… projects inflation may decline to 24% by year
The International Monetary Fund (IMF), has warned the Nigerian government against any action that will weaken the powers of the Central Bank of Nigeria (CBN) in the course of the ammendment of the CBN Act.
The IMF in a report released at the conclusion of its Executive Board 2024 article IV consultation with Nigeria, also recommended strengthening the independence of the central bank and called for caution regarding amendments to the CBN Act that might weaken the apex bank’s autonomy.
The IMF also predicted that with continued monetary tightening, Nigeria’s headline inflation could gradually decline to 24 percent year-on-year at end-2024.
Nigeria has been facing galloping inflation that peaked in March 2024, when the inflation rate hit 33.20 percent from 31.70 percent in February 2024.
The IMF expressed satisfaction with the policy reform efforts of the present administration which it described as ambitious.
The Board 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, maintaining exchange rate flexibility, and building reserves.
It said the bold reforms implemented by the new administration and its focus on revenue mobilization, 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.
According to the report, “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 mobilization, governance, and enhancing the monetary and exchange rate policy frameworks, as well as strengthening social safety nets.”
The IMF Executive Board 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, the Board said, “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.”
They 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.
Nigeria is experiencing economic challenges resulting from gross international reserves declined in 2023 amid persistent capital outflow pressures. The naira depreciated sharply after the unification of the official foreign exchange windows in June 2023. However, following monetary policy tightening in February and March 2024 and a resumption of FX interventions, the naira has started to stabilize.
The IMF also commended the Nigerian government for restarting the cash transfer program and emphasized the urgency of scaling it up to mitigate acute food insecurity. It also welcomed the authorities’ work on a comprehensive revenue mobilization strategy including boosting tax enforcement and broadening the tax base, underscoring that mobilizing revenue and reprioritizing expenditure, including phasing out costly and regressive energy subsidies, are critical to creating fiscal space for development spending and strengthening social protection, while maintaining debt sustainability.
It also emphasized the importance of close monitoring of financial sector risks and threw its weight behind the increase in the minimum capital for banks and urged the CBN to unwind the regulatory forbearance introduced during the Covid-19 pandemic.