The International Monetary Fund (IMF) has commended Nigeria for its strong economic performance in 2004, but also urged the authorities to broaden its ambitious reform agenda and expedite the overall pace of privatization.

In its annual review, the Washington-based financial institution forecast 3.4 percent increase in Nigeria's economy this year against an estimated 6.1 percent increase in 2004.

"Directors observed that a prudent fiscal policy in 2004 had contributed importantly to the macroeconomic stabilization effort, " the IMF said in a statement obtained Thursday.

"They encouraged the authorities to persevere in their efforts, building on the progress made in 2004 and broadening the reform agenda," it said.

The IMF said the fiscal restraint could help Nigeria, Africa's top oil producer, save its oil windfall, resulting in lower inflation and a sharp increase in international reserves, which rose considerably to 23 billion dollars at end-May 2005.

Despite this, Nigeria's economic transformation continues to face formidable challenges, owing to weak institutions, administrative and technical capacity constraints, resistance from entrenched interests, and the legacy of decades of economic mismanagement, it warned.

"Directors welcomed the provisions of the Fiscal Responsibility Bill, which, if passed, will enhance fiscal transparency and accountability at all levels of government, introduce formal fiscal rules into the budget process, and lay the foundations for medium-term fiscal sustainability," the IMF said.

It supported the recent actions of the Central Bank of Nigeria to limit broad money growth, and urged the authorities to allow short-term interest rates and the exchange rate to adjust as needed to meet the monetary targets.

The IMF said the overall pace of privatization was, however, disappointing as the Bureau of Public Enterprises was replaced in March 2005 to re-energize the privatization process.

"Directors ... welcomed the revamping of the Bureau of Public Enterprises and encouraged the authorities to expedite the overall pace of privatization, bearing in mind the need to rally public support for it," it said.

"They also welcomed the authorities' emphasis on broad-based participation in advancing the country's commitment to improve transparency in the oil and gas sector under the Extractive Industries Transparency Initiative," the IMF said.

"All directors welcomed a continuing close dialogue of the fund with Nigeria on policy formulation and implementation, in the most appropriate and effective form, including in the context of a possible non-borrowing relationship," it added.

Source: Xinhua