…says economic outlook, challenging
….commends CBN’s rate hike
The International Monetary Fund (IMF) has urged Nigerian government to take immediate steps to tackle present wide-spread hunger as it also noted that the country’s economic outlook remains challenging.
The IMF gave the advise after completing its 2024 Article IV Mission to Nigeria during which its team, led by Axel Schimmelpfennig, mission chief for Nigeria, visited Lagos and Abuja to hold talks with the Nigerian authorities between February 12 and 23, 2024.
During the visit, the team met with Wale Edun, finance minister and coordinating minister for the economy, Olayemi Cardoso, Central Bank of Nigeria Governor, senior government and central bank officials, Ministry of Agriculture, Ministry of the Environment, as well as representatives from sub-nationals, the private sector and civil society.
The IMF noted that addressing food insecurity is the immediate priority and that recent approval of a well-targeted and effective social protection system is an important step toward addressing this while warning that implementation will be crucial.
“With about 8 percent of Nigerians deemed food insecure, addressing rising food insecurity is the immediate policy priority. In this regard, staff welcomed the authorities’ approval of an effective and well-targeted social protection system.
The team also welcomed the government’s release of grains, seeds, and fertilizers, as well as Nigeria’s introduction of dry-season farming,” Schimmelpfennig noted in a statement he issued on concluding the visit.
“Nigeria’s economic outlook is challenging. Economic growth strengthened in the fourth quarter, with GDP growth reaching 2.8 percent in 2023. This falls slightly short of population growth dynamics. Improved oil production and an expected better harvest in the second half of the year are positive for 2024 GDP growth, which is projected to reach 3.2 percent, although high inflation, naira weakness, and policy tightening will provide headwinds,” he pointed out.
The IMF also acknowledged that President Tinubu’s government inherited a difficult economic situation marked by low growth, low revenue collection, accelerating inflation, and external imbalances built up over years, but was optimistic that a firm commitment to ongoing reforms and policies could help Nigeria’s economy turn the corner.
Schimmelpfennig noted: “Recent improvements in revenue collection and oil production are encouraging. Nigeria’s low revenue mobilization constrains the government’s ability to respond to shocks and to promote long-term development. Non-oil revenue collection improved by 0.8 percent of GDP in 2023, helped by naira depreciation. Oil production reached 1.65 million barrels per day in January as the result of enhanced security. The capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to 3 percent of GDP in 2024.
“The recently approved targeted social safety net program that will provide cash transfers to vulnerable households needs to be fully implemented before the government can address costly, implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected.
The IMF also commended the CBN’s recent decision to further tighten monetary policy as this will help contain inflation and pressures on the naira.
“The team welcomed the Monetary Policy Committee (MPC)’s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 percent for a total tightening of 1,025 basis points since May 2022.
“ This decision should help contain inflation, which reached 29.9 percent year-on-year in January 2024, and pressures on the naira.”
