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Nigerian economy is still vulnerable – IMF

This assessment was given in the recently released Article IV consultation on the country

This assessment was published in Article IV consultation on Nigeria which was released on Wednesday, March 7, 2018. The report noted that the current economic growth is mainly tied to oil prices with limited contribution from the real sector – Agriculture, industrial and service sectors.

The Article IV Consultation is an annual appraisal of a country’s economy by IMF and it usually contains policy recommendations for specific country. This document also serve as major source of reference for many foreign investors.

“The Nigerian economy is slowly exiting recession but remains vulnerable,” said the report.

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“Lower oil prices, tighter external market conditions, heightened security issues, and delayed policy responses are the main downside risks.”

In Q2 2016, Nigeria slipped into its first recession in 25 years which was triggered by low global oil prices and incessant attacks on oil facilities in the Niger Delta region. However, the economy recovered from this shock as oil price increases and output level went up in Q2 2017.

This large exposure to oil market volatility and low contribution of the non-oil sector were noted as weak points of the Nigerian economy.

Revenue from oil sales makes up about 75% of government and serve as major foreign exchange earnings of the country.

IMF and other development bodies have repeatedly called on the government to diversify the economy and also liberalise its foreign exchange system. This point was also made as a recommendation in the new Article IV.

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” …removing multiple currency practices and unifying the exchange rate as quickly as possible,” the fund recommended.

“Under the baseline scenario, growth would pick up to 2.1 percent in 2018, from 0.8 percent in 2017, helped by the full year impact of greater FX availability and recover oil production.”

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