Nigeria Recovery Still Facing Challenges

The International Monetary Fund says Nigeria’s economic outlook for 2018 remains challenging as private sector lending remains low and foreign exchange inflows are mostly short-term.

IMF in a statement issued in Washington Friday by Lucie Fouda, the fund’s press officer, said higher oil prices and portfolio flows had helped strengthen fiscal and external buffers, NAN reported.

It added that action on a coherent set of policies to reduce vulnerabilities and increase growth over the medium term remained urgent.

It said an IMF staff team led by Amine Mati, senior resident representative and mission chief for Nigeria, visited the country  from June 27 to July 9 to discuss economic and financial developments, update macroeconomic projections and review reform implementation.

Mati said: “Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging.

“International reserves remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April.

“Inflation declined to its lowest level in more than two years. Real GDP expanded by 2% in the first quarter of 2018 compared to the first quarter of last year.

“However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.”

It said corporate tax collection efforts improved but revenue shortfalls and the late adoption of the 2018 budget impeded its implementation.

“Revenue from higher oil prices is limited by net losses from retail fuel sales while non-oil revenue remains below expectations, with yields from tax administration measures–including the Voluntary Asset Income Declaration Scheme and increased tax audits–yet to fully materialize.

“Current spending remains in line with expectations. Carryover from 2017 to 2018 helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget.

“Lower yields have kept interest payments within the budgeted envelope, but the federal government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year,” the team leader said.

The fund said reforms to improve the business environment were progressing, including through identification of priority investment projects and the adoption of the Company and Allied Matters Act–a legislative landmark for private sector development.