The International Monetary Fund said on Wednesday that Nigeria was slowly exiting recession but remains vulnerable because its growth is tied to oil prices and improved revenues are restricted to the energy and agriculture sectors.
The assessment, published in a report on Wednesday, came in the IMF’s Article IV consultation, an annual appraisal of a country’s economy.
Reuters reported on the lender’s findings last week after seeing a copy of the document, which states that the fund expects Nigeria’s government to “muddle through” in the medium term.
Nigeria emerged in the second quarter of 2017 from its first recession in 25 years, largely caused by low crude prices and militant attacks on energy facilities. Higher oil prices and an end to the attacks mostly account for the end of the recession.
Crude oil sales make up around two-thirds of government revenue and the majority of foreign exchange.
“The Nigerian economy is slowly exiting recession but remains vulnerable,” the IMF said in its report.
It said the economy had been helped by higher oil prices, improved access to foreign exchange and foreign reserves rising to a four-year high. But the improvements have not yet boosted non-oil, non-agricultural activity, it said.
“Lower oil prices, tighter external market conditions, heightened security issues, and delayed policy responses are the main downside risks,” it said.
In the IMF’s summary of the government’s response to the report, unidentified Nigerian authorities wished “to register their displeasure with the phrase ‘muddle through’ … and failure to appreciate government efforts despite several initiatives to strengthen the fiscal situation and promote growth.”
The government also complained that the IMF had highlighted Nigeria’s endemic corruption.
“They find the reference to ‘pervasive/widespread corruption’ in Nigeria inappropriate, given that corruption is relative across the globe,” the IMF said. “Going forward, the (Nigerian) authorities request staff to correct the errors and use proper phrases to reflect actual situations.”
The Fund’s report also repeated its calls for Nigeria to lift its remaining foreign exchange restrictions and scrap its system of multiple exchange rates.
The IMF has for more than a year called for Nigeria to simplify its complex foreign exchange system, used to reduce the impact of dollar shortages, which has left large gaps between official rates and various windows that certain groups can use for access to other rates.
The report said the Fund recommends “removing multiple currency practices and unifying the exchange rate as quickly as possible”. It said the move would increase confidence, remove market distortions and increase transparency.
“Under the baseline scenario, growth would pick up to 2.1 percent in 2018, from 0.8 percent in 2017, helped by the full year impact of greater FX availability and recovering oil production,” the Fund said in the report.