A week ago, the International Monetary Fund (IMF) held a public presentation on the October issue of the Sub-Saharan Africa Regional Economic Outlook (REO). From some headlines, the outlook looks good—or better than expected. According to the report, Sub-Saharan Africa (SSA) is on a “steady recovery path”.
But that’s the problem with headlines. It’s impossible to capture the nuance of even a 30-page report.
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The International Monetary Fund (IMF) believes Nigeria’s economy will grow by 2.6% in 2021, rise slightly to 2.7% in 2022 and stagnate till 2027. This growth is due to recovery in non-oil sectors and higher oil prices.
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But, African economies, including Nigeria, are facing a combination of rising development-spending needs, ballooning public debts, and continued resistance to growing tax revenue, all worsened by the economic shock from a global pandemic.
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The IMF suggests that special drawing rights (SDRs) could assist governments in reducing their debt burden. SDRs will help Nigeria in the short term. But they do not remove the need for more profound macroeconomic adjustments or reforms.
If we believe the headlines, we are on a steady recovery path that includes the slowest vaccine rollout in the world, with only 4% of the SSA population fully vaccinated. A permanent drop in real income means the region would have to grow twice as fast in the next three years to match the recovery of advanced economies. And a deepening fiscal policy trilemma.
What is this trilemma? Many SSA countries (Nigeria included) are facing a combination of rising development-spending needs, ballooning public debts, and continued resistance to growing tax revenue.
This is what a “steady recovery path” looks like.
