NEWS - AFRICA
IMF Staff Concludes Visit to Nigeria
A
slow economic recovery is continuing, inflation is falling, and
external buffers are declining in the face of increased portfolio
outflows.
Elevated fiscal deficits rely on central bank financing, which complicates
monetary policy.
Action on a coherent and coordinated set of policies is urgently needed
to reduce vulnerabilities and increase growth over the medium term.
An International Monetary Fund (IMF) staff team led by Amine Mati,
Senior Resident Representative and Mission Chief for Nigeria, visited
Lagos and Abuja from September 25 to October 7, 2019 to discuss
recent economic and financial developments, update macroeconomic
projections, and review reform implementation. At the end of the visit,
Mr. Mati issued the following statement:
banks’ capital buffers would enhance banking sector resilience.
“Structural reforms, particularly on governance and corruption and in
implementing the much-delayed power sector recovery plan, remain
essential to boosting prospects for higher and more inclusive growth.”
“The team held productive discussions with senior government and
central bank officials. It also met with representatives of the banking
system, the private sector, and international development partners.
The team wishes to thank the authorities and all those it met for the
productive discussions, excellent cooperation, and warm hospitality.” •
“The pace of economic recovery remains slow, as depressed private
consumption and investors’ wait-and-see attitude kept growth in the
first half of the year at 2 percent, a rate significantly below population
growth. Headline inflation has fallen, reaching its lowest level since
January 2016, helped by lower food price inflation.
“Spurred by one-off increases in imports, the current account turned
into a deficit in the first half of 2019 after three years of surpluses. Gross
international reserves have fallen to below $42 billion at end-August
2019, mainly reflecting a decline in foreign holdings of short-term
securities and equity. The exchange rate in various windows remained
stable, helped by steady sales of foreign exchange by the Central Bank
of Nigeria (CBN).
“Carryover from 2018 to 2019 helped increase public investment
spending in the first half of 2019, but revenue underperformed
significantly relative to the budget target in the first half of 2019. Over-
optimistic revenue projections have led to higher financing needs than
initially envisaged, resulting in overreliance on expensive borrowing
from the CBN to finance the fiscal deficit. Federal Government interest
payments continue to absorb more than half of revenues in 2019.
“The outlook under current policies remains challenging. Growth
is expected to pick up to 2.3 percent this year on the strength of a
continuing recovery in the oil sector and the regaining of momentum
in agriculture following a good harvest. Revenue initiatives planned
under the 2020 budget—including a VAT reform that increases the
rate, introduces a minimum registration threshold and exempts basic
food products—will help partially offset declining oil revenues and the
impact of higher minimum wages, thus keeping the overall consolidated
fiscal deficit elevated.
TechnipFMC, JGC and Fluor Consortium Awarded
Contract in Mozambique
T
echnipFMC announces that JFT – a consortium between JGC
Corporation (JGC), Fluor Corporation (Fluor) and TechnipFMC
has been awarded an Engineering, Procurement and Construction
(EPC) contract by Mozambique Rovuma Venture S.p.A. (MRV) for the
Rovuma LNG onshore liquefied natural gas (LNG) production complex
project located in Cabo Delgado, Mozambique.
The current account’s shift to a deficit is expected to persist while the
pace of capital outflows continues to weigh on international reserves.
Inflation will likely pick up in 2020 following rising minimum wages
and a higher VAT rate, despite a tight monetary policy. MRV, a joint-venture composed of Eni, ExxonMobil and CNPC, holds
a 70% interest in the exploration and production concession of Area
4, with Galp, Kogas and Empresa Nacional de Hidrocarbonetos (ENH)
each holding a 10% interest.
“A comprehensive package of measures—whose design and
implementation will require close coordination within the economic
team and the newly-appointed Economic Advisory Council—is
urgently needed to reduce vulnerabilities and raise growth. The Rovuma LNG Project will produce, liquefy and market natural
gas from three reservoirs of the Mamba complex located in the Area 4
block in the Offshore Rovuma Basin. It includes the construction of two
natural gas liquefaction trains, with a total LNG nameplate capacity of
15.2 Mtpa(1), as well as associated onshore facilities.
“The increasing CBN financing of the government reinforces the need
for an ambitious revenue-based fiscal consolidation that should build
on the initiatives laid out in the Strategic Revenue Growth Initiative. A
tight monetary policy should be maintained through more conventional
tools. Managing vulnerabilities arising from large amounts of maturing
CBN bills—including those held by non-residents—requires stopping
direct central bank interventions, the introduction of longer-term
government instruments to mop up excess liquidity and moving
towards a uniform market-determined exchange rate.
“Banking sector prudential ratios are improving. However, new
regulations to spur lending—which has recently increased—should be
carefully assessed and may need to be revisited in view of the potential
unintended consequences on banks’ asset quality, maturity structure,
prudential buffers and the inflation target. Continued strengthening of
Nello Uccelletti, President Onshore/Offshore at TechnipFMC,
commented: “We are extremely honored to have been awarded by
MRV this new prestigious LNG project along with our long-time
partners, JGC and Fluor. This award confirms the market recognition
of TechnipFMC’s expertise and track record in gas monetization and,
in particular, in the LNG industry. It also reinforces the Company’s
positioning in the energy transition journey.
TechnipFMC is a strong player in Mozambique, a strategic country for
the Company, and already present through key LNG and Subsea on-
going projects. We are proud to serve our customer for the Rovuma
project and will continue to accompany the industrial growth of the
country, leveraging its resources and human capital.” •
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