Based on their tradition, the IMF releases its World Economic Outlook and the Regional Economic Outlook twice a year, first in April and another in October. There is an update, which comes in January and July. These projections are being revised, and new editions come on board because of some happenings and sudden events that were not anticipated before the report's writing. That is the essence of revising the forecasts based on these events.
Inflation is a global phenomenon. In 2019, particularly before the Russia-Ukraine war broke out in February 2022, the US has always maintained the long-term inflation target of 2% per annum. Likewise, the EU and the UK. But what happened? The global economy was shaken by the Russia-Ukraine war. This global inflationary pressure is not peculiar to Sub-Saharan Africa.
The dynamism and the uniqueness of the inflationary pressures arising from the geopolitical tensions between Russia and Ukraine are so unique that value supply chains across regions and nationals globally have been disrupted. When supply chains are being disrupted, for a particular product to complete its stages of production, there will be issues if there are issues relating to access to raw materials and access intermediates due to this war. Then, such a product will not proceed to the next production stage. What happens?
It affects every product, and considering the global position of these two countries, Russia and Ukraine, when it comes to global food markets, global agricultural markets, and global commodities markets, Russia is the second largest producer of oil in the world after Saudi Arabia.
Regarding grains, corn and wheat, Russia and Ukraine account for one-quarter of the total world production of grains. Regarding urea, which is attributed to the production of fertiliser, Ukraine can be identified with that. So many other countries depend more on Russian oil, particularly in the EU. This was the reason for the crisis in the EU when there was a multiplicity of bans on Russian oil exports by the UK, EU, US and advanced Western countries.
Countries like Spain leapfrog India as Nigeria's largest importer, particularly in the last two quarters of 2022. The European countries are diversifying their imports markets, particularly for crude oil and energy. Nigeria and other African countries have not been able to take advantage of this current price surge on the global market. even though they have more infrastructure to explore and leverage this advantage.
The trans-African gas pipeline deposits passing through Morocco to Europe, if well explored, it is expected that Nigeria will benefit from natural gas exports rather than just one of the top countries in the world with flared gas involved in gas flaring. Nigeria loses money for every quantum of gas that is flared.
There are a few points to note: one, the issue of inflation is a global phenomenon. two, what is the underlying cause of these inflationary pressures? It is not the demand side. The monetary policy of the monetary authorities and central banks worldwide, including the US Federal Reserve, have been increasing their rates to resume normalisation. This issue that fuels the current inflationary pressure is not a demand-side issue but a supply-side one. thus, measures to bring these inflationary pressures under control should address these supply bottlenecks and supply chain disruptions.
Although I do not doubt the analysis of the IMF, Nigeria has not been taking advantage of the global surge in oil prices due to low domestic oil production, highly attributed to oil theft and low investments in Nigeria's oil and gas sector. Like other African countries, there is too much dependence on other products and exports that do not have value on global markets and have very low international competitiveness.
Unlike the West and the Asian countries involved in refining these products, Nigeria produces oil being the largest producer of crude oil in Africa, but there is nothing to show for it. Nigeria cannot refine crude oil but can import it from other countries because the country's refineries are not working as they should.
The IMF report is an eye-opener for some African countries, including Nigeria, to wake up to this reality. In this part of the world, we do not look before we leap but rather leap before looking because we are unprepared for uncertainties and unexpected events. It is the reason shocks hit sub-Saharan Africa and other developing regions in the world; there is no resilience to absorb the shocks.
Hence, African countries must ensure value is added to their products and that the goods produced command global respect and meet global standards. Nigeria has to go through Ghana to ensure that goods produced are repackaged for export; the value of these packaging accrues to Ghana and not Nigeria's economy. the country must do the right thing at the right time to take advantage of uncertainties and global economic shocks.
The country cannot do something different if the right reforms to attract foreign direct investments into Africa are not initiated. The largest chunk of global FDI is found in Asian countries because they have the absorptive capacity to attract these FDI flows because of improved infrastructure, logistics, and the right institutional framework.
Finally, Asian countries attract a substantial share of the global FDI because there is a conducive environment for foreign investors. therefore, African countries need to think and advocate for African products. How would we ensure that we are advocates of made-in-Nigerian products and have a homegrown control system in Nigeria? So, the IMF analysis is always a business forecast. Everything based on countries or regions is an informed and holistic analysis of what happens and what goes for the region if we do the right thing.
Access the links below to download the April-2023 edition of the IMF's World Economic Outlook and SSA Regional Economic Outlook, respectively;
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023&ved=2ahUKEwiT7eTKu6z-AhWg_rsIHdE9ANoQFnoECA0QAQ&usg=AOvVaw2lAStgFh_spM9R2CAqdfPY
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023&ved=2ahUKEwj1ufjbu6z-AhUii_0HHY8RACwQFnoECA4QAQ&usg=AOvVaw0whjyRywiWVU3kpy1zKIHV
Your discussion points are multifaceted. I will comment only on part of this. With all due respect to the expert of the established international organisation, I do really doubt that you need a high FDI absorbing capacity to initiate an accelerated growth in the catching-up economy like Nigeria. What’s is much more important are technological skills and building up an industrial base. It could be financed, in resource-rich country like Nigeria, with internal capital. Foreign currencies inflow is only a temporary measure, it may strengthen, for some time, an exchange rate of local currency. You still need to remember that foreign investments are required to be paid back and it leads to long-term weakening of a local currency. In many developing countries, local elites used to disguise their investments under the guise of so-called foreign direct investment, thus hedging them in hard international currency (a phenomenon best described in the literature for US dollar-denominated bonds in Brazil). Foreign direct investment can only be advisable if, at the same time, it creates a completely new market for domestic products abroad (compare China's export-led development model).
https://www.imf.org/-/media/Files/Publications/WEO/2022/April/English/text.ashx
https://sunnewsonline.com/inflation-time-bomb-threatening-nigerias-economic-outlook/
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