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The International Monetary Fund on Tuesday expressed concerns over weaknesses in Nigerian banks and said that the situation might weigh on economic growth in the medium term.
The IMF stated this in its World Economic Outlook report, which was released at its headquarters in Washington DC, United States.
In the report, the IMF maintained that the Nigerian economy would grow by 0.8 per cent this year, after emerging from recession.
The Economic Counsellor and Director of Research, IMF, Maurice Obstfeld, spoke at a press briefing at the Fund’s headquarters shortly after the release of the report.
Obstfeld said policy implementation and market segmentation in a foreign exchange market that remained dependent on the Central Bank of Nigeria’s interventions would have some impact on the country in the future.
He stated, “Nigeria is expected to emerge from the 2016 recession caused by low oil prices and the disruption of oil production. Growth in 2017 is projected at 0.8 per cent, owing to recovering oil production and ongoing strength in the agricultural sector.
“However, concerns about policy implementation, market segmentation in a foreign exchange market that remains dependent on central bank interventions (despite initial steps to liberalise the foreign exchange market), and banking system fragilities are expected to weigh on activity in the medium term.”
The IMF director said growth prospects across emerging market and developing economies remained heterogeneous, with emerging Asian countries generally growing at a fast pace.
He, however, stated that many countries in Latin America, sub-Saharan Africa and the Middle East would struggle with subpar performance.
According to him, economic growth in sub-Saharan Africa is projected to reach 2.6 per cent in 2017 and 3.4 per cent in 2018, with sizeable differences across countries.
“Downside risks have risen because of idiosyncratic factors in the region’s largest economies and delays in implementing policy adjustments. Beyond the near term, growth is expected to rise gradually, but barely above population growth, as large consolidation needs to weigh on public spending,” Obstfeld added.
According to the WEO report, the world growth is projected to increase from 3.2 per cent in 2016 to 3.6 per cent this year and 3.7 per cent in 2018, an upward revision of 0.1 percentage point for both 2017 and 2018 relative to April.
Economic activity is projected to pick up speed in all country groups except for the Middle East, and forecasts of the strength of the outlook by region have changed only modestly.
Growth is forecast to increase strongly in emerging market and developing economies, from an upwardly revised 4.3 per cent in 2016 to 4.6 per cent in 2017 and 4.9 per cent in 2018, a 0.1 percentage point increase for 2017 and 2018 relative to the April forecast.
The report read in part, “The upward revisions to the growth forecast primarily reflect stronger projected activity in China and in emerging Europe for 2017 and 2018.
“As discussed earlier, although commodity importers account for the lion’s share of growth in emerging market and developing economies, the projected increase in growth from 2016 is driven primarily by stronger projected growth for commodity exporters, most notably Brazil and Russia that experienced severe macroeconomic strains during 2015-16.”
The IMF staff team led by Amine Mati had visited Nigeria from July 20 to 31, 2017 to discuss recent economic and financial developments, as well as update macroeconomic projections.