•Calls for strengthening of CBN’s autonomy
With continued monetary tightening, Nigeria’s headline inflation could gradually decline to 24 per cent by the end of the year, the International Monetary Fund (IMF) has projected.
Nigeria has faced runaway inflation that hit 33.3 per cent in March 2024. April’s figures are not ready but experts expected the inflation rate to remain high.
The IMF, in a report released after its Executive Board 2024 Article IV consultation with Nigeria, expressed satisfaction with the policy reforms of the present administration, which it described as ambitious.
The board also recommended strengthening the independence of the central bank while calling for caution regarding the planned amendment of the Central Bank of Nigeria (CBN) Act to avoid weakening the apex bank’s autonomy.
The IMF commended the government’s actions to rein in inflation and restore market confidence, stressing the importance of keeping a tight monetary policy stance to put inflation on a downward path.
The Fund also called for sustaining exchange rate flexibility and continued building the external reserves.
It said the bold reforms implemented by the new administration and its focus on revenue mobilisation, governance, social safety nets and upgrading policy frameworks in the face of Nigeria’s significant economic and social challenges are steps in the right direction.
“Nigeria, under its new administration, has set out on an ambitious reform path to restore macroeconomic stability and support inclusive growth. The authorities reformed the fuel price subsidies, unified official foreign exchange windows, and are focused on revenue mobilisation, governance, and enhancing the monetary and exchange rate policy frameworks, as well as strengthening social safety nets,” the report said.
The IMF encouraged the government to pursue a determined and well-sequenced implementation of its policy intentions, which it said would pave the way for faster, more inclusive and resilient growth.
Highlighting the importance of reforms, it stated: “Reforms enhance the business environment, improve security, implement key governance measures, develop human capital, boost agricultural productivity, and build climate resilience.
“These reforms are crucial to boost investor confidence, unlock Nigeria’s growth potential and diversify the economy, address food insecurity, and underpin sustainable job creation.
“Over the last decade, limited reforms, security challenges, weak growth and now high inflation have worsened poverty and food insecurity.”
It stressed the importance of steadfast, well sequenced and well communicated reforms to restore macroeconomic stability, reduce poverty, support social cohesion and pave the way for faster, inclusive and resilient growth.
The IMF also commended the Nigerian government for reactivating the cash transfer programme and emphasized the urgency of scaling it up to mitigate acute food insecurity.
It welcomed the authorities’ work on a comprehensive revenue mobilisation strategy including boosting tax enforcement and broadening the tax base, noting that mobilising revenue and reprioritising expenditure, including phasing out costly and regressive energy subsidies are critical to creating the right fiscal space.
