The International Monetary Fund (IMF) mission to Nigeria has said that the Nigerian economy is gradually beginning to witness some recovery from the negative impact of the Covid-19 pandemic.
This could be attributed to some of the fiscal and monetary policies put in place by the Federal Government to curb the spread of the pandemic which includes the vaccination programme; as well as the recovery of oil prices and others.
This disclosure is contained in a statement issued on Friday in Washington D.C. by the Team Lead of IMF mission in Nigeria, Ms Jesmin Rahman, who led staff virtual meetings with Nigerian authorities.
The meeting, which held from June 1 to 8, was to discuss recent economic and financial developments and the outlook of the country.
While commending the Federal Government for the measures put in place to contain the spread of Covid-19 in Nigeria, including the ongoing vaccination programme under the COVAX initiative, Rahman also expressed support for the government’s efforts to acquire additional doses from countries with surplus stocks.
What the IMF Nigeria mission Team Lead is saying
Rahman said following sharp output contractions in the second and third quarters, Gross Domestic Product (GDP) growth turned positive in Q4 2020 and growth reached 0.5% (year-on-year) in Q1 2021, which she said was supported by agriculture and services sectors.
She said, “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 per cent, owing to high food price inflation.’’
She, however, said that the strong pressure on the balance of payment had subsided with the increase in global oil prices and remittance flows.
She noted that although imports were rebounding faster than exports, foreign investor appetite remained subdued resulting in continued foreign exchange shortage, adding that the recovery in economic activity was projected to expand to different sectors, with GDP growth expected to get to 2.5% in 2021.
She pointed out that although inflation is expected to remain elevated in 2021, it is likely to decelerate in the second half of the year to reach about 15.5%, due to the removal of border controls and the elimination of base effects from elevated food price levels.
She added that downside risks in the short term are attributed to the further deterioration of security conditions and the uncertainty surrounding the pandemic both globally and in Nigeria.
Rahman expressed concern over the gradual reintroduction of fuel subsidies, reiterating the importance of introducing a market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor.
She recommended stepping up efforts to strengthen tax administration to mobilise additional revenues and help address priority spending pressures.
“The mission urged the authorities to keep reliance on Central Bank of Nigeria (CBN) overdrafts for deficit financing within legal limits, while the government continues to make efforts to strengthen budget planning and public finance management practices.
“This is to allow for flexible financing from domestic markets and better integration of cash and debt management.
“The recent removal of the official exchange rate from the CBN website and measures to enhance transparency in the setting of the NAFEX exchange rate are encouraging,’’ she stated.
She said that the mission was in support of sustaining the efforts towards fully unifying all exchange rate windows and establishing a market-clearing exchange rate and she also stated that the banking sector remained liquid and well-capitalised while Non-Performing Loans (NPLs) were contained.