Key Problems With The Nigerian Economy

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The Article IV Consultation is an annual appraisal of a country’s economy by IMF. It usually contains an evaluation of both fiscal and monetary policies of government as well as recommendations.

“The Nigerian economy is slowly exiting recession but remains vulnerable,” said the report.

1. Huge fiscal deficit
Increasing debt accumulation by the government was identified as a major problem. IMF also noted that this is an indication of weak revenue mobilization by the government. Despite the tax drives of the current government, it still heavily relies on external debts to fund its annual budget.

Bonds raising programs of the Nigerian government have also been noted to have crowded out the private sector. This means it has reduced the crediting raising opportunities for private businesses.

2. Low economy diversification
The country’s high dependence on oil sector was also brought to fore by IMF in this document. the report revealed that the economy was dragged into and brought out of recession by one sector – oil and gas sector.

“…This performance was accompanied by positive economic growth for two consecutive quarters in 2017, propped up by recovering oil production.”

3. Increasing domestic risks
The economy is still noted to be vulnerable to some domestic shocks. Some of which include heightened security tensions, weak implementation of structural reforms e.t.c

The herdsmen-farmers crisis was also noted in the report. More so, delayed fiscal policy response to issues such as subsidy payment and budgetary allocations were also cited.

4. Rising banking sector risks
The document also stated that there are many banking sector vulnerabilities, and advised that they should be contained.

As a result, the move by Central Bank of Nigeria (CBN) to increase capital buffers of weak banks by preventing dividends payment was commended by the fund.

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