could be discovered. In October 2015 five international hydrocarbon companies were awarded the exploration rights for blocks in the Angoche area, off the coast of Nampula provinces, in the Zambezi Delta, and elsewhere in Mozambique. Over the next four years more than 691 million US dollars will be spent on the search for oil and gas in these areas.

 

 

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