Nigeria’s Economy Vulnerable, Its Recovery Challenging—IMF

Tayo Olanipekun

Apart from the growth witnessed in its oil and agricultural sectors, Nigerian economy did not grow in the first three quarters of this year, making the recovery of Africa’s largest economy challenging, the International Monetary Fund (IMF) has said.

This is as it also noted that difficulties in accessing financing and high inflation in the country hinder companies’ performance, as exposure to the oil and gas sector also reduces the nation’s banks’ solvency ratios.

An IMF team, led by its Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, made the revelation through a statement on Friday after their two-week visit to Nigeria to conduct the body’s 2018 Article IV consultation, which ended on December 20, 2017.

It said to grow the economy, Nigeria should take actions to mobilize non-oil revenues, “through reforming the VAT and removing exemptions while safeguarding priority expenditures, including scaling up social safety nets and infrastructure investment.”

According to IMF in its summary of the statement,“Nigeria is exiting the recession but the economy remains vulnerable.Welcome actions to improve the power sector and business environment under the Economic Recovery and Growth Plan. Macroeconomic and structural reforms remain urgent to contain vulnerability and support sustainable private sector led growth.”

The non-oil-non-agricultural sector represents about 65 percent of the economy but it contracted in the first three quarters of 2017 relative to the same period in 2016.

“Overall growth is slowly picking up but recovery remains challenging. Economic activity expanded by 1.4 percent year-on-year in the third quarter of 2017,” IMF said, adding that in the banking sector,“non-performing loans have increased from five per cent in June 2015 to 15 per cent as of October 2017.”

It, however, acknowledged that the authorities have begun addressing macroeconomic imbalances and structural impediments through the implementation of policies underpinning the Economic Recovery and Growth Plan (ERGP).

“Welcome steps were also taken to improve the business environment and to address longstanding corruption issues, including through the adoption of the National Anti-Corruption Strategy in August 2017,”said the statement.

IMF said growth would continue to pick up in 2018 to 2.1 per cent, due to the full year impact of greater availability of foreign exchange and higher oil production.