The International Monetary Fund (IMF) on Thursday said the Nigerian economy was “gradually” recovering from the negative effects of the COVID-19 pandemic.
The IMF disclosed this in its End-of-Mission statement from its headquarters in Washington, DC, on preliminary findings following virtual meetings by its staff teams with the Nigerian authorities from June 1 to 8.
The IMF team, led by Ms. Jesmin Rahman, which discussed recent economic, financial developments and outlook and noted that “real Gross Domestic Product (GDP) was recovering but unemployment and inflation remained elevated”.
The report reads in part:
“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic.
“Following sharp output contractions in the second and third quarters, GDP growth turned positive in fourth quarter 2020 and growth reached 0.5 per cent (year-over-year) in first quarter 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels.
“Inflation slightly decelerated in May but remained elevated at 17.9 per cent, owing to high food price inflation.
“With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued foreign exchange shortage.
“Tax revenue collections are gradually recovering but, with fuel subsidies resurfacing, additional spending for COVID-19 vaccines, and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 per cent of GDP.
“Downside risks to the near-term arise from further deterioration of security conditions, and the still uncertain course of the pandemic both globally and in Nigeria.
“The mission urged the authorities to keep reliance on the Central Bank of Nigeria (CBN) overdrafts for deficit financing within legal limits.
“The mission also advised the government to continue to make efforts to strengthen budget planning and public finance management practices to allow for flexible financing from domestic markets and better integration of cash and debt management.
“The banking sector remains liquid and well-capitalized while non-performing loans (NPLs) are contained.
“The extension of the moratorium on principal payments of qualifying credit facilities on a case-by-case basis through March 2022 should be limited to viable debtors with strong pre-crisis fundamentals.
“CBN stress tests purport that the banking system would remain adequately capitalised except in case of a severe deterioration of credit quality.
“Nevertheless, it remains to be seen what share of forborne loans may turn non-performing as the impact of the pandemic abates.”