- Sub-Saharan African nations with heavy reliance on commodity exports urged to address macroeconomic imbalances
- Nigeria, South Sudan, and Angola currently facing high inflation and economic challenges due to high reliance on oil
- Growth rates of commodity-dependent economies sluggish compared to more diversified economies in the region
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African countries that depend on commodity exports for their economic growth have been advised by the International Monetary Fund (IMF), to reform their economies to tackle the uneven regional economic growth.
According to the African director of the International Monetary Fund (IMF) Abebe Aemro Selassie, Sub-Saharan African nations that depend more on commodity exports for their economic growth need to reform their economies to avoid being vulnerable to fluctuations in global commodity prices.
A country is deemed "commodity-dependent" if more than 60% of its total exports are comprised of primary commodities classified into three categories: Agricultural products, Minerals, ores, metals and Crude oil, gas, and other hydrocarbons in their natural, unrefined state.
The recent IMF's regional economic outlook report showed that this year, sub-Saharan African countries made up half of the 20 fastest-growing economies in the world. The report however, cautioned that the increased growth rates were supposed to reflect in the reduced widespread poverty and inequalities in the region.
The IMF's findings revealed a stark contrast between the growth pattern of economies heavily reliant on commodity exports and those with more diversified economic structures.
The commodity-reliant economies were found to be growing at a sluggish pace, roughly half that of the rest of the region, with oil-exporting nations facing the most significant challenges in an environment marked by 'subdued and uneven' regional growth.
"South Sudan, Nigeria, Angola are all very much in that camp," Abebe told Reuters.
The IMF regional economic outlook further projected that diversified economies such as Senegal and Tanzania will grow at above the regional average while Nigeria will fall short, growing at 2.9%.
Abebe noted that discrepancies like macroeconomic imbalances and financing challenges in the affected nations were the cause of the stunted economic growth.
South Sudan, Angola and Nigeria depend heavily on oil revenue. 98% of South Sudan's budget comes from oil revenues while Nigeria's petroleum industry accounts for about 5.5% of the country’s GDP and around 92% of the value of all exports.
Abebe has suggested that the Nigerian government should promptly tackle the challenges that are resulting in high inflation and a rise in the cost of living.
The Nigerian government, since the inception of President Tinubu's administration in May 2023, has initiated several 'uneasy' reforms to stabilize the economy.
These reforms have caused the country to experience a significant increase in inflation rates, which has resulted in a decrease in the purchasing power of its citizens. The prices of basic household commodities have also skyrocketed, making it difficult for Nigerians to afford basic needs.
The reforms like the removal of fuel subsidies, and floating of the naira among others, have however been hailed by the World Bank as policies that would bring the needed change in the country.
The senior vice-president of the World Bank Group, Indermit Gill, during the 30th Nigerian Economic Summit (NES), supported the reforms saying it would reverse the N10 trillion squandered through petrol subsidy and multiple foreign exchange rates over the years if allowed to continue,
The World Bank recommended cutting wasteful expenditures on non-essential items, such as vehicle purchases and external training, to reduce unnecessary spending.
Additionally, the global lender suggested streamlining collection costs for Ministries, Departments, and Agencies (MDAs) and government-owned entities to improve efficiency. Furthermore, the World Bank also advised on accelerating the rollout of targeted cash transfers to those in need.
Finally, the bank recommended allocating savings from the removal of the PMS subsidy to sustainably expand cash transfers and other well-targeted support initiatives.
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