In yet another confirmation of Nigeria’s weak economic recovery the International Monetary Fund (IMF) is of the opinion that foreign investors are yet to return to the country, due to worries relating to the ease of accessing foreign exchange despite the improved macroeconomic fundamentals. Ratings agencies Fitch and Moody’s had recently expressed similar sentiments.
Miriam Tamene, Senior Financial Sector Expert, International Monetary Fund (IMF), said this during a visit by the fund’s team to the Securities and Exchange Commission (SEC) in Abuja.
“Investors are interested in Nigeria, but with difficulties they had in getting their money out recently, that confidence is not there yet. It has improved though, but they are still watching.
At the root of the issue
Nigeria is largely dependent on earnings from crude oil to meet her foreign exchange needs. This is compounded by being a largely import dependent economy both for raw materials and finished goods. Crude oil price shocks last year, thus led to the apex bank implementing supply management measures. Foreign investors found it difficult getting dollars, and industries with foreign parent companies had to obtain loans.
What the country needs to do
Nigeria urgently needs to diversify her export base to generate more foreign exchange income. To do this, the country needs to fix her infrastructural issues, which have made the cost of doing business quite high. Goods produced in Nigeria are thus more expensive, than those imported.
About the IMF
The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944, and established in 1945. Membership spans across 189 countries, and the body has its headquarters in Washington, the United States of America. Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money.