The International Monetary Fund (IMF) has again dropped its 2016 forecast on Nigeria’s economic growth, saying the nation was faced with “substantial challenges” caused by low crude prices.
IMF officials, during a visit to the country in February, had forecast a 3.2 percent growth, but its annual review of Nigeria’s economic situation released on Thursday forecast 2.3 percent gross domestic product growth in 2016 from an estimated 2.7 percent in 2015.
“Key risks to the outlook include lower oil prices, shortfalls in non-oil revenues, a further deterioration in finances of state and local Governments, deepening disruptions in private sector activity due to constraints on access to foreign exchange, and resurgence in security concerns,” the IMF said in a statement.
It added that Nigeria’s general government deficit would grow further after doubling to 3.7 percent of GDP in 2015.
The IMF executive board said Nigeria needed to urgently implement policies to safeguard fiscal sustainability, reduce external imbalances and advance structural reforms that promote more inclusive growth.
“Directors emphasized the critical need to raise non-oil revenues to ensure fiscal sustainability while maintaining infrastructure and social spending,” the IMF said. “They urged a gradual increase in the VAT rate, further improvements in revenue administration, and a broadening of the tax base.”
Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility tied to policy reforms in the West African oil exporter, a spokesman for the Washington-based multilateral lender disclosed.
