By Judith Ugwumadu | 5 December 2013

The International Monetary fund has told Nigeria that its dwindling oil revenues are affecting its budgetary plans at federal, state and local levels, warning that the country would find it difficult to reduce unemployment and poverty.

It also noted that, although the outlook for Nigeria’s economy was positive, risks still needed to be managed. Growth is projected to increase to about 7% in 2014, while inflation should remain subdued in the single digits. 

‘Fiscal consolidation is progressing well, and the momentum needs to be preserved through the ongoing election cycle,’ the IMF said.

The fund noted that key public financial management reforms were underway in Nigeria, including the implementation of a Treasury Single Account and integrated information management systems. But lower-than-budgeted oil revenues were affecting budgetary plans. 

Subsequently, the IMF has advised Nigeria to ‘rebuild its fiscal buffers to manage oil revenue volatility’. It said the country needed to clamp down on the decline in oil prices and continued theft and losses in oil production, which led to the drawdown from its excess crude account. 

Nigeria should build in a mechanism to protect their revenues any future shocks to the oil trade, said the IMF, adding that an improved financial crisis management capacity and a stable banking system could turn things around. 

‘Moving toward a sustainable non-oil primary deficit path will require resolve in continuing fiscal consolidation, including through resisting procyclical election spending, mobilising non-oil revenue, improving efficiency in the public sector, and strengthening transparency in oil sector governance.’ 

It added that growth in the next decade would depend on the continued implementation of reforms to strengthen institutions, improve efficiency, and prioritise quality infrastructure investments.