Nigeria’s real GDP growth is broadening to all sectors except oil but inflation remains elevated, the International Monetary Fund said on Thursday after a team held meetings with the Nigerian authorities last week.

The IMF described the economic outlook for Africa’s most populous nation and top oil producer as challenging, with high food prices raising food security concerns.

“Regarding the economic outlook, GDP growth is projected at 3.4 percent (y/y) in 2022 while inflation is expected to remain elevated,” the IMF said in a statement.

It said economic recovery after a recession caused by the COVID-19 pandemic was gaining strength on the back of services and agriculture.

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Oil, the nation’s long-term economic mainstay, remained weak reflecting continued security and technical challenges in the troubled Niger Delta region.

The fiscal deficit was expected to remain high at 6.1% of GDP, due in great measure to costly petrol subsidies and limited tax revenue collections, the IMF said. Both of those have been perennial issues that successive administrations have failed to solve.

Downside risks included further deterioration of security conditions, next year’s elections, low vaccination against COVID-19 and higher global interest rates.

On the upside, steady private sector recovery and further broadening of growth could spur growth and development, the IMF said, also citing the expected start of operations at the 650,000 barrel-per-day Dangote refinery in Lagos.

“Regarding the external sector, the current account deficit narrowed significantly in 2021 helped by import compression and higher net oil balance,” the IMF said.

“However, the improving trade balance, which has continued so far in 2022, is having a limited impact on Foreign Exchange (FX) strains with the exchange rate premiums in the parallel market staying in the 35-40 percent range since October 2021.”