The International Monetary Fund (IMF) has expressed concern over the deteriorating level of security conditions in Nigeria, stressing that it was contributing to the subdued Gross Domestic Product (GDP) figures in the country.
It also listed other downside risks in the near-term to include the elections, low vaccination against Covid-19 and higher global interest rates.
The Washington-based institution made these known in an end-of-mission statement on Wednesday, at the end of its staff visit with Nigeria. It revealed that an IMF team led by the Country Director, Ms. Jesmin Rahman, held meetings with Nigerian authorities from June 6th to 10th, 2022, to discuss recent economic and financial developments, and the economic outlook for the country.
The fund in the statement noted that Nigeria’s economic recovery continued to gain strength on the back of services and agriculture with GDP growth reaching 3.6 percent (y/y) in first quarter 2022.
It stated that inflation reached 17.7 percent (y/y) in May led by a renewed surge in food prices, exacerbated by the war in Ukraine, and raising food security concerns as over 40 per cent of the population live below the poverty line.
“To contain inflationary pressures, the Central Bank of Nigeria has recently hiked its monetary policy rate by 150 basis points to 13 per cent.
“Regarding the external sector, the current account deficit narrowed significantly in 2021 helped by import compression and higher net oil balance. However, the improving trade balance, which has continued so far in 2022, is having a limited impact on forex strains with the exchange rate premiums in the parallel market staying in the 35-40 percent range since October 2021,” it added.
According to the IMF, despite supportive oil prices, the country’s gross FX reserves fell to $38.6 billion at end-May 2022, having reached $41.5 billion in September 2021 boosted by SDR allocation and Eurobond issuance.
“Regarding the economic outlook, GDP growth is projected at 3.4 percent (y/y) in 2022 while inflation is expected to remain elevated . The fiscal deficit of the Consolidated Government is expected to remain high at 6.1 percent of GDP due in great measure to costly petrol subsidies and limited tax revenue collections.
“Downside risks to the near-term arise from further deterioration of security conditions, elections, low vaccination against Covid-19 and higher global interest rates. On the upside, steady private sector recovery and further broadening of growth, the start of operations at the Dangote refinery and decisive steps to mobilize revenues, in line with the Strategic Revenue Growth Initiative (SRGI) could spur inclusive growth and development.
“The IMF mission would like to thank the authorities and other counterparts for the open and thoughtful discussions and excellent cooperation,” it added.
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