Judging IMF’s Position on Development Indices


Thursday, April 12, 2018 /02:50 PM/ Proshare Research 

Prior to the downturn, qualitative growth has largely been disconnected from its quantitative counterpart. Thus, as the business cycle began a reverse, the human development indices were heavily depressed; eventually blowing open a largely fragile index, as it quickly reaffirmed the position that growth for a long while has not been inclusive. 

Economic Growth has largely remained at the top of the pyramid when compared with other economic indicators, leaving both the middle income and the poor (base) behind. The decline in the growth of per capital income provides the needed precursor. Thereby, pinpointing the fact that policy over the years has failed to neither improve income distribution nor organically boost gross national income.    

Fig 1: Nigerian Development Indices
Proshare Nigeria Pvt. Ltd.
Source: UNDP

The state of Human Development Index (HDI) forced the International Monetary Fund (IMF) to tilt towards a more balanced approach with a more inclusive growth as the end game; as the existing growth level seemed to have failed to alleviate poverty since per capital income is still on a downward trajectory. 

Thus, the back dialing of policy to remedy such flaws has become critical. However, the fund made a decision to discard its conservative position by prescribing a full dosage of reforms which will be taken within a short span.  This shift underlines the willingness to accommodate growth while macro adjustment is taking place, having come to terms with the fact that allowing short term problem to emerge without retaining growth levers could be catastrophic, especially in emerging economies where income inequality is high and socio political fault lines are vivid.   

Proshare Nigeria Pvt. Ltd.

Therefore, this edition of Proshare confidential takes a deep study at the recently published IMF Article IV for 2018 which points out fiscal dominance, political interference and policy inertia as major risks to the macro economy.  In a nutshell, the fund highlights the following as its policy objectives:

  • Monitoring Price
  • Reducing  Income Inequality
  • Mobilization of Resources

The fund remained convinced about its growth forecast, while opting for a more reduced role for monetary aggregate as an intermediate tool.  Inflation targeting remains top notch for the fund, thus showing its aversion to a multi-targeting approach.    

In the same vein, the report proposed a unified base for tax while supporting an ad-volerem tax. This is hinged on the position that the Voluntary Asset and Income Declaration (VAIDS) might not be deep enough.

Moreover, there is a need to improve compliance regarding Personal Income Taxes (PIT) and Company Income Taxes. Though the progressive tax was proposed, the fund was quick to advocate for a widening in social net and cushioning.  

Most proposition by the fund largely in line with our position. However, this study is clear to point out that the trio of lean industrial structure, the nature of dependence on the external economy and the distribution of power and institution, all play out as strong determinant to the developmental path of any nation.  Thus, they cannot be ignored while moving forward.

The study also points out that the erosion in HDI due to income inequality and rising level of primary school dropout has contributed to the elevation in dependency ratio. Therefore, opening up the economy, strengthening female human developmental index, increasing public spending on research,  reducing the degree of school dropout and using remittances as a smoothening agent will go a long way in reducing income inequality.

The study also supported pro-poor policies especially those tending towards human development rather development which is solely consumption driven.

Certainly, a more proactive approach is inevitable in-order to alleviate poverty.  The hard nut is how best to sustain fiscal prudence, especially when consumption remains largely needed.

For further details contact research@proshareng.com 

Download PDF Here

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Previous Proshare Confidential Report (s)

  1. Money Market: The Folk Road – Feb 2018
  2. The Headache of Missing Targets – Jan 2018
  3. 2018 Outlook on the Nigerian Economy: The Need for an Even Keel – Dec 2017
  4. Nigeria External Economy and the White Noise of Import Dependency – Nov 2017
  5. States and the Rising Weight of Debt – Oct 2017
  6. Money Supply: Reeling from Policy Response – Sep 2017
  7. How Rail and Energy Will Deliver a Robust Economy for Nigeria – Aug 2017
  8. Too Big Government: The Hysteria of Developmental Quagmire – Jul 2017
  9. The Nigerian Debt Conundrum and the Need for Automatic Stabilizers – Jun 2017
  10. Article IV vs. ERGP - The Third Way – May 2017
  11. Lifting The Veil off The Financial Sector – Apr 2017
  12. Towards An Economic Model for Nigeria; Going Beyond Symptomatic Responses - The Panama Model – Mar 2017
  13. FX Utilisation in January 2017-Symptoms of An Opaque Structure – Feb 2017

Related News

  1. Transcript of IMF Press Briefing
  2. The IMF’s Good Report, With Qualifications
  3. IMF Selected Issues on Nigeria - Mobilizing Tax Revenues in Nigeria
  4. IMF Executive Board Concludes 2018 Article IV Consultation With Nigeria
  5. IMF Programmes in Africa and the Implications for Creditworthiness
  6. IMF and BIS—Working Together to Boost Financial Stability
  7. International Monetary Fund Revises Nigeria’s Gross Domestic Product Growth Upwards
  8. IMF Staff Completes 2018 Article IV Mission to Nigeria
  9. Transcript of IMF African Department Press Briefing, Comments on Nigeria
  10. Multiple Indicator Cluster Survey 2016-17
  11. Medium-Term Budget Frameworks in Selected Sub-Saharan African Countries
  12. Boosting Investments: Nigeria's path to growth
  13. The Mundell-Fleming Trilemma: The Nigerian Experience
  14. PMA Rates Clear lower as DMO Unexpectedly Cuts offer Size in half
  15. VFD Group Achieves 175% Subscription on Debt Note Offer
  16. CBN Moderates System Liquidity with c.N250bn OMO Sales ahead of T-bills PMA
  17. Funding Rates decline on FAAC Expectations
  18. Robust System Liquidity to Drive Buying Interest as PMA holds on Wednesday
  19. Summary of Nigeria''s USD2.5 Billion Eurobonds Priced in February 2018
  20. Bond yields close positive on renewed local interest
  21. A little Breathing Space for the DMO
  22. CBN Resumes OMO to offset Inflows from Maturing Bills
  23. Summary of FGN Bond Auction Results for February 2018
Related News