INTERNATIONAL Monetary Fund (IMF) mission to Nigeria says Nigerian economy has started to gradually recover from the negative effects of the COVID-19 pandemic.
Head of IMF Mission to Nigeria, Jesmin Rahman, stated this in virtual meetings with Nigerian authorities in Washington D. C, today.
According to Rahman, Federal Government’ measures to contain the transmission of COVID-19 in Nigeria, including the ongoing vaccination programme under the COVAX initiative with a knock-on effect in sharp output contractions in second and third quartres, Gross Domestic Product (GDP) growth turned positive in Q4 2020 and growth reached 0.5 per cent (year-on-year) in Q1 2021.
“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,” she noted.
Explaining that with the recovery in oil prices and remittance flows, the strong pressures on the balance of payments had somewhat abated, Rahman added that although imports were rebounding faster than exports, foreign investor appetite remained subdued resulting in continued foreign exchange shortage.
Although the team lead said the incipient recovery in economic activity was projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 per cent in 2021, she stated that inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 per cent, following the removal of border controls and the elimination of base effects from elevated food price levels.
“The mission urged the authorities to keep reliance on Central Bank of Nigeria (CBN) overdrafts for deficit financing within legal limits, while the government continues to make efforts to strengthen budget planning and public finance management practices. This is to allow for flexible financing from domestic markets and better integration of cash and debt management. The recent removal of the official exchange rate from the CBN website and measures to enhance transparency in the setting of the NAFEX exchange rate are encouraging,” said Rahman.