Nigeria needs high oil production to alleviate FX pressure, says Edun

Wale Edun, Nigeria’s minister of finance and coordinating minister of the economy, on Tuesday, highlighted the urgent need for Nigeria to enhance its oil production levels to mitigate foreign exchange challenges currently facing the nation.

His remarks were made during a G-24 press briefing at the ongoing IMF/World Bank annual meetings in Washington D.C, United States of America.

This comes a day after President Bola Tinubu launched the ‘1MMBOPD’, an initiative meant to raise production by 1 million barrels per day by harnessing dormant oil assets and optimising existing ones.

Nigeria’s oil production is currently below 1.61 mbpd, as of August 2024.

Edun asserted that the primary issue affecting Nigeria’s foreign exchange market is supply. “As regard to Nigeria, the key issue about the foreign exchange market really is supply,” he stated. “As an oil-producing country, we just need to get our oil production up, and that will address the issue of foreign exchange supply and pressure on foreign exchange every time there are large flows.”

With high inflation rates impacting Nigeria, Edun acknowledged the Central Bank of Nigeria (CBN)’s approach of maintaining monetary tightening. “In the context of high inflation, the governor of the Central Bank of Nigeria continues with monetary tightening, and that is the orthodoxy of the day,” he remarked.

When addressing key lessons from Nigeria’s ongoing structural reforms, Edun pointed out the importance of focusing on broader frameworks applicable to developing countries rather than solely Nigeria.

“The requirement for support from the international community and development partners is that you undertake reforms leading to macro-level sustainability,” he said.

He emphasised the necessity of incorporating a robust social safety net to support vulnerable populations facing the immediate impacts of rising living costs. “The benefits of these programmes are often long-term, while the costs are front-loaded,” he explained, underscoring the importance of planning for poverty alleviation initiatives.

“Communication is critical in carrying out these macroeconomic reforms,”Edun continued. “It’s essential to communicate what is being done, what to expect, and the timing of various activities. This transparency builds public trust.”

He suggested that the government should establish a dashboard to track and publish the progress of direct benefits and fund transfers to those in need.

Ralph Recto, first vice-chair of the G-24 and secretary of finance for the Philippines, noted that while inflation may be easing, rising geopolitical tensions continue to pose threats to commodity prices and interest rates. “This situation imperils capital flows, fiscal stability, and the survival of economies,”Recto noted. He cautioned that any slowdown in the global economy due to these tensions would disproportionately impact developing nations.

He stressed the need for the international community to prioritise sustainable and inclusive development by 2030, emphasising that this goal is still achievable with concerted international cooperation.

“We continue to call for a more agile and strong-willed IMF and World Bank,” he urged. “We need to heighten development cooperation, scale up support, and innovate solutions as we navigate these challenges.”

Highlighting the 80th anniversary of the Bretton Woods system, Recto noted the necessity for critical assessments of its adaptability to the rapidly changing global environment. He outlined four key reforms the G-24 identified to enhance the system’s effectiveness and empower both the IMF and World Bank to better serve their members.

“First, the IMF must create a new mechanism to support countries with sound fundamentals during liquidity crises,” he said. “Second, to eradicate poverty on a livable planet, the World Bank needs to set more ambitious goals for its concessional and non-concessional windows.”

He also called for reforms in the sovereign debt resolution framework to provide comprehensive and impactful debt relief for vulnerable economies, and stressed the importance of accelerating governance reforms to increase the representation of developing nations within these institutions. “Without these bold actions, decades of progress in eradicating poverty and inequality will be halted or even reversed,” Recto warned.

Additionally, Iyabo Masha of the G-24 secretariat raised concerns about rising protectionist policies globally and their negative impacts on sectors critical to growth and development. “What we’re calling for is for the World Trade Organization (WTO) to become the center of trade discussions and negotiations,” Masha stated. She urged the IMF and World Bank to engage more multilaterally to influence national policies positively.