ABUJA (Reuters) – Nigeria is exiting recession but its economy remains vulnerable, the International Monetary Fund (IMF) said on Friday, after conducting a review of Africa’s largest economy.
International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017. REUTERS/Yuri Gripas
The regional power climbed out of its first recession in a quarter of a century in the second quarter, but economic growth remains sluggish. That has contributed to a cycle of poverty that drives Nigeria’s yawning wealth inequality as well as social unrest.
“Overall growth is slowly picking up but recovery remains challenging,” the IMF said in a statement about the review.
Macroeconomic and structural reforms remain urgent to contain any vulnerability, it said.
“In the absence of new policies, the near-term outlook remains challenging,” the IMF said.
The IMF made broadly similar statements earlier this year, a sign that little progress had been made.
The administration of President Muhammadu Buhari, who campaigned on vows to fix Nigeria’s economy, has struggled to follow through with plans to reduce the country’s dependence on oil.
Much of Nigeria’s recovery since the second quarter has been driven by crude production, which accounts for roughly two-thirds of government revenues, despite the government’s assertions they are investing in infrastructure and key industries such as agriculture to drive employment and boost growth.
“Growth is expected to continue to pick up in 2018 to 2.1 percent, helped by the full year impact of greater availability of foreign exchange and higher oil production, but to stay relatively flat in the medium term,” said the IMF.
Low oil prices, security issues and a lack of policy all threaten the country’s economic recovery, the lender said.
The naira’s exchange rate, still controlled by the government and central bank, remains a bugbear after more than a year of efforts to convince the administration to liberalise the currency.
“Moving toward a unified and market-based exchange rate as soon as possible while continuing to strengthen external buffers would be necessary to increase confidence and reduce potential risks from capital flow reversals,” said the IMF.
Earlier on Friday, Nigeria’s stats office said that four in every ten members of the country’s workforce were unemployed or underemployed at the end of September.
Reporting by Paul Carsten; Editing by Alison Williams