* Nigeria in first recession in quarter of century
* IMF says Nigeria economy expected to grow 0.8 pct this
* IMF review precedes talks on loans of at least $1.4 bln
(Adds quotes, details, background)
By Alexis Akwagyiram and Chijioke Ohuocha
ABUJA, March 30 The International Monetary Fund
urged Nigeria on Thursday to lift its remaining foreign exchange
restrictions and scrap its system of multiple exchange rates in
order to revive its economy, which is in its first recession in
The recommendation came in the Washington-based Fund's
regular assessment of the country's economy. A staff report, an
accompanying document seen by Reuters and addressed to the IMF's
executive board, outlined a raft of failings in Nigeria's
handling of its economy.
Nigeria fell into recession last year largely due to the
impact of low oil prices and militant attacks on energy
facilities in the Niger Delta oil hub. Crude sales account for
more than 90 percent of foreign exchange earnings and two-thirds
of government revenue.
President Muhammadu Buhari has rejected a devaluation of the
naira currency and backed restrictions imposed by the central
bank that force firms to buy dollars needed for imports for a
premium on the black market, where the currency trades around 30
percent weaker than the official exchange rate.
The fund said its directors "urged the authorities to remove
the remaining restrictions and multiple currency practices, thus
unifying the foreign exchange market and helping regain investor
Nigeria, Africa's most populous country, has at least five
exchange rates which include the official one, a rate for Muslim
pilgrims travelling to Saudi Arabia, one for school fees abroad
and a retail rate set by licensed exchange bureaux.
The IMF's verdict comes weeks after the budget ministry
published its Economic Recovery and Growth Plan for 2017 to 2020
which called for a market-determined exchange rate. However, the
plan offers few concrete steps.
Nigeria has not asked the Fund for fiscal support but its
recommendations may influence institutional lenders ahead of the
annual spring meetings with the World Bank.
The World Bank has been in talks with Nigeria for more than
a year over an application for a loan of at least $1 billion and
the African Development Bank has $400 million on offer. But
talks have stalled over economic reforms.
Nigeria's economy contracted 1.5 percent last year.
"Under unchanged policies, the outlook remains challenging,"
the report said, adding that growth would "pick up only
slightly" to 0.8 percent this year, mostly reflecting some
recovery in oil production.
The Fund said the country's fiscal deficit increased to 4.7
percent of GDP in 2016, up from 3.5 percent in 2015, due to
And it made recommendations regarding the country's banking
sector, which has seen lenders who fuelled an oil sector credit
boom being hammered by the impact of low oil prices which
spawned foreign exchange shortages and the naira's plunging
The Fund said it encouraged "quickly increasing the capital
of undercapitalized banks and putting a time limit on regulatory
However, it also said it welcomed efforts to strengthen the
resilience of the banking sector.
"In light of the persisting internal and external
challenges, they emphasised that stronger macroeconomic policies
are urgently needed to rebuild confidence and foster an economic
recovery," the statement said of the board's assessment.
(Editing by Jeremy Gaunt)