By Ken Afor
Amid the current economic hardship in Nigeria, the International Monetary Fund (IMF) has urged the federal government to prioritize addressing food insecurity in the country, which has denied millions of its citizens from accessing basic food items.
The IMF, in its End-of-Mission statement released following the conclusion of its Staff 2024 Article IV Mission to Nigeria in Abuja on Tuesday, stated that President Bola Ahmed Tinubu inherited a challenging economic situation characterized by low growth, poor revenue collection, rising inflation, and long-standing external imbalances from the immediate past administration of Muhammadu Buhari.
While commending the government on its bold steps in tackling the economic crisis caused by the removal of fuel subsidy through the social protection scheme, as well as the current food crisis, the financial institution emphasized that the implementation of these initiatives is paramount.
According to the IMF, “Addressing food insecurity is the immediate priority.
”The recent approval of a well-targeted and effective social protection system is an important step towards addressing food insecurity in Nigeria, and its implementation will be crucial.”
Following the abysmal performance of the Nigerian Naira against the US Dollar in the foreign exchange market, the IMF noted that the decision taken by the Monetary Policy Committee (MPC) to tighten monetary policy is a step towards the right direction which would help to control inflation and alleviate pressure on the Naira.
The financial institution gave a broader view of the country’s economy following the recent visit by the IMF team led by Mr. Axel Schimmelpfennig, IMF mission chief for Nigeria last month, where they met with key managers of the country’s economy including the Minister of Finance and Coordinating Minister of the Economy of Nigeria, Wale Edun, and the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso among other top government officials.
The IMF noted that the country could achieve its projected GDP growth of 3.2% due to improved oil production and anticipated agricultural improvements in the second half of 2024.
However, the economy faces threats of high inflation, currency depreciation, and policy tightening.
The IMF team in its statement issued by Schimmelpfennig commended the government of its targeted social protection system and initiatives like releasing grains, seeds, and fertilizer, along with promoting dry-season farming.
The statement added, “Nigeria’s economic outlook is challenging. Economic growth strengthened in the fourth quarter, with Gross Domestic Product (GDP) growth reaching 2.8 per cent in 2023. This falls slightly short of population growth dynamics.
”Improved oil production and an expected better harvest in the second half of the year are positive for 2024 GDP growth, which is projected to reach 3.2 per cent, although high inflation, naira weakness, and policy tightening will provide headwinds.
“With about eight per cent of Nigerians deemed food insecure, addressing rising food insecurity is the immediate policy priority. In this regard, staff welcomed the authorities’ approval of an effective and well-targeted social protection system.
“The team also welcomed the government’s release of grains, seeds, and fertiliser, as well as Nigeria’s introduction of dry-season farming.”
Schimmelpfennig noted that recent advancements in revenue collection and oil production were positive signs.
However, he emphasized that Nigeria’s limited revenue mobilization restricts the government’s capacity to address shocks and foster sustainable long-term development.
“Non-oil revenue collection improved by 0.8 per cent of GDP in 2023, helped by naira depreciation. Oil production reached 1.65 million barrels per day in January as a result of enhanced security.
Schimmelpfennig highlighted that capping fuel pump prices and electricity tariffs below cost recovery could incur a fiscal cost of up to three percent of GDP in 2024.
Additionally, he stressed the importance of fully implementing the recently approved targeted social safety net program, which aims to provide cash transfers to vulnerable households.
”This is before the government can address costly implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected.
“The team welcomed the MPC’s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 per cent for a total tightening of 1,025 basis points since May 2022.
“This decision should help contain inflation, which reached 29.9 per cent year-on-year in January 2024, and pressures on the naira.”
