Abuja, Nigeria, February 9, 2024: The International Monetary Fund (IMF) has advised the Nigerian government to completely eliminate costly fuel and electricity subsidies, stating that they are inefficient in reaching the most vulnerable segments of the population.
In a report titled “IMF Executive Board Concludes Post-Financing Assessment with Nigeria,” released on Friday, the IMF commended President Bola Tinubu’s administration for taking bold steps to address structural issues by removing fuel subsidies and unifying exchange rates.
“The new administration has made a strong start, tackling deep-rooted structural issues in challenging circumstances. Immediately, it adopted two policy reforms that its predecessors had shied away from: fuel subsidy removal and the unification of the official exchange rates,” the report stated.
The IMF cautioned, however, that Nigeria faces significant external and domestic challenges, including scarce external financing, surging global food prices, stalled per-capita growth, and high levels of poverty and food insecurity.
The report emphasised the importance of revenue mobilisation and digitalization to improve public service delivery and fiscal sustainability. It suggested that a reduction in the overall deficit in 2024 would help contain debt vulnerabilities and eliminate the need for Central Bank of Nigeria (CBN) financing.
Furthermore, the IMF advised the Nigerian government to prioritise settling the CBN’s overdue dollar obligations, asserting that this move is crucial for rebuilding confidence in the central bank and the naira, thereby contributing to a more stable financial environment.
According to the IMF, Nigeria’s capacity to repay the fund is adequate under the baseline scenario, but it underscores the need for aggressive monetary tightening and fiscal adjustment, along with support from development partners, to restore macroeconomic stability in the event of downside risks.
The IMF’s recommendations highlight the ongoing challenges facing Nigeria’s economy and the importance of decisive policy measures to address structural weaknesses and foster sustainable growth.