The International Monetary Fund (IMF), has disclosed that Nigeria’s economic reality for 2018 is still a source of concern as banking borrowing is still considerably low and foreign exchange inflows are mostly short-term.
IMF Press Officer, Lucie Fouda in a statement released in Washington on Friday, said fiscal and external buffers have been strengthened by higher oil prices and portfolio flows
It added that action on a coherent set of policies to reduce vulnerabilities and increase growth over the medium term remained urgent.
According to a statement, Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, lead a team of IMF staff to Nigeria from June 27 to July 9 to discuss recent economic and financial developments, update macroeconomic projections and review reform implementation.
The IMF staff team leader at the end of the visit issued a statement.
“Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging.
“International reserves remained stable at about 47 billion dollars, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April.
“Inflation declined to its lowest level in more than two years. Real GDP expanded by two per cent in the first quarter of 2018 compared to the first quarter of last year.
“However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.” IMF quoted Mati.
IMF said that efforts have been set in motion to improve the business environment vie identification of priority investment projects and the adoption of the Company and Allied Matters Act (CAMA) – a legislative landmark for private sector development.
According to IMF, the execution of the Power Sector Recovery Plan is progressing through a mini-grid policy and regulations on potential customers and meter asset providers.
“Under current policies, the outlook remains challenging. Growth would pick up to about two per cent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth.
“The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget.
“Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices.
“Increased oil exports would keep the current account in surplus, helping stabilise gross international reserves even if the current pace of foreign portfolio outflows continues,” the Fund said.
IMF disclosed that there is an urgent need for a coherent set of policies to reduce vulnerabilities and increase growth.
“This includes specific and sustainable measures to increase the currently low tax revenue – including through avoiding new tax exemptions – and ensuring budget targets are adhered to even in an election year.
“This process should be supported by keeping monetary policy tight through appropriate monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market-determined exchange rate.
“Moving ahead with structural reforms is needed to invigorate inclusive growth, particularly in the power sector where faster progress would be needed to ensure financing shortfalls in the sector are met in a sustainable manner,” it said.
IMF team met with various stakeholders in the Nigeria economic landscape, including top government officials, officials from the Central Bank of Nigeria, representatives of the banking system, the private sector, civil society, and international development partners.
The Fund expressed its gratitude to Nigerian authorities and all those with whom the team met for the productive discussions, excellent cooperation, and warm hospitality.