By Clara Nwachukwu
To cushion the impact of current economic hardship, the International Monetary Fund (IMF), has stressed the need for targeted support to the most vulnerable in Nigeria.
According to the IMF: “Temporary and targeted support to the most vulnerable in the form of social transfers is needed, given the ongoing cost-of-living crisis.”
This, it said, is because “Fuel and electricity subsidies are costly, do not reach those that most need government support,” while urging that it “should be phased out completely.”
This is contained in a statement on the IMF Executive Board Concludes Post Financing Assessment with Nigeria, released on Friday.
indeed, the Washington-based institution expressed concern that “Per-capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis.”
This is even as it admitted that “Low reserves and very limited fiscal space constrain the authorities’ option space.”
Against this backdrop, the IMF said the Nigerian government’s “focus on restoring macroeconomic stability and creating conditions for sustained, high and inclusive growth is appropriate.”
It also noted that “Like many other countries, Nigeria faces a difficult external environment and wide-ranging domestic challenges.
“External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation.”
Temporary and targeted support to the most vulnerable in the form of social transfers is needed, given the ongoing cost-of-living crisis.
This notwithstanding, the IMF believes the Bola Tinubu’s administration “has made a strong start, tackling deep-rooted structural issues in challenging circumstances,” through its twin policy of fuel subsidy removal and the unification of the official exchange rates.
It also noted the Central Bank of Nigeria (CBN’s) resolve to maintain price stability as opposed to development finance, while the fiscal authorities “are developing an ambitious domestic revenue mobilization agenda.”
Describing the CBN’s monetary tightening policy as “a welcome path”, the IMF said: “Continuing to raise the monetary policy rate until it is positive in real terms would be an important signal of the direction of monetary policy.”
Additionally, it said that “Settling the CBN’s overdue dollar obligations will help rebuild confidence in the central bank and the naira.
“Sharing comprehensive information on Nigeria’s reserves position would facilitate a more complete assessment of the external situation, even as it urges “a careful assessment of unintended consequences,” while exploring options to strengthen reserve position.
Overall, it believes “The government’s focus on revenue mobilization and digitalization would improve public service delivery and safeguard fiscal sustainability.”
It added that “The envisaged reduction in the overall deficit in 2024 would help contain debt vulnerabilities and eliminate the need for CBN financing.”
