The International Monetary Fund (IMF) says the incipient recovery in economic activity in Nigeria is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021.
This was the outcome of an IMF team led by Ms. Jesmin Rahman after its virtual meetings with the Nigerian authorities from June 1-8, 2021 to discuss recent economic, financial developments and outlook.
A statement issued by Ms Rahman, is the IMF said: “The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic.
The statement reads in part:
“Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels.
“Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation.
“With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage”.
According to the IMF, Nigeria’s inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.
“Tax revenue collections are gradually recovering but, with fuel subsidies resurfacing, additional spending for Covid-19 vaccines, and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP,” said the IMF.
Downside risks to the near-term arise from further deterioration of security conditions, and the still uncertain course of the pandemic both globally and in Nigeria.
The mission commended the authorities’ measures to contain the transmission of Covid-19 in Nigeria, including the ongoing vaccination program under the COVAX initiative, and strongly supported the authorities’ efforts to acquire additional doses from countries with surplus stocks.
The mission expressed its concern with the resurgence of fuel subsidies. It reiterated the importance of introducing market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor.
The mission recommended stepping up efforts to strengthen tax administration to mobilize additional revenues and help address priority spending pressures.
The mission urged the authorities to keep reliance on CBN overdrafts for deficit financing within legal limits, while the government continues to make efforts to strengthen budget planning and public finance management practices to allow for flexible financing from domestic markets and better integration of cash and debt management.
