Sunday, January 13, 2013

Nigeria Risks Decline in Foreign Aid in 2013 - Experts

Nigeria and Nigerian institutions risk significant decline in foreign aid and assistance from multilateral donor agencies and developed countries, economic experts have said.
Speaking at the Finance Correspondents Association of Nigeria (FICAN) Roundtable on the Economy, with the theme "Nigerian Economy in 2013: Issues and Expectations", experts said that the uncertainties in the global economy and the planned rebasing of Nigeria's Real Gross Domestic Product (GDP) could lead to decline in foreign aid and support to the country and institutions in the country that depend on such aids.
In a paper titled, Global Economic Outlook in 2013: Implications for Nigeria, Professor Akpan Ekpo, Director General, West African Institute for Financial and Economic Management (WAIFEM), said that some advance countries have started reducing funding of key multilateral financial institutions, who also have indicated intention to reduce aid given to developing economies like Nigeria and institutions in such countries that depend on such aids.
On his part, Mr. Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Company (FDC) Limited, said that the planned rebasing of Nigeria's real GDP could lead to decline in foreign aid to the country and magnify income inequality.
The real GDP is the total output of goods and services produced in an economy at the prices of a particular year, called the base year. Currently, Nigeria's real GDP is calculated using 1990 prices. But the National Bureau of Statistics plans to increase the base year to 2008 hence real GDP will be calculated using 2008 prices.
In a paper titled, "Monetary Policy and Economic Growth in 2012 - Outcomes and Prospects in 2013," Rewane observed that this move is not economically expedient and it is for political mileage, adding that it is like wearing high heel shoes to increase ones height.
He said that the rebasing will result in an increase in the nominal GDP to an estimate of $400 billion from the current estimate of $273.8 billion while Real GDP growth rate could decline from seven per cent to five per cent in 2013.
He noted that when the maximum deficit to GDP ratio of 3.0 per cent is applied, the rebasing will increase the amount of money government can borrow, as three per cent of $400 billion is higher than three per cent of $273.8 billion.
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