The International Monetary Fund says that Nigeria needs a fundamental policy reset to durably exit the current economic crisis.
The IMF disclosed this in a statement titled, “Nigeria: 2020 Article IV Consultation – Press Release.”
IMF revealed that Nigeria’s economy is at a critical juncture.
Citing that the economy was already weakened by falling per capita income, double-digit inflation, “limited buffers and significant governance vulnerabilities has been hit hard by the global pandemic. Plunging oil prices and sharp capital outflows in 2020Q1 significantly increased balance of payments (BOP) pressures which, together with the pandemic-related lockdown in 2020Q2, have caused a historic output contraction.”
The Fund warned that Nigeria has limited space to respond to the crisis because the consolidated government revenue-to-GDP ratio at 8% in 2019, which is among the lowest in the world.
In April 2020, Nigeria received IMF financial assistance amounting to $3.5 billion under the Rapid Financing Instrument (RFI) in the wake of the oil price shock. IMF urged that a fundamental policy reset is needed to durably exit this crisis.
“What set Nigeria apart are its weak pre-crisis fundamentals that threaten to turn a temporary crisis into a slump with more lasting consequences for employment and living standards.
“Long-running inward-looking policies have been stepped up in recent years through increased import restrictions, a partial border closure, administrative control of foreign exchange (FX) allocation and capital flow measures (CFMs),” it said.
IMF warned that Nigeria’s protectionist policies are yet to deliver its job, which is rich growth as the economy remains heavily dependent on the oil sector, through direct and indirect exposures, and vulnerable to periodic commodity shocks.
IMF praised the Federal Government for undertaken commendable and timely measures to counter the pandemic’s impact on lives and livelihood.
IMF mentioned policies include palliative measures, a strict lockdown, removal of fuel and electricity subsidies as well as fiscal and monetary policy support for the health sector and the economy. Others include higher subsidies on Central Bank of Nigeria’s (CBN) credit intervention facilities and regulatory forbearance measures to ease debt service.
The Fund also warned that Nigeria’s Covid-19 plan could face difficulties through potential funding gaps as a plan is yet to be developed for Covid-19 vaccine purchase, distribution and administration.
What you should know
- Recall Nairametrics reported last month that the International Monetary Fund (IMF) expressed optimism about the global economy but warns that the new COVID 19 variant could affect the global economic growth, according to its latest World Economic Outlook.
- According to the report, “the institution now expects the global economy to grow 5.5% this year — a 0.3 percentage point increase from October’s forecasts. It sees global GDP (gross domestic product) expanding by 4.2% in 2022”.
- IMF also advised that the FG should implement major policy adjustments embracing broad market and exchange rate reforms are needed to address recurrent BOP pressures and raise the medium-term growth path.