Nigeria must implement more fiscal reforms to unlock growth potential – IMF

The International Monetary Fund (IMF), says Nigeria needs to implement more monetary and foreign exchange reforms among many other reforms to help unlock the country’s growth potential.

This is according to the End-of-Mission press release on the 2020 Article IV Mission to Nigeria by International Monetary Fund (IMF) staff, posted on the IMF website yesterday, 11th December 2020.

Considering that Real GDP is contracting, inflation is increasing, and external vulnerabilities remain large; the team, at the conclusion of the mission, concluded that major policy adjustments embracing broad market reforms are needed.

It would be recalled that the Federal Government adopted a revised budget in July, which removed fuel subsidies and prioritized spending to make room for a support package including higher subsidies on CBN credit intervention facilities and regulatory forbearance measures to ease debt service in affected sectors.

Major policy adjustments embracing broad market and exchange rate reforms are needed to address recurrent BOP pressures and raise the medium-term growth path.

A durable solution to Nigeria’s recurrent BOP problems requires re-calibrating exchange rate policies to reduce BOP risks, instil market confidence and facilitate private sector planning.

Significant revenue mobilization – including through tax policy and administration improvements is required to create space for higher social spending and reduce fiscal risks and debt vulnerabilities.

While the banking sector has been resilient, thanks to the ample pre-crisis buffers, the mission recommended vigilance and corrective actions to prevent an increase in financial stability risks arising inter alia from increasing non-performing loans.

On the structural front, the approval of the power sector recovery program financing plan, the ratification of the African Continental Free Trade Area (AfCFTA), and the completion of key road projects are positive steps. Going forward, the mission recommended decisive actions to tackle governance weaknesses and implement regulatory and trade-enabling reforms, including the lifting of trade restrictions, to unlock Nigeria’s strong growth potential.

The International Monetary Fund, IMF, promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.

The IMF’s primary mission is to ensure the stability of the international monetary system – the system of exchange rates and international payments that enables countries and their citizens to transact with each other.

The IMF team, led by Jesmin Rahman, conducted a virtual mission from October 30 to November 17, 2020, in the context of the 2020 Article IV Consultation with Nigeria, coming to the conclusion increased revenue mobilization, and structural reforms will help to unlock Nigeria’s growth potential.