International Monetary Fund Managing Director Ms Christine Lagarde has urged Nigeria to adopt tight monetary policy and a fiscal policy that pursue vigorously non oil revenue mobilisation. Answering reporters question at the opening press conference of the 2018 IMF/World Bank Annual Meetings in Bali Lagarde said “I am delighted that Nigeria has appointed, yet again, a female Finance Minister, and I welcome the meeting that I will have with her. But if she was to ask me, what is our policy recommendation? I would certainly start with a tight monetary policy, higher non‑oil revenue mobilisation. I remind you, you know that probably inside‑out that domestic revenue mobilisation is 5 per cent of GDP in Nigeria, and that is just way too low, relative to where Nigeria should be in order to address the issues of health, education, proper social spending on the people, and particularly the young people of Nigeria.
“That would certainly be a very strong recommendation that I would give her. And structural reforms that would probably include really making sure that the refineries and the oil equipment that is available in Nigeria works well and works for the benefit of Nigeria. That would be my recommendation. Speaking on the global economy she said “So what I would like to do is to identify three questions, and then you can ask any questions that you want to ask. The first question that I want to consider is, I wonder whether the economy, as it is—and based on the documents that you have seen in the last couple of days—is the economy strong? And I think the answer to that is: Yes, the economy is stron,g at the moment. We expect growth to remain steady, at 3.7 percent this year and next. But the real question is: is the economy strong enough? To that, our answer is probably not enough, because we clearly see that growth has plateaued if, three years in a row, it is at 3.7 per cent. And we also see that that growth is more unevenly allocated around the world.
“Moreover, some of the risks that we have highlighted, particularly at our Spring Meetings in April, have now begun to materialise, especially from the rising trade barriers. And if these tensions were to escalate, the global economy would take a significant hit. So our strong recommendation is to de‑escalate those tensions and to work toward a global trade system that is stronger, that is fairer, and that is fit for purpose and fit for the future because if services are not sufficiently covered, if digital transformation is not covered in that trade framework, then we are missing the point, and we are probably losing out on the productivity gains that we could have.
“The second question I want to ask is: is the economy, as it stands now, safe enough? And the bottom line is that 10 years after the great financial crisis, or the global financial crisis, we are safer, and measures have been taken. But we are not safe enough. With global and public debt, private and public, at an all‑time high, any slight change in the wind could provoke capital outflows and economic instability in emerging markets, as we see in some of those markets. To guard against this, our recommendation is certainly to encourage countries to have the right combination of domestic policies, using all the tools or the arrows that they have, and for global policies to also reflect those requirements of safety.
“We also need to press ahead with the financial regulatory agenda and resist the risk of backsliding. There has been a lot of progress in the last decade but also an unfinished agenda, combined with the added challenges from continued financial innovation, which has its upside but also its downside. A safer global economy also means tackling the issue of sustainability, including the existential threat of climate change. And we know from work that was done last year—in particular, at the time of the World Economic Outlook—that low‑income countries and low‑lying countries are the first victims of such development. And we know from having heard from the U.N. IPCC (Intergovernmental Panel on Climate Change) that time is of the essence and that we cannot afford to waste it.
“The third question, which is for the medium to longer term as well, is: are the benefits of growth actually shared enough for our global economy to continue to grow in a sustainable fashion? And the answer to that is that, in our view, the benefits of stronger growth are not being shared enough. Excessive inequality, as our research has demonstrated in the last few years, excessive inequality—whether it is produced by technology, by trade, by integration, by policies favouring capital over labor—is magnifying economic and social tensions, especially in advanced economies. And that is why we need policies and reforms that not only boost growth but do so in a manner that is inclusive and sustainable. So as I said in my curtain raiser speech last week, we need to steer the boat, not let it drift. And that means using the current growth momentum—because we still have it—to implement the right policy actions in the areas that I have just outlined: de‑escalate trade tensions; fix the system, do not break it; the right policy mix; and that inclusive growth, which requires both short‑ and longer‑term policies. But to achieve these goals, we need stronger international cooperation as well”.
