The IMF, which just concluded its Article IV consultation with Nigeria, said Buhari’s recovery plan was a welcome development for Nigeria, but stated the need to unify exchange rates, raise taxes, and eliminate subsidies. “Executive Directors recognized that the Nigerian economy has been negatively impacted by low oil prices and production,” IMF said in a statement. Without a change in focus, the Nigerian economy will expand less than 1 percent even with a recovery in crude oil prices, the International Monetary Fund said.
It said the President Buhari-led government needs stronger policies in order to deliver on the objectives set by its Economic Recovery and Growth Plan (ERGP).
The IMF also commended the Central Bank of Nigeria (CBN) for recent foreign exchange policy actions, saying that directors underscored that external adjustment is necessary to protect foreign currency buffers and reduce vulnerabilities.
The directors also commended the recent easing of some exchange restrictions and urged the authorities to remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.
Continuing on the CBN’s efforts to strengthen the naira, IMF said: “Directors emphasised that these policies should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange rate overshooting, as well as structural reforms to improve competitiveness.
The Nigerian economy sank into recession last year, with a contraction of 1.6 percent. With oil production centers in the Niger Delta the target of rebels, production faltered last year and the economy has “hard hit” by the strains of weaker crude oil prices.
According to the Central Bank of Nigeria, the rate of annual inflation is about 18 percent. In its latest assessment, the IMF said that, if Nigeria does nothing on the economic front, growth will be around 0.8 percent this year, which would mostly come from some recovery in crude oil production.
Secondary sources told economists at the Organization of Petroleum Exporting Countries that member state Nigeria produced 1.6 million barrels of oil per day in February, a gain of 3.7 percent from the previous month.
Nigeria is exempt from an OPEC agreement to establish a ceiling on production because of the economic challenges presented by national security and sector-related issues.
OPEC economists noted that Nigeria’s non-oil private sector was showing some of its strongest gains in more than a year. Directors at the IMF added that Nigerian economic planners have taken steps to reduce vulnerabilities and enhance resilience.
“However, in light of the persisting internal and external challenges, they emphasized that stronger macroeconomic policies are urgently needed to rebuild confidence and foster an economic recovery,” the IMF’s latest country report read.
The Central Bank noted that second quarter GDP was better than the previous two quarters and some gains were emerging on the domestic front. Outside of Nigeria, however, the bank said it was concerned by protectionist policies emerging in the wake of the British decision to leave the European Union.
“The protectionist stance of the new U.S. administration could impact negatively on global trade and economic recovery,” it added.
Though U.S. oil production is expanding, the world’s No. 1 economy is still relying on imports from Canada, Mexico and mostly OPEC members. The four-week moving average for Nigeria crude oil imports was up nearly 10 percent year-on-year.