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The International Monetary Fund cut Nigeria’s economic growth outlook, citing the effect that the Chinese coronavirus outbreak has had on global oil demand.
The revision follows a visit to the country by IMF officials, who said in a statement that Nigeria’s economic recovery remains shaky and challenges abound.
“External vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals,” the IMF’s Mission Chief for Nigeria, Amine Mati, said in the statement.
“Under current policies, the outlook is challenging. The mission’s growth forecast for 2020 was revised down to 2 percent to reflect the impact of lower international oil prices. Inflation is expected to pick up, while deteriorating terms of trade and capital outflows will weaken the country’s external position.”
Nigeria is currently producing less than 1.8 million bpd according to OPEC’s latest monthly report. This is a lot less than it wants to produce, but the country is bound by its commitment to the OPEC+ club that is keeping production capped to stimulate prices, however unsuccessfully this has been going lately.
At the same time, Nigeria is trying to boost its oil income in other ways. Last year, the country slapped Big Oil majors active in its oil industry with a lawsuit demanding $62 billion in back taxes payable under a legal stipulation from the early 1990s concerning the review of royalty rates based on international prices.
Meanwhile, several oil majors are cutting their presence in Nigeria. Chevron, Total, and Exxon are all looking for buyers for some of their Nigerian assets. This does not bode well for Nigeria’s oil industry unless it completes the sector reform that has been dragging its feet for two decades now. Then it could turn its attention to non-oil revenues, too.
“Non-oil revenue mobilization—including through tax policy and administration improvements—remains urgent to ensure financing constraints are contained and the interest payments to revenue ratio sustainable,” the IMF’s missions said in its statement.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.