After several weeks of in-house appraisal of Nigeria’s economic environment and policies the International Monetary Fund, IMF, has identified five key risks to Nigeria’s economic outlook in the immediate and medium terms.
Announcing the completion of its 2016 Article IV consultation to Nigeria, institution gave the key risks as ‘’lower-than-budgeted oil prices, shortfalls in non-oil revenues, deterioration in finances of state and local governments and resurgence in security concerns’’.
It stressed the need for regulatory and supervisory frameworks which would ensure a strong and resilient financial sector supportive of private sector investment across production segments, particularly SMEs, at reasonable financing costs.
The IMF team who have been working with the officials of the finance ministry and other relevant government agencies in Nigeria assessed the economic impact of the sharp decline in oil prices and policies for addressing near-term vulnerabilities.
It provided fiscal, monetary and socioeconomic policy opinions to address the situation.
On the fiscal side, the IMF suggest the establishment of medium-term fiscal policy goals that support fiscal sustainability to boost the ratio of non-oil revenue to GDP, improvement in revenue administration and broadening the tax base while also rationalizing spending.
On the monetary policy side, IMF stated that sustained private sector-led growth could be achieved in a competitive economic environment.
The institution advised that the exchange rate should be more reflective of market forces and the removal of restrictions on access to foreign exchange.
It applauded government’s ongoing efforts to promote infrastructure including power, integrated transport network and housing, to reduce business environment costs through greater transparency and accountability while also promoting employment of youth.
The IMF also said it expected Nigeria to grow by 3.2 per cent this year, below the forecast of 3.78 per cent.
Many economy observers have been more concerned with domestic measures aimed at addressing the headwinds.
Reflecting on this analysts at Sterling Capital Markets Ltd said ‘’we are yet to witness clarity on the macroeconomic policy direction of government to combat the weak economic conditions bedeviling growth’’.
In response to the adverse economic environment, President Muhammadu Buhari is to inaugurate an Economic Conference to proffer solutions to the country’s current economic challenges.
There have been heated debate from the pubic domain on the economy with issues surrounding currency devaluation, decline in oil prices at the international markets and the intense fight against corruption in the country.
Sterling Capital also said ‘‘so far, public confidence on the current economic policies appears to be waning. In our view, we expect the conference to provide the needed platform for economic actors and policy experts to proffer solutions to the current economic challenges bedevilling the country’’.
In its reaction economists at Afrinvest Group, another Lagos based investment house, said ‘‘with growing pessimism in the international community on government economic reforms, the need for an economic management team, which has been long due, becomes much more important to drive implementation of pragmatic solutions to the economic challenges.
‘‘A carefully selected solution-centred team, coupled with improved government communication of reform objectives and strategies, could restore confidence into the economy’’.