IMF warns Nigeria, poverty, unemployment could get worse

The International Monetary Fund, (IMF) has warned that unless Nigeria’s government took urgent steps to stem the current economic decline, there could be a worsening of unemployment and widespread poverty in Africa’s largest economy.

The fund therefore called on Nigeria to stop pegging its currency and to remove curbs on access to foreign exchange as economic growth is estimated to have eased to its slowest pace in 16 years amid low oil prices.

The economy of Africa’s largest oil producer expanded 2.8 percent last year, compared with 6.3 percent in 2014, the IMF said in a statement on Wednesday.

That’s probably reversed progress in reducing widespread unemployment and poverty, while straining the banking industry and company balance sheets, the Washington-based lender said.

“With oil prices are expected to remain low for a long time, continuing risk aversion by international investors, and downside risks in the global economy, the outlook remains challenging,” Gene Leon, the IMF’s representative in Nigeria, said in the statement.

“As part of a credible package of policies, the exchange rate should be allowed to reflect market forces more and restrictions on access to foreign exchange removed.”

In a bid to conserve dwindling reserves and boost local manufacturing, Nigeria’s central bank last year imposed restrictions on access to foreign currency.

The moves have suffocated businesses dependent on imports and encouraged capital flight from foreign portfolio investors.

The economy may grow by 3.2 percent this year and 4.9 percent in 2017 if infrastructure investment is prioritised, Leon said. Nigeria needs to boost non-oil revenue and broaden its tax base, while structural reforms, such as passing a revamped Petroleum Industry Bill, are needed to strengthen the oil sector, he said.

“Emphasis should be sustained on doing ‘more with less’ to improve the efficiency of public sector service delivery and create an enabling environment to attract investment,” Leon said. “Key risks to the outlook include lower-than-budgeted oil prices, shortfalls in non-oil revenues, a further deterioration in finances of state and local governments, and a resurgence in security concerns.”

The government says it’s making progress in its battle against the Islamist militant group, Boko Haram, mainly in the northeast of the country. In a statement Wednesday, Buhari said Nigeria and its neighbours have “significantly destroyed” the fighting capacity of the insurgents.

Onyinye Nwachukwu