By Omoh Gabriel, Business Editor

LAGOS — International Monetary Fund, IMF, in its assessment of the Nigeria economy released, yesterday, endorsed the Federal Government and the Central Bank’s fiscal and monetary policy positions to cushion the effect of falling oil prices on the economy.

It, however, advised the CBN to manage the unified foreign exchange market in a transparent, efficient and fair manner.

The IMF in endorsing the government measures agreed that tightening fiscal policy and allowing the exchange rate to depreciate while using some of the reserve buffer were appropriate responses to the recent fall in oil prices.

Nonetheless, they stressed that achieving the authorities’ fiscal targets will require a careful prioritisation of public spending and a cautious implementation of capital projects.

They also highlighted the importance of improved budgeting at the level of state and local governments to help better manage their fiscal adjustment

In its review of the 2014 Article IV with Nigeria, the IMF Directors “welcomed the recent unification of the foreign exchange rates, noting that greater exchange rate flexibility could help cushion external shocks.

“As the largest single supplier of foreign exchange, it will be important for the CBN to intermediate this supply in a transparent, efficient, and fair manner.”

Lowering oil dependency

The IMF report said: “Directors emphasised that Nigeria’s longer term prospects rest on lowering oil dependency and strengthening private sector’s participation in economic activity. Lasting and more inclusive growth calls for improving the business environment, promoting youth and female employment, and advancing human capital development.

“They noted that Nigeria’s economic data are broadly adequate for surveillance. Nonetheless, they encouraged the authorities to further improve statistics, in particular as regards the balance of payments.”

The report of Executive Board Assessment further noted: “Executive Directors commended the authorities for progress in promoting Nigeria’s economic diversification and for their macroeconomic response to collapsing export prices.

“Directors noted, however, that vulnerabilities remain high in view of the uncertainties about oil price, security, and the political situation, and concurred that additional policy adjustments and broader structural reforms will be necessary in the period ahead to reconstitute buffers, mitigate risks, and meet pressing development needs.

“Directors agreed that tightening fiscal policy and allowing the exchange rate to depreciate while using some of the reserve buffer were appropriate responses to the recent fall in oil prices. Nonetheless, Directors stressed that achieving the authorities’ fiscal targets will require a careful prioritization of public spending and a cautious implementation of capital projects. They also highlighted the importance of improved budgeting at the level of state and local governments to help better manage their fiscal adjustment.

Mobilising additional non oil revenues

“Directors agreed that mobilising additional non oil revenues is critical to open up fiscal space and improve public service delivery over the medium term. They welcomed ongoing initiatives to strengthen tax administration, and encouraged the authorities to also rein in exemptions, keep tax rates under review, persevere with subsidy reform, and improve the management of oil revenue.”