Just In: 5 Things IMF Wants Nigeria To Do
On Wednesday, the International Monetary Fund, IMF published its Article IV consultation on Nigeria. This is an annual appraisal of a country’s economy.
Although the report acknowledged Nigeria’s progress since falling into a recession in 2016, it is not pleased that recovery has been slow and tied to commodity prices.
It therefore made some recommendations on how the country can get back on track faster. Here are 5 things the Fund said it would like Nigeria to do.
1. Growing The Non-Oil Sector: The IMF said despite the progress Nigeria has made in terms of stabilizing the foreign exchange market, improving tax administration and significant strides in improving the business environment, important challenges remain, as growth in the non-oil, non-agricultural sector has not picked up.
The IMF director also noted that inflation remains high and sticky; unemployment is rising; and poverty is high, and that to address these vulnerabilities, the government need to urgently undertake comprehensive and coherent policy actions.
2. Nigeria Needs More Ambitious Tax Policy: Despite the aggressive push by Tunde Fowler and his team, the IMP directors said he needs to do more.
They “underlined the need for more ambitious tax policy measures, including through reforming the value-added tax, increasing excises, and rationalizing tax incentives”.
According to them: “The implementation of an automatic fuel price-setting mechanism, sound cash and debt management, improved transparency in the oil sector, increased monitoring of the fiscal position of state and local governments, and substantially scaled-up social safety nets should support the adjustment.”
3. CBN Should Not Cut Rate: The Central Bank Governor, Godwin Emefiele had said monetary policy rate may be cut this year from the 14% it has been for more than a year now. But the IMF directors think otherwise. They think, he should instead raise it to further strengthen monetary policy framework.
According to a statement from the Fund, “…. a number of Directors urged consideration of a higher monetary policy rate, a symmetric application of reserve requirements, and no direct central bank financing of the economy.
“A few directors urged confirmation of the appointments of the central bank’s board of directors and members of the monetary policy committee.”
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4. End Multiple Exchange Rates: The directors commended the recent foreign exchange measures by the CBN and “recent efforts to strengthen external buffers to mitigate risks from capital flow reversals”. They welcomed the authorities’ commitment to unify the exchange rate and urged additional actions to remove remaining restrictions and multiple exchange rate practices.
5. CBN Should Do More To Protect Weak Banks: You may have heard recently that the CBN stopped some banks from paying dividends. The IMF wants the apex bank to take more of such actions in order to contain rising banking sector risks.
They called for an asset quality review to identify any potential capital need. They noted that an enhanced risk-based banking supervision, strict enforcement of prudential requirements, and a revamped resolution framework would help contain risks.