UPDATE 2-Nigeria's economy to contract 3.25% in 2020 due to COVID-19 -IMF

(Adds central bank projection, banking impact)
By Andrea Shalal and Chijioke Ohuocha
WASHINGTON/ABUJA, Dec 11 (Reuters) - Nigeria's economy is
likely to contract by 3.25% this year before rebounding to
growth of 1.5% in 2021, the International Monetary Fund said on
Friday.
Africa's largest economy entered its second recession in
four years in the third quarter. The IMF projected a recovery to
start next year with subdued growth, and output recovering to
its pre-pandemic level in 2022.
The IMF said Nigeria needed broad market and exchange rate
reforms to fix its balance of payment pressures and steepen the
medium-term growth path.
"Under current policies, the outlook is challenging," the
IMF said.
The central bank expects growth of roughly 2% in
2021. The coronavirus pandemic and an oil price crash have
hammered an economy that relies on crude sales for government
revenues, triggering a historic decline in growth and large
financing needs as well as weakening the naira.
The IMF comments come a day after the World Bank said
Nigeria must expand its currency reforms before the Bank can
approve a $1.5 billion loan. The central bank has adjusted the exchange rate three times
this year, after an official devaluation in March, in an attempt
to align multiple quoted currency rates.
On Thursday, the World Bank said the measures to unify the
exchange rates had not been enough, and that remittances this
year were likely to fall to 2015 levels of $20.2 billion from
$26.4 billion last year.
"If balance of payment and inflationary pressures intensify,
there might be a need to withdraw liquidity or raise rates," the
Fund said, adding that further cuts were unlikely to support to
the economy.
It urged the central bank to reconsider imposing a minimum
loan-to-deposit ratio to offset risks to financial stability.

(Writing by Chijioke Ohuocha; Editing by Kevin Liffey)