February 9, 2023

IMF pushes for fiscal, monetary policy reforms in Nigeria

IMF denigrates Nigeria’s economic growth

By Emma Ujah  

The International Monetary Fund, IMF, has said that Nigeria’s economic recovery should be anchored on decisive fiscal policy reforms and further monetary policy tightening.

The brettonwood institution also urged concerted efforts towards securitization of the Central Bank of Nigeria, CBN, existing stock of overdrafts to the Federal Government, FG, while emphasizing that the apex bank’s budget financing should strictly adhere to the statutory limits.

In a statement following the conclusion of its assessment of the 2022 Article IV Staff Report, the Executive Board of Directors of the IMF also urged the FG not to go back on its planned petrol subsidy removal, this June.

Giving details of the assessment, the IMF stated: “Looking ahead, Directors recommended decisive fiscal and monetary tightening to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive, sustainable growth.

“Directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities.

“Directors urged decisive and effective monetary policy tightening to avoid a de-anchoring of inflation expectations.

  “Noting recent increases in the policy rate, they encouraged the Central Bank of Nigeria (CBN) to stand ready to further increase the policy rate if needed, and to implement additional actions, including fully sterilizing central bank financing of fiscal deficits and phasing out credit intervention programs.

“Strengthening the CBN’s independence and establishing price stability as its primary objective is critical. Directors also urged the authorities to finalize securitization of the CBN’s existing stock of overdrafts and emphasized that the CBN’s budget financing should strictly adhere to the statutory limits.

“Directors encouraged a continued move toward a unified and market-clearing exchange rate by dismantling various exchange rate windows at the CBN. Providing clarity on exchange rate policy would help boost investor confidence, quell capital outflow pressures, and rebuild buffers. They welcomed Nigeria’s intention to participate in the African Continental Free Trade Agreement”.

The assessment report also highlighted other areas of concern in Nigeria’s economic recovery saying, “Directors highlighted the importance of improving the performance of the agricultural sector for job creation and food security”.

It also “urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023, and to increase well-targeted social spending.”

The IMF Board called for strengthening revenue mobilization, “including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority.”

In the medium term, the board recommended modernizing customs administration, rationalizing tax incentives, and raising tax rates to the levels of the Economic Community of West African States (ECOWAS).