Finance: Nigeria's economy has a lot to worry about after the IMF's visit

At 0.8 percent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty -

Nigeria’s economic activity contracted in the first quarter of the year by 0.6 percent according to the International Monetary Fund (IMF) after its visit to the country.

The reduction was blamed on the challenges with oil production ,the main revenue earner for the country. Nigeria’s refineries have been struggling with meeting production capacities inspite of an investment of over $1.8 billion by the government.

“Preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high (40 percent at end-June) and projected to increase further under current policies".

According to the leader of the team ,Amine Mati, who is the IMF Mision Chief for Nigeria, the economy had however shown marginal growth on the back of growth in the manufacturing sector.

“The economic backdrop remains challenging, despite some signs of relief in the first half of 2017. Economic activity contracted in the first quarter of the year by 0.6 percent, mainly as maintenance stoppages reduced oil production. However, following four quarters of negative growth, the non-oil economy grew by 0.6 percent (year-on-year), on the back of a rebound in manufacturing and continued strong performance in agriculture.

"Various indicators suggest an uptick in activity in the second quarter of the year. Helped by favorable base effects, headline inflation decreased to 16.1 percent in June 2017, but remains high despite tight liquidity conditions".

The IMF also warned about the need for Nigeria’s Central Bank to implement strong interventions if the economic outlook for the year was to improve.

“However, near-term vulnerabilities and risks to economic recovery and macroeconomic and financial stability remain elevated. At 0.8 percent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty. Concerns about delays in policy implementation, a reversal of favorable external market conditions, possible shortfalls in agricultural and oil production, additional fiscal pressures, continued market segmentation in a foreign exchange market that remains dependent on central bank interventions, and banking system fragilities represent the main risks to the outlook."

West Africa’s biggest economy continues to struggle with corruption and poor regulation of several sectors of the economy that has led to stagnated economic development. The uncertainty over the health of the president, Buhari has also contributed to poor investor confidence with the president having spent that past three months out of the country on medical leave.

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