(More Bank) – Nigerian presidential candidates' pledges to revive an economy that rivals that of South Africa as the largest in the continent may not be fulfilled if the country does not free itself from its dependence on oil .
President Muhammadu Buhari, 76, a former military leader who is running for a second four-year term in this week's vote, has struggled to revive the economy and reduce growth to 10 percent. 39, he had promised before the previous election, product contracted in 2016. His main rival is the former vice president Atiku Abubakar, a successful businessman accused of corruption.
To learn more about the election promises of the two main candidates
The winner of the February 16 elections will be tasked with diversifying the economy of Africa's largest oil producer, reducing persistent inflation and improving the living conditions of a young and rapidly growing population that is struggling to find a job.
Falling prices and oil production caused the first economic contraction in 25 years in 2016. According to a report released Tuesday, the economy grew by 1.9%, and the growth of the Fund's projects international monetary rate will be 2% in 2019.
Africa's largest oil producer relies heavily on crude oil, which accounts for 90 percent of foreign exchange earnings and two-thirds of government revenue. Without reforms to reduce its dependence on oil, Nigeria risks "a lost decade" of sluggish economic growth, according to a report published in January by the Brookings Institution.
"Whoever becomes president must ensure that the non-oil performing sectors also become globally competitive, so as to make up a larger share of the export basket," said Phumelele Mbiyo, an economist at Standard Bank Group Ltd. .
Soaring food prices and pre-election spending fueled inflation. This has led the central bank to raise its key interest rate to record levels and maintain it despite earlier calls by the government to help boost economic growth by relaxing policy.
Although Nigeria's public debt level is among the lowest in the world at around 21 percent of gross domestic product, according to the CIA World Factbook, insufficient tax collection could compromise its ability to repay its future obligations.
Increased debt levels and tighter financing conditions have led to higher Nigerian bond yields and crowded out private credit, as banks have bought government debt instead of lending. announced the IMF in March.
The authorities have tried to give up the loan of national governments by issuing nearly $ 10 billion in Eurobonds over the past two years. However, the government needs to diversify its economy to increase its income in order to unlock private credit and improve business performance, said the IMF.
A slow recovery with little job creation has hindered efforts to reduce poverty in Nigeria, which has the largest number of people living in extremely precarious conditions, according to a separate report released in June by the Brookings Institution.
The growth in unemployment has "increased the risk of social unrest or dissatisfaction" in Nigeria, the African Development Bank said in its outlook for the continent for 2018. The country has nearly 200 million inhabitants.
"Unemployment will remain a problem even when the economy will start to flourish, simply because of the rapid population growth rate," which exceeds the GDP growth, said Michael Famoroti, an economist at the consulting firm based at Lagos, Stears Business.
Nigeria, which the IMF expects to be the third most populous country in the world by 2050, needs "faster growth to improve per capita incomes and significantly reduce unemployment and poverty. poverty, "said the lender.
In order to attract foreign investment, Mr. Abubakar is committed to abandoning a multiple exchange rate system put in place under Buhari, which, according to the IMF, creates distortions in the economy. ;economy. But the governor of the central bank Godwin Emefiele, which Abubakar says he wants to replace, believes that a float naira would lead to a flight of capital.
(Updates with economic growth in the fourth paragraph.)
To contact the reporters on this story: Alonso Soto in Dakar at asoto54@More Bank.net, Solape Renner in Abuja at srenner4@More Bank.net
To contact the makers of this story: Antony Sguazzin at asguazzin@More Bank.net, Ana Monteiro, René Vollgraaff
For more articles like this, go to More Bank.com
© 2019 More Bank L.P.