Security risks, low vaccination rates threaten Nigeria’s economic outlook, IMF warns

The International Monetary Fund (IMF) says low vaccination rates, inflation and insecurity may threaten Nigeria’s economic growth.

The Bretton Woods institution said this in its April 2022 regional economic outlook for sub-Saharan Africa titled ‘A New Shock and Little Room to Maneuver’.

The IMF had recently upgraded its growth forecast for the Nigerian economy in 2022 to 3.4 per cent.

According to the latest report, IMF advised the country to diversify away from oil, saying that the move is critical to raise growth potential sustainably and reduce volatility.

“Nigeria’s growth outlook has improved through higher oil prices and a stronger-than-anticipated recovery of manufacturing and agriculture,” the report reads.

“Growth is expected to reach 3.4 per cent in 2022, falling back to 2.9 per cent from 2024 onwards.

“The outlook is subject to high uncertainty associated with oil prices and financial conditions.

“Moreover, low vaccination rates, rising security risks, and elevated price pressures weigh negatively on the medium-term growth outlook.”

The institution also faulted the parallel market system for foreign exchange in Nigeria and Zimbabwe.

According to the IMF, the lack of a unified framework can weigh on growth — distorting investment, encouraging rent-seeking, and add to uncertainties.

“The decision to return to a more unified framework is often difficult, but experience suggests that the shift to a market-clearing official rate is not in itself likely to lead to a sharp increase in inflation, as prices in the real economy tend to reflect the less-favourable parallel exchange rate; and removing exchange-market distortions can give a substantial boost to development, by reducing uncertainty and strengthening competitiveness (Gray 2021),” the report adds.

The IMF projected that sub-Saharan Africa’s economic growth in 2022 will weaken to 3.8 per cent due to the Russia-Ukraine war.

The institution, however, said some of the countries in the region may benefit over the medium-term from European energy diversification efforts.

It said Nigeria, Senegal, Mozambique, and Tanzania have the largest proven natural gas reserves in the region.

It added that the four countries may face stronger export demand from Europe, especially given the EU’s recent decision to classify gas as sustainable.