The International Monetary Fund (IMF) said on Thursday that it has again cut its growth forecast for Nigeria as the oil exporter faces "substantial challenges" from low crude prices.
In its annual review of Nigeria's economic situation, the IMF said that gross domestic product growth would slow to 2.3 percent in 2016 from an estimated 2.7 percent in 2015. In February, after IMF officials visited the country, the Fund had forecast 3.2 percent growth for Nigeria in 2016.
"Key risks to the outlook include lower oil prices, shortfalls in non-oil revenues, a further deterioration in finances of state and local Governments, deepening disruptions in private sector activity due to constraints on access to foreign exchange, and resurgence in security concerns," the IMF said in a statement.
It added that Nigeria's general government deficit would grow further after doubling to 3.7 percent of GDP in 2015.
The IMF executive board said Nigeria needed to urgently implement policies to safeguard fiscal sustainability, reduce external imbalances and advance structural reforms that promote more inclusive growth.
"Directors emphasized the critical need to raise non-oil revenues to ensure fiscal sustainability while maintaining infrastructure and social spending," the IMF said. "They urged a gradual increase in the VAT rate, further improvements in revenue administration, and a broadening of the tax base."
Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility that is tied to policy reforms in the West African oil exporter, a spokesman for the Washington-based multilateral lender said on Thursday.