The International Monetary Fund (IMF) warned on Wednesday that Nigeria’s economy remains vulnerable despite a gradual exit from recession.
The Fund’s concerns are that the witnessed economic growth is still largely driven by the by oil revenues and gains from agriculture.
The economy expanded with an estimated 1.92 percent in the third quarter of 2017 and 0.83 percent for the entire year, but the IMF is worried that the improvements were yet to boost non-oil, non-agricultural activity.
“The Nigerian economy is slowly exiting recession but remains vulnerable,” the IMF warned in its 2018 Article IV Consultation on Nigeria released on Wednesday.
The Bretton Woods institution acknowledged that rising oil prices, new foreign exchange (FX) measures, attractive yields on government securities, and a tighter monetary policy have contributed to better FX availability, increased reserves to a four-year high, and contained inflationary pressures. It also observed that economic growth in the third quarter of 2017 was positive for the second consecutive quarter, driven mainly by recovering oil production.
“However, these improvements have not yet boosted non-oil non-agricultural activity, brought inflation closer to the target range, contained banking sector vulnerabilities, or reduced unemployment,” it observed.
“A higher fiscal deficit driven by weak revenue mobilization amidst still tight domestic financing conditions has raised bond yields, and crowded out private sector credit.”
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