The International Monetary Fund has stated that Nigeria’s reported unemployment rates, as at the end of 2020 are yet to come down. However, it cited that recent COVID-19 monthly surveys shows Nigeria’s employment back at its pre-pandemic level.
This was disclosed by the IMF in a statement on Monday as the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nigeria.
IMF added that higher debt service to government revenues (through higher US interest rates and/or increased borrowing) pose risks for fiscal sustainability.
The Fund stated that Nigeria exited the recession in the 4th quarter of 2020 and output rose by 4.1% (y-o-y) in the third quarter, with broad-based growth except for the oil sector which is facing security and technical challenges. It also said projected growth is at 3% for 2021.
”Headline inflation rose sharply during the pandemic reaching a peak of 18.2% y-o-y in March 2021 but has since declined to 15.6% in December helped by the new harvest season and opening of land borders.
“Reported unemployment rates (end 2020) are yet to come down but more recent COVID-19 monthly surveys show employment back at its pre-pandemic level,” it said.
It warned that despite higher oil prices, Nigeria’s fiscal deficit is projected to widen in 2021 to 5.9% of GDP, reflecting implicit fuel subsidies and higher security spending.
“The consolidated government revenue-to-GDP ratio at 7.5 percent remains among the lowest in the world. After registering a historic deficit in 2020, the current account improved in 2021 and gross FX reserves have improved, supported by the IMF’s SDR allocation and Eurobond placements in September 2021,” it stated.
The IMF also warned that low vaccination rates expose Nigeria to future pandemic waves and new variants, including the ongoing Omicron variant, while higher debt service to government revenues (through higher US interest rates and/or increased borrowing) pose risks for fiscal sustainability.
“A worsening of violence and insecurity could also derail the recovery. On the upside, the non-oil sector could be stronger, benefitting from its recent growth momentum, supportive credit policies, and higher production from the new Dangote refinery,” it added.
The Fund added in the Executive Board Assessment that Directors highlighted the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks, calling for “significant domestic revenue mobilization, including by further increasing the value-added tax rate, improving tax compliance, and rationalizing tax incentives.”
It also called for the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources. IMF directors praised the resilience of Nigeria’s banking sector and the planned expiration of pandemic-related support measure, and added that the newly launched eNaira could help foster financial inclusion and improve the delivery of social assistance.
It called for bold reforms in the trade regime and agricultural sector, as well as investments, to promote diversification and job-rich growth and harness the gains from the African Continental Free Trade Agreement (AfCFTA).