The International Monetary Fund (IMF) on Wednesday highlighted some of the issues the Nigerian government needs to address if it is to sustain growth in the country’s economy.
Speaking at the 2019 World Economic Outlook Press Conference in Washington, Economic Counselor and Director of the Research Department in the Fund, Gita Gopinath, said in view of the high dependence of Nigerian on oil exports, the growth of the economy would be influenced by oil prices and market prospects.
Mr Gopinath reportedly noted the continued weakness as a result unstable prices and supply, saying the government must ensure the structural reforms were sustained to boost a weakening per capita growth
Although he said there was a slight upward revision for growth this year, mostly from strong agricultural production early in the year, he said the growth was not high enough to lift ‑‑ to turn the country’s per capita growth into positive territory.
“For some time now, we have been emphasising the need for a comprehensive package to lift growth. One element of that will have to be stronger non‑oil revenue mobilisation.
“Nigeria has one of the lowest rates of revenue in the world, which was hit hard by the drop in oil prices. That is essential for the country to be able to spend more on priorities, such as social safety net and infrastructure.
“Other areas are the need for tight monetary policy and a simpler unified exchange rate system. Foreign exchange restrictions have also been distorting public and private sector decisions and holding back investment.
“More generally, strengthening the banking system’s resilience and continued stronger structural reforms, especially in infrastructure and the power sector and broader governance, are critical.
“A comprehensive package of measures—whose design and implementation will require close coordination within the economic team and the newly-appointed Economic Advisory Council—is urgently needed to reduce vulnerabilities and raise growth.”
Last week, the Fund in its end-of-mission following its visit to Nigeria recommended that the Central Bank of Nigeria should adopt a more ambitious revenue-based fiscal consolidation to build on the initiatives laid out in the Strategic Revenue Growth Initiative.
Although it noted the improvement in the banking sector prudential ratios, the IMF criticised the new regulations by the apex bank requiring banks to avail 65 per cent of the cash reserve for lending should be carefully assessed.
The Fund suggested the policy might need to be revisited in view of the potential unintended consequences on banks’ asset quality, maturity structure, prudential buffers and the inflation target.
“Structural reforms, particularly on governance and corruption and in implementing the much-delayed power sector recovery plan, remain essential to boosting prospects for higher and more inclusive growth,” it added.