A slow economic recovery is continuing, inflation is falling, and external buffers are declining in the face of increased portfolio outflows in Nigeria, preliminary findings by the International Monetary Fund staff team show.
The IMF stated this in a press release made available to SaharaReporters on Tuesday night.
According to the end-of-mission statement, one of the teams’ preliminary findings is that a slow economic recovery is continuing, inflation is falling, and external buffers are declining in the face of increased portfolio outflows.
Other findings noted that Elevated fiscal deficits rely on central bank financing, which complicates monetary policy; and that action on a coherent and coordinated set of policies is urgently needed to reduce vulnerabilities and increase growth over the medium term.
Between September 25 and October 7 this year, an IMF staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, visited Lagos and Abuja to discuss recent economic and financial developments, update macroeconomic projections, and review reform implementation.
At the end of the visit, Mati said: “The pace of economic recovery remains slow, as depressed private consumption and investors’ wait-and-see attitude kept growth in the first half of the year at 2 percent, a rate significantly below population growth. Headline inflation has fallen, reaching its lowest level since January 2016, helped by lower food price inflation.
“Spurred by one-off increases in imports, the current account turned into a deficit in the first half of 2019 after three years of surpluses. Gross international reserves have fallen to below $42 billion at end-August 2019, mainly reflecting a decline in foreign holdings of short-term securities and equity. The exchange rate in various windows remained stable, helped by steady sales of foreign exchange by the Central Bank of Nigeria (CBN).
“Carryover from 2018 to 2019 helped increase public investment spending in the first half of 2019, but revenue underperformed significantly relative to the budget target in the first half of 2019. Over-optimistic revenue projections have led to higher financing needs than initially envisaged, resulting in overreliance on expensive borrowing from the CBN to finance the fiscal deficit. Federal Government interest payments continue to absorb more than half of revenues in 2019.”