The International Monetary Fund (IMF) on Monday 17 February 2020 released a reviewed projection of Nigeria’s GDP for 2020 which moved from 2.5 percent to 2 percent. The global lender attributed the reversed forecast to the unexpected outbreak of coronavirus which is connected to a fall in oil prices, rising inflation, and a fall in revenue, amongst others. 

This was stated in the Bretton Wood Institutions Article IV Consultation on Nigeria which was carried out by Amine Mati, IMF Senior Resident Representative and Mission Chief for Nigeria, during a visit to Lagos and Abuja from January 29-February 12, 2020 to conduct this forecast. 

At the end of his visit, Mati revealed key issues validating the new projections on the Nigerian economy. “The pace of economic recovery remains slow, as declining real incomes and weak investment continue to weigh on economic activity,” Mati said in a statement. Also,  “external vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals.” Nigeria, therefore, needs a major policy shift and refocus in order to reduce growing vulnerabilities and shocks in the economy. 

According to IMF’s findings, high fiscal deficits are complicating the monetary policy and weak non-oil revenue mobilization has led to further deterioration of the fiscal deficit, which was mostly financed by the Central Bank of Nigeria (CBN) overdrafts. The interest payments to revenue ratio remain high at about 60 percent. With inflation expected to pick up while deteriorating terms of trade and capital outflows, the country’s external position will weaken. 

IMF recognized that non-oil revenue mobilization- including through tax policy and administration improvements- remains urgent to ensure financing constraints are contained and the interest payments to revenue ratio sustainable. The global lender also affirmed that the central bank’s overdrafts should be limited and supports the authorities’ plans to use the low domestic yield environment to front-load their financing requirements.

Nigeria’s border closure remains and will continue to have significant economic consequences on the country and its neighbours. “It is important that all involved parties quickly resolve the issues keeping the borders closed-including to stop the smuggling of banned products,” Mati said.

Recognizing these vulnerabilities, the Nigerian authorities have taken a number of measures to boost revenue through the adoption of the Finance Bill and Deep Offshore Basin Act and; and improve budget execution by adopting the 2020 budget by end-December 2019. The tightening of monetary policy in January 2020 through higher cash reserve requirements to respond to looming inflationary pressures is also a good initiative.

Once these key issues are resolved to revive the Nigerian economy, it will build resilience, boost inclusive growth, encourage long-term investment and unlock growth potential in the country. 

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