The International Monetary Fund (IMF) has given its seal of approval to the economic reforms initiated by President Bola Ahmed Tinubu’s administration, as outlined in the recent Article IV Consultation released on May 9th, 2024.
The IMF’s Executive Directors lauded the government’s proactive measures in areas such as revenue mobilization, governance enhancement, and the strengthening of social safety nets, recognizing them as significant strides towards addressing Nigeria’s economic and social challenges.
In contrast to the IMF’s endorsement, many Nigerians express ongoing concerns regarding high inflation, weakening purchasing power, lower wages, and increasing income inequality fueled by these policies. However, the IMF’s appraisal focuses on the administration’s bold reforms aimed at restoring macroeconomic stability, reducing poverty, supporting social cohesion, and fostering inclusive and resilient growth.
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The IMF’s Executive Directors commended Nigeria’s administration for its emphasis on revenue collection and the effectiveness of policy frameworks in achieving these objectives. They emphasized the importance of steadfast, well-sequenced, and well-communicated reforms to navigate Nigeria through its economic challenges, including maintaining a tight monetary policy stance to curb inflation and restore market confidence.
Particularly noteworthy is the IMF’s support for Nigeria’s shift towards an inflation-targeting regime, along with recommendations for maintaining exchange rate flexibility and removing foreign exchange market distortions. The IMF also praised Nigeria’s reinstatement of the cash transfer program, essential for addressing acute food insecurity, and urged scaling up this initiative alongside comprehensive revenue mobilization efforts.
The revenue mobilization efforts encompass strengthening tax enforcement and expanding the tax base to generate funds essential for development spending and social protection, all while ensuring debt sustainability.
Furthermore, the IMF highlighted the importance of regulatory reforms, including increasing minimum capital requirements for banks and unwinding pandemic-related regulatory forbearance measures. They acknowledged improvements in Nigeria’s Anti-Money Laundering and Countering Financing of Terrorism framework and supported efforts to exit the Financial Action Task Force grey list.
Regarding the controversial cyber security levy of 0.5%, the IMF refrained from expressing explicit support or opposition during a question and answer session with a journalist.
The IMF’s keynotes are as follows:
‘‘Executive Directors agreed with the thrust of the staff appraisal. They welcomed the bold reforms implemented by the new administration and commended the authorities’ focus on revenue mobilization, governance, social safety nets, and upgrading policy frameworks in the face of Nigeria’s significant economic and social challenges.
‘‘In view of the downside risks, Directors stressed the importance of steadfast, well-sequenced, and well-communicated reforms to restore macroeconomic stability, reduce poverty, support social cohesion, and pave the way for faster, inclusive, and resilient growth. Directors commended the authorities’ actions to rein in inflation and restore market confidence.
‘‘They stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path, maintaining exchange rate flexibility, and building reserves. Directors welcomed the removal of foreign exchange market distortions and encouraged the authorities to continue improving the functioning of the FX market, including by adopting a well-designed FX intervention framework.’’
However, the IMF’s supportive stance on President Tinubu’s economic policy framework, while it indicates a positive outlook for Nigeria’s economic trajectory, stands in stark contrast with the views of Nigerians.
In February, human rights lawyer and Senior Advocate of Nigeria, Femi Falana, said that the federal government should resist the economic prescriptions of the IMF and the World Bank, particularly regarding the removal of subsidies and the floating of the naira.
He argued that government subsidies on various products are commonplace globally and stressed that the policies advocated by the IMF and the World Bank are unlikely to bring stability to the country.
“The right thing to do is to reject the prescriptions of the IMF and World Bank, which are to remove fuel subsidy, float your currency, and so on. These have never assisted any country to develop. The government is dancing around the problem,” he said.
“Many of us were opposed to the removal of petrol subsidy because there is no society in the world where the government does not subsidize one product or another, even in the most advanced capitalist societies.
“That is why Nigerians must begin to ask the government to discard and jettison the deleterious programme and policies of the IMF and the World Bank.”