Lower oil income and domestic political instability are among the greatest risks facing Nigeria, the International Monetary Fund said.

The economy of Africa’s biggest oil producer is expected to have expanded 6.4 percent last year, and growth will improve further in 2014, driven by agriculture, trade and services, the Washington-based lender said in a report published today.

“While the economic outlook remains favorable, key risks include continued lower oil revenues from oil production losses and lower oil prices, the impact from the unwinding of unconventional monetary policy in advanced economies, and domestic political and security uncertainties,” the IMF said.

Nigeria is struggling to contain an insurgency by the Boko Haram Islamist militant group. Amnesty International said on Feb. 28 that more than 600 people had been killed in the violence since the start of the year.

The IMF said the benefits of economic growth haven’t been translated into widespread development.

“Despite significant job creation, unemployment and poverty are high and social indicators lag those of peers,” it said. “Continued weaknesses in labor markets, access to electricity, cost of doing business, and small and medium enterprises’ access to finance have prevented a transition to a more robust and inclusive growth path.”

Nigeria will hold elections on Feb. 14, when the ruling People’s Democratic Party will face its stiffest electoral challenge since it came to power in 1999. The opposition All Progressives Congress is running on a platform of creating jobs and fighting corruption.

“Policies should focus on rebuilding external and fiscal buffers, avoiding spending pressures from the political cycle, strengthening the transparency and governance of the oil sector, and enhancing financial stability,” the IMF said.

Source: Bloomberg (by Daniel Magnowski)