LAGOS -Nigeria’s economy is likely to grow by 2.6% this year in a “subdued” recovery from last year’s recession, the International Monetary Fund (IMF) said on Friday.
The fund, which had said it was likely to revise up its 1.5% growth projection for 2021, said the pace of recovery was still limited, given Nigeria’s rising population.
“This is just above the population growth rate, implying stagnant per capita income in the medium term,” it said.
It said annual growth of 2.6%-2.7% was likely over the medium term.
The IMF, in a statement following a mission to Africa’s largest economy, also repeated its long-running calls to scrap costly fuel and electricity subsidies and said some reforms were needed as soon as possible.
“Major reforms in fiscal, exchange rate, trade and governance are needed to alter the long-running lacklustre growth path,” it said.
Nigeria’s economy grew just over 4% in the third quarter, the statistics office said earlier this week, the fourth consecutive quarter of growth. However, the third-quarter growth rate slowed compared with the previous quarter.
The IMF warned that Nigeria faced “significant downside risks” in the near term due to the ongoing COVID-19 pandemic as well as tenuous domestic security.
But the fund’s most urgent calls related to subsidies and foreign exchange.
Nigeria imports virtually all its fuel despite its status as Africa’s largest oil exporter, and rising oil prices significantly boosted its import bill.
And despite Central Bank efforts to close the gap between Nigeria’s multiple naira rates, the IMF said more action was needed.
“The mission advised a move to a unified and market-clearing exchange rate without further delays,” it said.
The World Trade Organization has also raised concerns about how Nigeria’s foreign exchange management has been used to support manufacturing, exports and imports.
(Reporting By Libby George; Editing by Kevin Liffey and Barbara Lewis)