The International Monetary Fund (IMF) has called on Nigeria to deepen its economic reforms with a strong focus on achieving sustained growth and boosting domestic revenue, warning that without these measures, poverty and food insecurity will remain entrenched.
In a blog post, IMF Mission Chief to Nigeria, Axel Schimmelpfennig, and IMF Resident Representative, Christian Ebeke, acknowledged that the country had made progress through bold reforms over the past two years. However, it stressed that more was needed to translate policy efforts into improved living conditions for the population.
The blog which is in furtherance of the recent IMF Staff report for Nigeria noted that while the reforms are starting to show results, poverty and food insecurity remain high, and the uncertain global environment presents additional challenges.
They however noted that the right policies can help Nigeria realize its potential as an African and global economic powerhouse.
Pointing out that Nigeria’s GDP had been on a decline between 2014 and 2023, with poverty rate at 42 percent, the IMF directors said the difficult situation was compounded by limited access to dollars.
“In response to these challenges, Nigerian policymakers have embarked on a series of bold reforms over the last two years. Since these reforms were implemented, international reserves have increased, and anyone can now access foreign exchange in the official market.
“Nigeria successfully returned to international capital markets last December and was recently upgraded by rating agencies. A new domestic, private refinery is positioning Nigeria up the value chain in a fully deregulated market.”
The IMF noted that while progress has been encouraging, “significant challenges remain. Inflation still exceeds 20 percent. Poor infrastructure, especially for electricity, inhibits economic activity. Poverty and food insecurity remain high. Nigeria lacks an effective social safety net to cushion the impact of shocks on the most vulnerable.
To address these challenges, the Fund said Nigeria should focus on sustainable growth, increasing its revenue and an effective budget framework. “The country needs stronger and more sustained growth to lift millions of people out of poverty and food insecurity, which is what the authorities are focusing on.
The fund also urged the monetary policy should continue to decisively tackle inflation and reduce economic uncertainty.
It also urged the government to continue to increase domestic revenues.
“This is essential given Nigeria’s substantial funding needs in growth-enabling areas such as agriculture, infrastructure, including access to electricity, and climate adaptation. The government’s tax reforms will make it easier to pay taxes and ensure that everyone who owes taxes pays them. Over time, once the ongoing cost-of-living crisis abates and the cash transfer system is fully operational, there will be room to align tax rates with those in neighboring countries. For now, the share of revenue that goes to interest spending leaves too little for investment in people and infrastructure. It is therefore critical that the substantial financial savings from the removal of fuel subsidies flow to the government to fund priority spending.
Nigeria’s potential is beyond doubt but achieving it will require continued reforms and an effective social safety net to carry the most vulnerable along.
