IMF mission visits Nigeria

To address the economic consequences of plummeting oil prices, Gene Leon led an International Monetary Fund (IMF) team on visits to Abuja, Nigeria, Dec. 14 to Dec. 17 and Lagos Jan. 10 to Jan. 25.

The visits were part of a required 2016 Article IV consultation.

"Nigeria is facing the impact of a sharp decline in oil prices," Leon said. "Due to its dependence on oil revenues, the general government deficit doubled to about 3.3 percent of GDP (gross domestic product) in 2015, despite a sharp reduction in public investment. Exports dropped about 40 percent, pushing the current account deficit to an estimated 2.4 percent of GDP. With foreign portfolio flows slowing significantly, reserves fell to $28.3 billion at [the] end [of] 2015."

Leon said the Central Bank of Nigeria, in an effort to protect reserves, had implemented foreign exchange restrictions, which "have impacted significantly segments of the private sector that depend on an adequate supply of foreign currencies."

"Coupled with fuel shortages in the first half of the year and lower investor confidence, growth is estimated to have slowed to 2.8 percent in 2015 (from 6.3 percent in 2014), weakening corporate balance sheets, lowering the resilience of the banking system, and likely reversing progress in reducing unemployment and poverty," Leon said.

The nation's inflation rate was up 7.9 percent from December 2014 to 9.6 percent.

"With oil prices expected to remain low for a long time, continuing risk aversion by international investors, and downside risks in the global economy, the outlook remains challenging," Leon said. "The authorities’ policy response has focused on seeking to support growth, while preserving international reserves. The draft 2016 budget envisaged, appropriately, a significant shift in the composition of fiscal spending toward capital investment while increasing the allocation for a social safety net. At the same time the CBN has eased monetary conditions."

Leon also recommended “steadfast implementation of structural reforms."

"Adopting a sound petroleum industry bill, including by applying the anti-money laundering/combating the financing of terrorism framework, will help strengthen the regulatory framework for the oil sector," he said. "Emphasis should be sustained on doing 'more with less' to improve the efficiency of public sector service delivery and create an enabling environment to attract investment."