The International Monetary Fund (IMF) has forecasted a troubling trajectory for Nigeria’s foreign reserves, predicting a potential plunge to $24 billion by 2024.
The IMF’s latest country report for Nigeria paints a grim picture, highlighting challenges ahead for Africa’s largest economy.
“The financial account is likely to deteriorate, with no projected issuance of Eurobonds, large Fund and Eurobond repayments of $3.5 billion, and portfolio outflows,” the IMF report stated, laying out the factors contributing to the bleak outlook.
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Amid projections of a current account surplus, the IMF anticipates a decline in reserves, attributed partly to decreased crude oil exports resulting from oil theft and insufficient investment in upstream infrastructure. Despite a slight offset from profit repatriation in the oil sector, the downward trend persists.
Foreign Direct Investment remains stagnant, while portfolio outflows, including equity and Eurobond repayments, continue to rise. The IMF underscored the lack of disclosure regarding short-term foreign exchange liabilities by Nigerian authorities, a critical factor for accurately assessing net international reserves.
Moreover, stalled per-capita growth, entrenched poverty, and heightened food insecurity exacerbate the cost-of-living crisis in Nigeria. Low revenue collection further impedes the government’s ability to provide essential services and invest in public infrastructure.
“The headline inflation reached 27 percent year-on-year in October, reflecting the effects of fuel subsidy removal, exchange rate depreciation, and poor agricultural production,” the IMF report noted, underscoring the multifaceted challenges facing the Nigerian economy.
As Nigeria grapples with these formidable obstacles, the IMF’s prognosis serves as a sobering reminder of the urgent need for comprehensive reforms and strategic interventions to stabilize the economy and foster sustainable growth.