The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria mission chief and senior resident representative Dr Gene Leon on Wednesday.

"But we are starting from a point of huge deficits -- social, infrastructural," he pointed out. "There is a need for political and social will to address these. And also the need for the proper policies and to maintain them for as long as needed."

"The picture of Nigeria [today] is strong growth, but very poor in social indicators, very poor in infrastructure," he added. "A lot of poverty. A lot of inequality."

And that inequality is not evenly spread. In the north-east of the country, in the region currently afflicted by the Boko Haram insurgency, the poverty levels are over 50%, according to the World Bank. The insurgency helps maintain that poverty. Poverty levels are much lower in the southern half of the country. There is a clear north/south divide.

Contrary to popular opinion, the Nigerian economy is no longer dominated by oil. In fact, oil is now responsible for only 11% of the country's gross domestic product (GDP). But the fundamental problem -- which is an imbalance and a risk -- is that oil provides 60% of the government's revenues and accounts for 95% of exports, yet only amounts to about 5% of the Nigerian Stock Exchange.

In other words, he highlighted, the non-oil 89% of the economy provides only 40% of State revenues. This was, in fact, a tax structure problem and tax reform was needed. The IMF has recommended to the Nigerian government that it increase its revenues from the non-oil economy, and the government is aware of the problem and has already started addressing tax administration and wider governance reforms.

Not that the tax burden is high. "Nigeria has consolidated government revenues at about 10% of GDP," he noted. "That is very low." Gross national debt is also very low: it is expected to be 11.9% of GDP this year and forecast to be 11.8% next year.

The recent dramatic falls in the oil price acted as a shock on Nigerian government revenues and for the Nigerian Central Bank. And, although it has recovered a little, the oil price is expected to stay low for the next few years. Furthermore, the country has suffered from cuts in oil production due to various criminal activities, including sabotage. In addition, the Central Bank had a policy of maintaining exchange rate stability.

These three factors combined have worked to erode the country's foreign exchange reserves. Nevertheless, these are still big enough to cover six months of imports.

"The government has reacted very well in terms of trying to contain the [oil] shock," affirmed Leon. "Expenditure was cut by 1.7% of GDP, in the face of a revenue decline of 2.4% of GDP, mostly in capital expenditure and fuel subsidies [which automatically reduced because of the oil price decline]. ... The oil price shock has woken people up to the extent this [dependence on oil] is a vulnerability."

The country's banking sector indicators are better than international norms and regulatory and supervision reforms are on track. "The Central Bank is doing a good job. The banking sector is fairly strong. ... Fiscal policy is prudent and sustainable."

"Growth is still actually fairly robust," he reported. It is forecast to reach 4.8% this year and 5% next year. "This is being driven by the non-oil economy. Inflation seems to be holding, but we see a slight uptick later this year."

The short-term domestic risks facing Nigeria are the postponed elections, the Boko Haram insurgency, lower oil production and slow implementation of key reforms. Short-term global risks are (because of the country's dependence on oil exports) the pace of the global recovery, capital flow reversals (back from emerging markets to developed markets), lower oil prices and international security issues.

"The priority now is to create the fiscal space to close the infrastructure gap, improve social service delivery and address socioeconomic regional disparities," asserted Leon. "[This means] Mobilise non-oil revenues. Carry out tax reform." And exports have to be diversified.

Leon was addressing consultancy Frontier Advisory's Frontier Forum seminar on Nigeria in Sandton, north of Johannesburg.