Macroeconomic Stability: IMF Recommends Determined Implementation of Government’s Policy in Nigeria
The International Monetary Fund(IMF) says determined and well-sequenced implementation of government’s policy intentions would pave the way for faster, more inclusive, resilient growth in Nigeria.
The IMF said this in a statement after its Executive Board’s 2024 Article IV Consultation with Nigeria, a copy of which was obtained in Abuja on Thursday.
The Board of Directors of the IMF said the government’s reforms had to be well-communicated to also help restore macroeconomic stability, reduce poverty, and support social cohesion.
The Directors highlighted the importance of reforms to enhance the business environment, improve security, implement key governance measures, develop human capital, boost agricultural productivity, and build climate resilience.
“These reforms are crucial to boost investor confidence, unlock Nigeria’s growth potential and diversify the economy, and address food insecurity, and underpin sustainable job creation.”
They said over the last decade, limited reforms, security challenges, weak growth and now high inflation had worsened poverty and food insecurity in Nigeria. While Nigeria swiftly exited the COVID-19 recession, per-capita income has stagnated.
“Real Gross Domestic Product (GDP) growth slowed to 2.9 per cent in 2023, with weak agriculture and trade, and despite the improvement in oil production and financial services. Growth is projected at 3.3 per cent for 2024 as both oil and agriculture outputs are expected to improve with better security. The financial sector has remained stable, despite heightened risks.
“Food insecurity could worsen with further adverse shocks to agriculture or global food prices. Adverse shocks to oil production or prices would hit growth, the fiscal and external position, and exacerbate inflationary and exchange rate pressures.”
The directors said Nigeria, under its new administration, had set out on an ambitious reform path to restore macroeconomic stability and support inclusive growth.
“The Executive Directors agreed with the thrust of the staff appraisal and welcomed the bold reforms implemented by the new administration.” They commended the authorities’ focus on revenue mobilisation, governance, social safety nets, and upgrading policy frameworks in the face of Nigeria’s significant economic and social challenges. The directors commended the administration’s actions to rein in inflation and restore market confidence.
They stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path, maintaining exchange rate flexibility, and building reserves.
The directors recommended caution regarding amendments to the Central Bank of Nigeria (CBN) Act that might weaken the central bank’s autonomy.
They also commended the authorities for restarting the cash transfer programme and emphasised the urgency of scaling it up to mitigate acute food insecurity.
The directors welcomed the administration’s work on a comprehensive revenue mobilisation strategy including boosting tax enforcement and broadening the tax base.
They underscored that mobilising revenue and reprioritising expenditure, including phasing out costly and regressive energy subsidies, were critical to creating fiscal space for development spending and strengthening social protection while maintaining debt sustainability.
The directors appreciated the authorities’ commitment to discontinue deficit monetisation and positively noted progress in macroeconomic policy coordination. They emphasised the importance of close monitoring of financial sector risks.
The directors supported the increase in the minimum capital for banks and urged the CBN to unwind the regulatory forbearance introduced during the pandemic. They supported the administration’s efforts to foster financial inclusion and deepen the capital market.
The directors welcomed the IMF’s capacity development to support the Nigerian authorities’ reform efforts.
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