The International Monetary Fund, IMF, has predicted a 7.3 percent economic growth for Nigeria in 2014, up from 6.4 percent in 2013, with inflation to continue on downward trend.
IMF said the accelerated economic growth, which reflects , a more optimistic outlook than the 6.75 growth projected by Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, would be driven by sectors outside its dominant energy industry.
The forecast puts inflation ending the year at 7 percent, down from 7.9 percent at the end of 2013, continuing a two-year downward trend supported by tight monetary policy.
“Economic growth is expected to improve further in 2014, driven by agriculture, trade, and services. Inflation should continue to decline, with lower food prices from higher rice and wheat production and supported by a tight monetary policy and a budget execution that maintains medium-term consolidation objectives,” the IMF said in a report following consultations with government officials.
The IMF said there were risks to its projections, including the uncertain pace of the global recovery, lower oil prices and production, slow implementation of reforms and the continuation of a bloody Islamist insurgency in the north. It also cautioned against draining fiscal buffers. “Policies should focus on rebuilding external and fiscal buffers, avoiding spending pressures from the political cycle, strengthening the transparency and governance of the oil sector,” the report stated.
Forex reserves have also fallen, to a 19-month low of $40 billion, and the naira, which had been stable, is under pressure from the emerging market asset sell-off and since Central Bank of Nigeria Governor Lamido Sanusi was suspended last month, hitting investor confidence. Reserves remain at a relatively comfortable 5.6 months of imports, the IMF noted.
“Despite significant job creation, unemployment and poverty are high and social indicators lag those of peers. Continued weaknesses in labour markets, access to electricity, cost of doing business, and small and medium enterprises’ access to finance have prevented a transition to a more robust and inclusive growth path,” the IMF said.