US shutdown may affect Nigeria oil price – IMF

Semiu Salami
Semiu Salami
IMF President, Christine Largade

Christine Lagarde, Managing Director, International Monetary Fund (IMF), has said that the ongoing shutdown witnessed in the US might affect Nigerian and other countries’ trade on oil prices.

Laggard who stated this at a news conference on the official opening of the ongoing annual meeting of the World Bank and the IMF in Washington DC, stated that “Now, as far as Nigeria is concerned, clearly, we would have to look into how it would affect the price of the oil, because Nigeria is an oil consuming and exporting country.

“We are, as I said, currently working on this analysis and engaging in a dialogue with countries,” she said.

Lagarde said that the shutdown would have negative consequences for the US economy and also very negative consequences outside of the US economy.

According to her, the IMF does not take a stand and does not make recommendation as how politically such matters can be resolved. “This is not for the IMF to say; we don‚Äôt have a political view; we only look at the economic consequences of the measures decided anywhere in the world.

“When it affects largest economy in the world, we are bound to not only look at the immediate domestic consequences, but also have to look at what happens elsewhere.

“And we have to engage in a dialogue with our members to see how they can best prepare for that and anticipate,” the managing director said.

Lagarde said that the effect of the shutdown might materialise in various channels in different economies.

“In Nigeria, it would include the trade channel because the US economy would have to balance its budget and would certainly reduce its economic activity starting from the third quarter onward.

“The second channel, which is probably going to be much more active, is the financial channel, where as a result of uncertainty and material, practical issues having to do with impaired versus non-impaired securities, we are likely going to see.

“If that matter is not resolved, we are likely to see volatility, uncertainty and consequences on the rest of the world.‚Äô‚Äô

On the global economic outlook, she said that “2014 looks a little better in forecast with point five and seven per cent up from this year‚Äô‚Äô.

According to her, the 2013 forecast by IMF indicates that there was recovery, but it was slow and unbalanced.

On support to the low-income economies, she said the IMF had reached the threshold of enough approvals from members to transfer gold profit to meet the financial needs of low income countries.

“We have what we call Poverty Reduction and Growth Trust (PRGT) that we very much want to be sustainable so that it can respond to the needs of the low-income countries. We need a threshold of 90 per cent.

“Ninety per cent of the membership has agreed to transfer over to the trust the windfall profit that was made at the time of gold sale that took place about three years ago.

“So that is the good news of this week for us and we are very pleased that the membership has recognised the need to actually make sure that the PRGT for low income countries be sustainable.‚Äô‚Äô

Similarly, Nigeria’s Finance Minisrer and Coordinating minister of the economy, Ngozi Okonjo-Iweala, said that ‚ÄúThe present situation in the US creates uncertainties for people in the developing and emerging markets; that is why we look forward to a swift resolution of the issue of the debt ceiling.

“If not resolved it could upset the market, we could see higher interest rates, it could directly affect Nigerian bonds — as you know we do not have only the 500 million Euro bond we floated two years ago but also the highly successful Euro Bond we floated recently about three, four months ago”.

The minister said that the present administration was working hard to ensure that the growth which the nation’s economy has recorded was converted into better living standards for ordinary people.

According to her, the Federal Government is massively investing in infrastructure facilities, especially electricity which she identified as Nigerian’s most critical development impediment, among both the rich and the poor.

She said: “We are utilizing the funds freed from petroleum subsidy to create social safety nets in the area of maternal and infant health, which has won a commonwealth award for its initiative.”

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