Nigeria’s economy still weak, IMF insists

The International Monetary Fund (IMF) has said although Nigeria is said to have exited recession, the economy still remains largely vulnerable.

It made this known at the conclusion of its four-day mission to the country on Article 1V consultation with the Federal Government.

Article 1V Consultation is the assessment of IMF member countries macroeconomic (fiscal and monetary) conditions with a view to identifying growth challenges, as well as potentials so as to address them and tap into the opportunities.

Key findings in Nigeria during the mission identified huge opportunities in the country’s power sector and business environment under the Economic Recovery and Growth Plan (ERGP).

Equally, the mission said macroeconomic and structural reforms remain urgent to contain vulnerability and support sustainable private sector led growth.

The IMF staff team was led by Amine Mati, the Resident Representative and Mission Chief for Nigeria during the two weeks 2018 Article IV consultation, following which he issued the verdict on the country’s macroeconomic condition.

“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 percent 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 18½ per cent at end-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.

“These factors contributed to raising the ratio of interest payments to federal government revenue to unsustainable levels. Reflecting the low growth environment and exposure to the oil and gas sector, the banking industry’s solvency ratios have declined from almost 15 to 10½ per cent between December 2016 and October 2017, and non-performing loans have increased from five per cent in June 2015 to 15 per cent as of October 2017, although with provisioning coverage of about 82 per cent,” the statement reads.