January 5, 2016

IMF to Buhari: Make your economic policies flexible

IMF to Buhari: Make your economic policies flexible

President Muhammadu Buhari receiving IMF Managing Director, Christine Lagarde in Abuja.

*Rules out conditional loans negotiations

*Says with right policies, Nigeria has no reason to borrow

By Levinus Nwabughiogu

ABUJA–Following the dwindling oil prices that have apparently affected the national income of most countries, the International Monetary Funds, IMF, has warned President Mohammed Buhari not to strangulate poor Nigerians with rigid economic policies.

President Muhammadu Buhari receiving IMF Managing Director, Christine Lagarde in Abuja.

President Muhammadu Buhari receiving IMF Managing Director, Christine Lagarde in Abuja.

The Body also stated that it was concerned by the condition of teeming population of poor Nigerians who would be affected by the rigidity of the policies, stressing the need to inject fiscal discipline in the policy formulations.

The remarks emanated from the Managing Director of the International Monetary Fund (IMF), Christine Lagarde, who visited president Buhari at the presidential villa in Abuja on Tuesday.

Briefing the State House Correspondents after the meeting, the visiting IMF scribe also said that her mission to Nigeria was not connected to the negotiations of any loan with any kind of conditionalities but to have discussion on the economic reforms and objectives of the present government.

Also recalling the tremendous progress Nigeria has made in its democratic process, Lagarde said a lot had changed in the country since she last visited four years ago.

She also revealed that a team of Economists from IMF would be engaging the financial authorities in Nigeria to review the economic polices.

She said: “I was in Nigeria four years ago and in four years, many things have changed. That has been the topic of our discussions with President Buhari and his team. Looking back four years ago, massive democratic change has occurred in this country peacefully. Nigeria has become the largest economy in Africa, certainly the most populated and with a very attractive market.

“But things have changed in a more complicated way in the sense that the the source of revenue to the government of Nigeria which was predominantly oil has seen its price divided by more than half and the financing cost around are beginning to rise if only because the economic situation in the United States has improved and interest rates will begin to rise. Added to which emerging countries economies are decelerating their growth….

“First let me make it clear that I’m not here nor is my team in this country to negotiate a loan with conditionalities. We are not into programme negotiations and frankly at this point in time, given the determination, resilience displayed by the President and his team, I don’t see why an IMF programme will be needed. So, of course, discipline is going to be needed, of course, implementation is going to be key for the objectives and the ambitions to serve the country well, in order for it to be actually sustainable.

“We believe that with very clear primary ambition to support the poor people of Nigeria, there could be added flexibility in the monetary policy, particularly if as we think, the price of oil is likely to be possibly low for longer, because clearly the authorities should not deplete the reserves of the country, simply because of rules that will be exceedingly rigid. I’m not suggesting that but that rigidity be totally removed but some degree of flexibility will be enough.

“We have excellent discussions with Buhari and we discussed the challenges ahead stemming from oil price reduction. The necessity to apply fiscal discipline and the need to also respond to the population needs while addressing the Medium Term specificities of improving the competitiveness of Nigeria and yet also focusing on the short term fiscal situation which requires that revenue sources be identified in order to compensate the shortfall resulting from oil price decline.

“Oil is not the major contributor to the Nigerian GDP, it is only about 40 percent but it is a big source of revenue for the government.

“We discussed with the President, Vice President and the Minister of Finance and Minister of Budget how more efficiency, more transparency, better  accountability, the enlarging the base of revenue could actually contribute to sound budget going forward.

“It is not for me here and now to actually approve or comment on the budget because we have procedures in the IMF under which a team of Economists is going

to come next week actually to do what we call the Article 4 which is to review….good discussion with partners, IMF on one hand, country’s authorities on the other hand to really access whether financing is in place, whether the debt is sustainable, whether the borrowing cost are sensible and what strategy put in place in order to address challenges going forward.

“But what I certainly mentioned to Mr. President was that his fight and his determination to fight corruption and his determination to bring about transparency and accountability at all levels of the economy are very important agenda item and very ambitious goal that needed to be deliberated upon which he, himself is definitely committed to as he indicated this morning and as he inspires his team members.

“With that I am going to have more discussions with the Finance Minister and the Governor of Central Bank. We will be discussing issue of fiscal discipline, financing monetary policies and the degree of flexibility, all that with the fact that Nigeria with a vibrant large economy still has to deal with poor people, a lot of inequality and those two components should certainly be the drivers of reforms, whether it is looking at subsidies and how they are structured and how they can be phased out, whether it is monetary policy and the flexibility needed and knowing what effect it has on the poor, all, of those are ambitions that we could quickly recognize and support.

”Our technical discussions will continue and to those of you who wonder why the IMF Director is visiting Nigeria. It is precisely to have good discussion about these new objectives, these reforms agendas that have been identified and supported by the President and also to appreciate the impact that it will have on neighbouring countries because when a country large as Nigeria, anything that it decides, any hardship that it faces will have consequences around it and that is what our research and analytical work is demonstrating. Nigeria is one of those that have impact not just on itself and its people but around it and its neighbours.”