The International Monetary Fund (IMF) has commended the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to increase the interest rate, stating that it will assist in alleviating pressure on the naira.
In a statement released on Monday, the IMF expressed satisfaction with the resolutions following discussions led by Axel Schimmelpfennig, the IMF’s mission chief for Nigeria, during a visit to Lagos and Abuja for the 2024 Article IV Consultation.
During the visit, the IMF team engaged with key figures including Wale Edun, the Minister of Finance, and Olayemi Cardoso, the Governor of the CBN, as well as other senior government and central bank officials, representatives from sub-national entities, the private sector, and civil society.
The IMF highlighted that the MPC’s decision to further tighten monetary policy, including a 400 basis points increase in the policy rate to 22.75 per cent, is expected to curb inflation, which surged to 29.9 per cent year-on-year in January 2024, and relieve pressure on the naira.
“Economic growth demonstrated resilience in the fourth quarter, with GDP expanding by 2.8 per cent in 2023, albeit slightly below population growth rates,” the statement noted.
The IMF projected a positive outlook for 2024 GDP growth, anticipating a rise to 3.2 per cent, buoyed by improved oil production and anticipated agricultural gains in the latter half of the year.
However, the IMF cautioned that persistently high inflation, naira depreciation, and continued policy tightening would present challenges to Nigeria’s economic trajectory.
To address escalating food insecurity, the IMF welcomed the government’s efforts towards establishing an effective and targeted social protection system, including the distribution of grains, seeds, and fertilisers, alongside initiatives to promote dry-season farming.
Regarding fiscal matters, the IMF underscored the need for increased revenue mobilisation, noting improvements in non-oil revenue collection in 2023, albeit constrained by naira depreciation. The organisation also highlighted the significance of enhancing security measures to sustain oil production levels.
Moreover, the IMF urged full implementation of recently approved social safety net programmes before considering adjustments to fuel and electricity subsidies, emphasising the importance of shielding low-income households.
The statement reiterated the IMF’s previous stance, issued on February 12, advocating for the gradual phasing out of petrol and electricity subsidies, citing their substantial fiscal burden.
