Nigerians are getting poorer despite the countrys slow recovery from
recession, and economic reforms are urgently needed, the International
Monetary Fund (IMF) said in a report seen by Reuters on Wednesday.
The Fund expects the government to muddle through in the medium term,
and any progress could also be threatened if elections next year consume
political energy and resources, the report said.
Since emerging from recession in the second quarter of 2017, Nigerian
officials have repeatedly boasted that they have set the economy back on
track.
But critics say much of the recovery comes from a return to oil dependence
after a rise in global oil prices and a rebound in crude production – more
the result of militants in the Niger Delta halting attacks on oil
facilities than of economic policy under President Muhammadu Buharis
administration.
The IMF said in the report that the outlook for growth has improved but
remains challenging.
Comprehensive and coherent economic policies remain urgent and must not
be delayed by approaching elections and recovering oil prices, it said in
its annual Article IV review of Nigerias economy.
Higher oil prices would support a recovery in 2018 but a muddle-through
outlook is projected for the medium term under current policies, with
fiscal dominance and structural constraints leading to continuing falls in
real GDP per capita, the IMF said.
In the report, it identified risks to growth including additional delays
to implementing policies and reforms ahead of 2019 elections, security
tensions, and oil prices, a fall in which could see capital flows
reversed.
Further delays in policy action — including because of pre-election
pressures — can only make the inevitable adjustment more difficult and
costlier, the report said.
EXCHANGE RATE CONFUSION
The lender repeated its call for Nigeria to simplify its complex foreign
exchange system, a bugbear for the IMF for more than a year which has left
large gaps between official rates and various windows that certain groups
can use to get other rates.
Moving towards a unified exchange rate should be pursued as soon as
possible, the IMF said. (IMF) staff does not support the exchange
measures that have given rise to the exchange restrictions and multiple
currency practices.
The Fund further singled out the central bank, saying it should
discontinue direct interventions in the economy.
The Central Bank of Nigeria (CBN) frequently injects hundreds of millions
of dollars into the foreign exchange market to keep its own rates stable.
Commercial banks struggling to remain solvent were also called out, but
not identified by the IMF, including one that the lender said was already
insolvent: Some of these banks are kept afloat through continuous
recourse to the CBNs lending facilities.
The IMF said it does not comment on purported leaks. A spokeswoman for the
Fund said a statement would be issued after the lenders board meets to
discuss its assessment on Friday.
A Nigerian finance ministry spokeswoman did not immediately respond to a
phone call and email requesting comment.