The International Monetary Fund (IMF) yesterday affirmed that Nigeria’s economy will be out of recession this year, growing by 0.8 per cent but it said the growth will not be enough to address its challenges of unemployment and poverty.
It would be recalled that IMF team led by Amine Mati had visited Nigeria last July over recent economic and financial developments, update macroeconomic projections, and review reform implementation. They noted that the near- term risks to Nigeria’s recovery remained elevated and that the growth would not be sufficient to reduce unemployment and poverty.
The Fund in a statement following a staff visit noted that that near-term risks to Nigeria’s recovery remained elevated, saying, “The economic backdrop remains challenging, despite some signs of relief in the first half of 2017.”
IMF’s Senior Resident representative and Mission Chief for Nigeria, Mr Amine Mati, in his statement yesterday said despite the uptick in economic indices in the first half of the year, “near-term vulnerabilities and risks to economic recovery and macroeconomic and financial stability remain elevated.
“Concerns about delays in policy implementation, a reversal of favorable external market conditions, possible shortfalls in agricultural and oil production, additional fiscal pressures, continued market segmentation in a foreign exchange market that remains dependent on central bank interventions, and banking system fragilities represent the main risks to the outlook.”
The IMF representative explained that “preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high at 40 percent as at end of June and projected to increase further under current policies.
“High domestic bond yields and tight liquidity continue to crowd out private sector credit. Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, non-performing loans increased from 6 percent in 2015 to 15 percent in March 2017.”
Noting the impact the Economic Recovery Growth Plan of the federal government is to have on the economy, he stated the need to act on an appropriate and coherent set of policies to enhance an economic recovery remains urgent.
“This includes implementing immediately specific priorities that will help achieve the goals of the ERGP. In the near term, a stronger push for front-loaded fiscal consolidation through a sustainable increase in non-oil revenues would be needed to create space for infrastructure spending, social protection, and private sector credit.
“This should be simultaneously accompanied by a monetary policy that avoids direct financing of the government and is kept sufficiently tight, a unified and market-based exchange rate, and rapid implementation of structural reforms. Pursuing these policies would help reduce macroeconomic vulnerabilities and create an environment for a diversified private-sector led economy.