Nigeria’s Economy Still Vulnerable —IMF

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Minister of Finance, Mrs. Kemi Adeosun

THE International Monetary Fund (IMF) on Friday described Nigeria as vulnerable in spite of its exit from recession.

The IMF in a statement by its Media and Press Officer, Raphael Ranspach,welcomed the Federal Government’s actions to improve the power sector and business environment under the Economic Recovery and Growth Plan (EGRP).

The Fund explained that macroeconomic and structural reforms remained urgent to contain vulnerability and support sustainable private sector led growth.

The IMF said its staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, visited Nigeria from Dec. 6 to Dec. 20, 2017 to conduct the 2018 Article IV consultation, which led to this report.

“Overall growth is slowly picking up but recovery remains challenging. Economic activity expanded by 1.4 per cent year-on-year in the third quarter of 2017 – the second consecutive quarter of positive growth after five quarters of recession — driven by recovering oil production and agriculture.

“However, growth in the non-oil-non-agricultural sector (representing about 65 per cent of the economy) contracted in the first three quarters of 2017 relative to the same period last year.

“Difficulties in accessing financing and high inflation continued to weigh on companies’ performance and consumer demand.

“Headline inflation declined to 15.9 per cent by end-November, from 18.5 per cent at end of 2016, but remains sticky despite tight liquidity conditions.

“High fiscal deficits – driven by weak revenue mobilisation – generated large financing needs, which, when combined with tight monetary policy necessary to reduce inflationary pressures, increased pressure on bond yields and crowded out private sector credit.”

The fund said the factors enumerated above contributed to raising the ratio of interest payments to the Federal Government revenue to unsustainable levels.

Reflecting the low growth environment and exposure to the oil and gas sector, the banking industry’s solvency ratio have declined from almost 15 to 10.5 per cent between December 2016 and October 2017.

“In addition, non-performing loans have increased from 5 per cent in June 2015 to 15 per cent as of October 2017, although with provisioning coverage of about 82 per cent,” it said.

IMF, however, said the authorities had begun addressing macroeconomic imbalances and structural impediments through the implementation of policies underpinning the ERGP.

It said recovering oil prices, the new Investor and Exporter foreign exchange window has increased investor confidence and provided impetus to portfolio inflows.

The fund added that these have helped to increase external buffers to a four-year high and contributed to reducing the parallel market premium.

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